On September 23, 2016, Same Day ACH becomes a reality.
Let’s take a few minutes for a refresher. The Electronic Payments Association (NACHA, previously the National Automated Clearing House Association) has adopted a rule to move payments faster by enabling same day processing for ACH payments. Currently, NACHA moves money between financial institutions with a guarantee of 48-hour transactions. In the past, in order to move money faster, an expensive wire transfer was required.
The move to same day ACH is game changing, and helps those firms providing payroll services meet real business problems. The rule enables same day ACH payments through new ACH Network functionality. The transactions most commonly used are off-cycle direct deposits, termination pay and remittance of tax payments on the due date.
There are significant use cases for those providing payroll—among the significant use cases for Same Day ACH, the Electronic Payments Association lists the following:
- Same day payrolls, providing flexibility for late and emergency payrolls and missed deadlines, supporting the needs of businesses to pay hourly workers and also enabling employees to have faster access to their pay in these cases:
- Business-to-business payments, enabling faster settlement of invoice payments between trading partners, and including remittance information with the payments
- Expedited bill payments using both ACH credits and debits, enabling consumers to make on-time bill payments on due dates, and providing faster crediting for late payments
- Account-to-account transfers, providing faster crediting for consumers who move money among various accounts they own
The amended rule will become effective in three phases:
- In Phase 1, effective September 23, 2016, ACH credit transactions will be eligible for same day processing at 10:30 a.m. and 3:00 p.m. ET, supporting use cases such as hourly payroll, person-to-person payments and same day bill pay
- In Phase 2, effective September 15, 2017, Same Day ACH debits will be added, allowing for a wide variety of consumer bill payment use cases like utility, mortgage, loan and credit card payments
- In Phase 3, effective March 16, 2018, faster ACH credit funds availability requirements for Receiving Depository Financial Institutions (RDFIs) will be introduced, and funds from Same Day ACH credit transactions will need to be available to customers by 5:00 p.m. RDFI local time
The settlement windows are the following:
- A morning submission deadline at 10:30 a.m. ET, with settlement occurring at 1:00 p.m. ET
- An afternoon submission deadline at 3:00 p.m. ET, with settlement occurring at 5:00 p.m. ET
The rule also requires that all RDFIs receive same day transactions and provide faster funds availability to customers. For example, RDFIs will have to make funds available from Same Day ACH credits (such as payroll direct deposits) to their depositors by 5:00 p.m. at the RDFI’s local time. This is expected to happen by end of day for the recipient.
In addition, fees charged to the sender are negotiated by the originator’s financial institution. Only international transactions (IATs) and high-value transactions above $25,000 will not be eligible for same day processing. Also note that existing one-day and two-day ACH processing and settlement capabilities would not be impacted. Finally, prenotes will not return same day, but will accelerate Notification of Changes (NOCs) by an estimate of one day.
Keep in mind to ensure that only transactions you want to be same day have the current day in the settlement field. You can use the sorting and filtering options in ACH to ensure only same day transactions have the current date and the effective date.