On September 23, same-day settlement of certain ACH transactions became available. Because of the potential benefits for payroll, the APA strongly supports this initiative by NACHA – the Electronic Payments Association.
To allow time for financial institutions to prepare for faster processing procedures, same-day ACH settlement capabilities will be implemented in three phases:
- Phase 1, currently being implemented, is for ACH credit entries. During this phase, there will be two submission deadlines. Originating depository financial institutions (ODFIs) must submit files by 10:30 a.m. ET with settlement occurring at 1:00 p.m. ET; or submit files by 2:45 p.m. ET with settlement occurring at 5:00 p.m. ET. Funds must be made available to the receiver by the end of the receiving depository financial institution’s (RDFI) processing day (which varies from bank to bank).
- Phase 2 becomes effective on September 15, 2017, and expands the transactions available for same-day ACH settlement to include both credit and debit entries.
- Phase 3 becomes effective on March 16, 2018, and requires that the funds from the same-day ACH transactions be made available to the receiver at 5:00 p.m. local time.
Same-Day ACH Benefits for Payroll
Same-day ACH can benefit payroll in several ways, including reducing the time lag between the reporting of hours worked and payment to hourly and temporary workers, and allowing employers to pay terminated employees on the day of termination. Also, if the deadline to submit ACH for a Thursday settlement is missed, a same-day ACH transaction could ensure employees are still paid on Friday. Employers interested in using same-day ACH should contact their ODFI or payroll processor to discuss whether it is appropriate and cost-effective. Not all ODFIs and payroll processors will offer same-day ACH origination.
Deciding Whether to Use Same-Day Settlement
Some considerations when determining whether to implement same-day ACH are:
- An increase in per transaction cost
- Different file requirements
- New file submission cutoff times
- New exception resolution cutoff times
Although employees will receive credits on the effective date (check date), the credit will be posted later in the day. Businesses will want to educate their employees regarding the timing of the deposits.
Transactions Not Available for Same-Day ACH Settlement
Some types of transactions may not be made on a same-day basis, including:
- International payments (IATs);
- Individual transactions of more than $25,000 (the limit is per direct deposit, not for the entire ACH file); and
- Payments to the federal government.
NOTE: Same-day federal tax payments may be made via wire transfer. Wires must be received by 5:00 p.m. ET, or they will be rejected.
Correct Effective Entry Date
Because the entry date in the ACH file will be used to identify same-day ACH transactions, employers should ensure the effective entry date is correct so they do not accidentally send a file for same-day processing. If the file contains a stale or invalid date in the Effective Entry Date field, the ACH operator will process the entry in the next available window, which could be the same day or the next day.
NACHA has created a Same Day ACH Resource Center containing links to articles, news releases, infographics, and other materials. NACHA has also published the Guidance for Employers and Payroll Professionals on Same Day ACH Direct Deposit document.