ARE YOU READY FOR SAME DAY ACH??

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1 ARE YOU READY FOR SAME DAY ACH?? The National Automated Clearing House Association (NACHA) recently adopted new rules that govern Same Day ACH processing. The new NACHA operating rules require mandatory participation in Same Day ACH processing. Credit unions that originate ACH transactions (ODFI) can elect whether or not to participate as an originator. However, credit unions that receive ACH transactions (RDFI) must have the ability to accept additional ACH files each day and post any Same Day ACH items to their member accounts. The new rules for Same Day ACH will impact ALL ACH participants, unlike the current FRB same day service which had optional participation. Additionally, the FRB same day service will be discontinued when the NACHA process is implemented later this year. The implementation process will occur in the following three phases: Phase Effective Date Requirements Phase 1 September 23, 2016 includes credits only with funds availability at the end of RDFI s processing day Phase 2 September 15, 2017 includes both credits and debits with funds availability at the end of RDFI s processing day Phase 3 March 16, 2018 includes both credits and debits with funds availability required by RDFI at 5:00 pm local time Clarification questions: Is there a reason why the process starts with credits only? The decision to start with credits was based upon feedback that NACHA received during an earlier same day proposal in Credits generally cause fewer exceptions and returns than debits, and therefore are viewed by many as a good way to gain initial experience processing same-day ACH transactions. Although phase one only focuses on credits you should also begin to consider what impacts phase two debit processing and phase three funds availability may have on your credit union. Are all ACH transactions eligible for Same Day ACH? All ACH transactions are identified by their Standard Entry Class code (SEC). All SEC codes are eligible for Same Day ACH except IAT (international ACH) and ENR (automated government enrollment request) transactions. Transactions over $25,000 are also excluded from the new Rule. For phase one, debit entries will not be allowed. All other origination transaction types, returns and notification of changes will be allowed. Is there a fee to process Same Day ACH transactions? Yes, a Same Day Entry Fee of $0.052 per origination transaction will be assessed as a surcharge to ODFI s and credited to RDFI s to cover the RDFI s costs of enabling and supporting Same Day ACH. This includes all forward origination transactions including pre-notes but excludes all returns or notifications of change transactions. The Same Day Entry Fee will be collected by the ACH Operators on behalf of the RDFI s and will settle to ODFI s and RDFI s on a monthly basis. ACH returns processed on the same day will not be subject to this fee. Alloya will not charge any additional fees for originating or receiving Same Day ACH transactions.

2 How do I know if an item is a Same Day ACH transaction? When receiving Same Day ACH, the settlement date assigned by the ACH Operator will be the only indicator for Same Day ACH transactions. It should be noted that the settlement date and the effective entry date may be different. The effective entry date is the date that the originator intended for the transaction to settle. The settlement date is the date determined by the ACH Operator and is based on when the originator actually processed the transaction. There will be an optional company descriptive date field that may show SD1300 or SD1700; however, not all originators may input this data and the ACH Operator will not validate this field. The SD1300 or SD1700 description translates to Same Day and the military time of the file distribution from the ACH Operator, however because this field is optional it should not be relied on by the RDFI for processing. RDFI Responsibilities All credit unions that receive ACH transactions are required to comply with the new Same Day ACH rules. There are a few things you will need to consider as you make adjustments to your policies and procedures to process Same Day ACH transactions. Step 1: Process additional file(s) All financial institutions that receive ACH transactions must accept Same Day ACH transactions as of the implementation date, September 23, On the implementation date, Alloya will distribute ACH receipt files up to three times per day: Distribution Window File Availability* Morning Files will be available by 6:00 am ET Noon Files will be available by 12:30 pm ET Afternoon Files will be available by 4:00 pm ET *All distribution files listed above may contain both same-day and future dated transactions. Times are estimates and are based on ACH Operator file distribution times which can vary. Your credit union will have the option to receive all three files or just the morning and afternoon files. If the latter option is chosen, then the transactions contained in the afternoon file would include any items from the noon distribution. If there are no transactions for a specific distribution time, then no file will be created for your credit union. Closer to the implementation date, Alloya will ask for your file distribution preference. Important! Please check with your data processor to make sure that your core data processing system can process multiple files per day and can generate exception reports at each file import. The standard NACHA file formats will not be changing. The files may contain a mixture of both same day items and future dated items. Same day items must be posted before the end of your processing day, while the future dated items may be optionally warehoused and posted on the effective date. Step 2: Make funds available to your members You should process transactions based on the settlement date provided by the ACH Operator. You do not need to review effective entry date or any other indicator to determine processing, nor do you need to determine same day eligibility for processing. Phase 1, effective September 23, 2016, an RDFI is required to make funds available from a Same- Day ACH credit in its member s account no later than the end of processing of transactions for that settlement date. While funds do not need to be available for cash withdrawal at that time (e.g., via 2

