Key Learnings from the Same Day ACH Vendor Forum #2

By Ryan Waterman, AAP, AVP, Risk & Regulatory Compliance

Posted: June 14, 2016

On May 10th, the Federal Reserve Bank of Atlanta (FRB) hosted the second Same Day ACH (SDA) Vendor Forum where ACH software vendors, NACHA, and the Regional Payments Associations (including WesPay) convened to discuss various SDA-related topics including FedACH system functionality, the Federal Government’s initial non-participation, upcoming Fed testing, and Fed account balancing information.

FedACH System Functionality

The Fed provided the following updates related to SDA:

  1. Financial institutions that use the FedACH Derive Returns function should be aware that only prior day entries will be available for deriving returns on the SDA Phase One implementation date of September 23, 2016. After that date, same-day returns will be included.
  2. The current FedACH Same Day Opt-in Service will cease to exist as of September 9, 2016 and there will be a two-week gap in service from September 9th until SDA Phase One implementation on September 23rd. Any items submitted for same-day processing after September 9th will settle the next business day. More details can be found on the FRB Services site or in their FAQs.

Federal Government Non-Participation

The Federal Government will not be participating in Phase One of SDA.

RDFI Impact:

There is no change to how RDFIs will process received Federal Government entries in the SDA environment. RDFIs can continue to rely solely on the Settlement Date assigned by the ACH Operator like they do today.

ODFI Impact:

ODFIs that transmit entries to Federal Government Receivers need to keep in mind that those entries (such as tax payments) are not eligible for Same Day ACH settlement. In the event where an origination file includes a same-day entry to a Federal Government Receiver, the ACH Operator will assign the settlement of that entry to the next business day. The ACH Operator will identify Federal Government payments by the Receiver’s Routing Number. Federal Routing Numbers have a value of “36” in the 5th and 6th positions.

However, there are exceptions to this format. The following Routing Numbers listed below are valid financial institutions that will be eligible to receive SDA entries (they just happen to have the “36” in the 5th and 6th positions of their Routing Number):

121036953 Manufacturers Bank
121136358 First Northern Bank of Dixon
121136785 Umpqua Bank
121136808 Monterey County Bank
122236244 Bank Leumi USA

As a financial institution, you should consider the following related to Federal payments:

  1. How will you be accounting for these settlement exceptions and/or excluding SDA originations with a value of “36” in the 5th and 6th positions of an originated entry beginning with SDA Phase One?
  2. There may be future routing numbers that will be made eligible for SDA and don’t belong to Federal agencies. The FRB is pursuing a conversation with Accuity, who assigns Routing Numbers, to address this issue and working towards a solution.
  3. Credits sent to Federal government entities will settle the next business day, even when the effective entry date shows the current or a stale date.
  4. State tax credit payments are eligible for SDA.

FRB Testing Plans for Phase One Implementation

The FRB shared their plans for testing SDA implementation. The main points are listed below:

  1. The FRB is planning for testing windows to be from Tuesday through Friday during the hours of 12:00 PM PT to 2:00 PM PT. Requests for time extensions will be accepted but testing will not be allowed on Mondays.
  2. Testing for all customers is slated to open on June 28, 2016 and will be open until September 5, 2016. FRB customers should have received a communication with more information, or they can go here: https://www.frbservices.org/files/communications/pdf/fedach/060216-same-day-ach-testing.pdf
  3. The test request form is available on the FRB Services site. FRB requests to allow for a minimum of one week for setup.
  4. Testing will include normal daily processing of files but there will not be any month-end scenario testing available.
  5. Bandwidth for testing is limited but there is currently no set limit in place for the number of test participants.
  6. FRB will provide a testing script to be used during testing. If you wish to deviate from FRB’s script, they must be informed. Additionally, if FRB performs any off-script testing, they will communicate what those variances are.

Fed Account Balancing

Financial institutions will need both the Advice Report and Summary Statement to reconcile their Fed account after implementation of SDA on September 23, 2016. Additionally, multiple advice reports may be needed as the Fed accepts files up to four days in advance of the settlement date. More information can be found here: https://www.frbservices.org/resourcecenter/sameday_ach/files/052616_sameday_ach_testing_support.pdf.

In addition, the NACHA and the ACH Operators have just announced a methodology for rounding the monthly SDA entry fees and credits. More information on the rounding methodology can be found here: https://www.nacha.org/news/rounding-monthly-ach-operator-statements-same-day-entry-fees

Resources

WesPay Same Day ACH site

Federal Reserve Bank Same Day ACH Resource Center

NACHA Same Day ACH site

SDA Entry Fees