In an effort to save Virginia's taxpayers the costs associated with disbursing checks, a state agency has launched a new direct deposit program for government employees.

The agency, the Virginia Retirement System, was created in 1950 to disburse pension, health, and life insurance benefits to active and retired state employees. It has assets of about $20 billion.

The agency worked with First Union Corp. and the Virginias Automated Clearing House Association to develop a marketing program for promoting direct deposit.

The effort, largely a direct mail campaign, will highlight the benefits of receiving funds electronically instead of in the form of paper checks.

It is just one of many recent examples of how banks, trade groups, government agencies, and other entities are stepping up their war against paper checks, of which more than 60 billion were written last year.

Although the agency has offered direct deposit since the early 1980s, "We came to the conclusion that we have to start doing things a little smarter," said William H. Leighty, director of the Richmond-based Virginia Retirement System.

The many mergers taking place in the banking industry has created a chaotic situation for the agency's 136-member staff, such as "changes in bank routing numbers," which lead to "an increasing number of difficulties with mixed-up payments," Mr. Leighty said.

The banking industry's "desire to acquire" has not kept pace with the back-office changes required to maintain service levels, he said.

The agency's goal is to increase its direct deposit participation rates among beneficiaries to about 80% from its current rate of just over 50%.

The Virginia Retirement System has more than 260,000 active members and 78,000 retirees, and pays out approximately $63 million each month.

Other efforts to bolster direct deposit include the recently announced initiative between the Federal Reserve banks, the Social Security Administration, and the National Automated Clearing House Association, as well as the Internal Revenue Service's program for direct deposit of tax refunds.

Under the IRS program, taxpayers can supply their bank account information on a new form, to be included with income tax forms 1040 and 1040A.

IRS officials claimed the use of direct deposit means taxpayer's can obtain their refunds one week earlier.

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