3 an ATM), they must be available to satisfy other subsequent debit entries against the account that may process after the afternoon file has been received. (e.g., to pay ACH debits and checks). Phase 2, effective September 15, 2017, same as above with the addition of Same-Day ACH debits. Phase 3, effective March 16, 2018, RDFIs must make funds available for withdrawal (including cash withdrawal at the teller or ATM as applicable) by 5:00 pm at the RDFI s local time. RDFIs may make funds available earlier; this time is a no later than deadline by which funds must be available. RDFIs always have discretion to make funds available earlier. Step 3: Process Returns Returns will be allowed, but not required, to be processed on the same day they are received. You still have to follow the normal time frame for ACH returns, but you should be aware that since settlement is one day sooner for Same Day ACH transactions, the return deadline is also one day sooner. Appendix Four of the NACHA rules states that Return entries must be received by the ACH Operator by its deposit deadline for the Return Entry to be made available to the ODFI no later than the opening of business on the second Banking Day following the Settlement Date of the original Entry. Alloya will implement the following cut-off times for processing ACH returns as of the implementation date, September 23, 2016: Return Window Cut-off Time* Return Settlement Morning 9:30 am ET Same day settlement by 1:00 pm ET Noon 1:30 pm ET Same day settlement by 5:00 pm ET Afternoon 7:00 pm ET Next day settlement by 8:30 am ET NOTE: You will now have until 1:30 pm ET to submit your ACH return items and receive the settlement on the same business day. Also note, that Alloya s cut-off times may differ from the FRB ACH Operator schedule. This is due to the fact that Alloya will need some time to process files before sending them to the ACH Operator on your behalf. Return transactions processed according to the cut-off times listed above may include both same day and prior day items as long as the items are returned within their respective time frame according to the return reason and transaction type. Step 4: Account for additional income The Rule includes a Same Day Fee on each Same Day ACH transaction so that RDFI s can recover, on average, their costs for enabling and supporting Same Day ACH. The Federal Reserve will pass through the fee income each month in the amount of $0.052 per Same Day ACH item received. Step 5: Review downstream applications Review all downstream applications and systems that may be impacted by Same Day ACH. Also review policies, procedures, agreements and disclosures that may need to be updated based on processing changes. For additional items to consider as a receiver of Same Day ACH transactions, please refer to the NACHA Same Day ACH RDFI Implementation Checklist. ODFI Responsibilities Processing Same Day ACH transactions will be optional for Originators and ODFI s. Processing Same Day ACH through Alloya s ACH services will require an opt-in request from your credit union. Closer to the implementation date, Alloya will ask for your opt-in preference. 3

4 If you opt-in for Same Day ACH, you will need to be aware of the following processing requirements: 1. You must insert the appropriate effective date in the ACH transaction. Alloya s system will process the ACH transactions based on the effective date that you enter. If you enter an effective date for the current date and submit the transaction prior to the Same Day origination cut-off time, the transaction will be forwarded to the ACH Operator for same day processing. 2. Transactions with stale dates that are submitted prior to the Same Day origination cut-off time will also be considered Same Day transactions. 3. You will be charged by the ACH Operator $0.052 for each Same Day ACH transaction. The charges will be assessed once a month. 4. During phase one, September 23, 2016, through September 14, 2017, only credits can be submitted for Same Day ACH transactions. After September 14, 2017, both credits and debits can be submitted. Understand the differences in how debit and credit settlement will post during phase one if a file contains both debits and credits. 5. Review policies, procedures, agreements, and downstream applications and systems that may be impacted by Same Day ACH. Alloya will implement the following cut-off times for processing ACH origination transactions as of the implementation date, September 23, 2016: Origination Window Cut-off Time* Same Day Origination Settlement Future Dated Origination Settlement Morning 9:30 am ET 1:00 pm ET same day 8:30 am ET next day Noon 1:30 pm ET 5:00 pm ET same day 8:30 am ET next day Afternoon 7:00 pm ET 8:30 am ET next day 8:30 am ET next day NOTE: You will now have until 1:30 pm ET to submit your ACH return items and receive the settlement on the same business day. Also note, that Alloya s cut-off times may differ from the FRB ACH Operator schedule. This is due to the fact that Alloya will need some time to process files before sending them to the ACH Operator on your behalf. Transactions processed according to the cut-off times listed above may include both same day and future day items (credits up to two days in advance and debits one day in advance). For additional items to consider as an originator of Same Day ACH transactions, please refer to the NACHA Same Day ACH ODFI Implementation Checklist. Important! The effective entry date is critical. Assuming the file is submitted by the appropriate deadline, it is the effective entry date field that triggers same day settlement for eligible transactions. The current processing day date in the effective entry date field is interpreted as an intentional indication of the desire for same day settlement. In addition, a batch will be eligible for same day settlement whether the effective entry date field contains the current processing date, or is invalid or stale. This also means that a batch could be unintentionally processed as same day where settlement would occur and the appropriate Same Day Entry Fee will be assessed. ACH Settlement The ACH Operator has implemented two new settlement times for ACH transactions. The new settlement schedule will be as follows for ALL ACH participants (receivers and originators) effective September 23, 2016: 4

5 ACH Operator Processing Window* Settlement Schedule Same day origination and return items submitted by 10:30 am ET 1:00 pm ET same day Same day origination and return items submitted by 2:45 pm ET 5:00 pm ET same day Future dated origination and return items submitted by 2:15 am ET 8:30 am ET next business day *Please note that Alloya s processing times may differ from the FRB ACH Operator schedule. This is due to the fact that Alloya will need some time to process the files after receiving them from the ACH Operator. Today, ACH settlement is only processed once a day at 8:30 am ET. You will need to understand how the additional settlement postings in the afternoon may affect your end of day cash positioning and make any necessary changes to your operations. For example, in phase one if you receive Same Day ACH credits then your end of day balances may be higher. In future phases when debits are allowed you will need to ensure that you have adequate balances at the end of the day to cover any debit settlement. What if I still have questions? Alloya is proud to have 11 Accredited Automated Clearing House Professionals (AAP) on staff that are here to assist any member through the process as part of the benefits of membership. To reach an Alloya AAP, AskAnAAP@alloyacorp.org, or contact either your Senior Business Consultant or Member Service Representative to connect you with a professional who can assist. You can also find more documentation online on NACHA s website at 5