Payroll professionals are good at deadlines – which is a good thing because this year, some of them have a new one to contend with and it's only weeks away. Payroll providers who use banks for ACH direct deposit payroll processing must register all of their payroll customers with the National Automated Clearinghouse Association (NACHA) by March 1 for the bank to continue processing their direct deposits.
Why Is This Happening?
In September, NACHA began requiring payroll providers who use a bank to process their ACH payroll transactions — considered Originating Depository Financial Institutions (ODFIs) — to identify and register their payroll customers, referred to as "nested third-party sender customers."
The process was designed to promote "consistent customer due diligence among all ODFIs and serves as a tool to support NACHA's continuing efforts to maintain ACH Network quality," according to the NACHA website.
Registration of a payroll provider's customers includes:
- Company name and contact information
- Name and principal business location of each "nested" third-party sender (all of your customers)
- Routing number: specifically, the third-party processor's routing number as included in the identification field used in ACH transactions originated for the third-party sender
- Company identification(s) of the third-party sender
Additional information may also be required in cases NACHA sees as posing potential risk of financial losses, rule violations or excessive returns. In such cases, NACHA can issue a written request for supplemental information that may include:
- Doing-business-as names
- Taxpayer identification numbers
- Street and website address
- Name and contact information of a contact person
- Names and titles of principals
- The approximate number of originators for which the third-party sender transmits entries
- A statement describing whether the third-party sender transmits debit or credit entries (or both)
If requested, the additional information is required within 10 banking days.
All of the information provided must be kept up to date and failure to comply can subject a bank to fines which may lead banks to fine payroll providers.
How to Avoid NACHA Third-Party Registration
Keeping current with NACHA third-party registration is often a large time sink for companies, but it's one Cachet clients don't have to deal with.
Why? As an ACH direct deposit payroll provider and third-party processor subject to the registration requirements, keeping up-to-date on NACHA requirements is our responsibility, not that of our clients.
As a result, we've already collected this information on behalf of our payroll service bureau and remarketer clients because California has required it since 2013. We register our clients' clients, and keep this information updated at no extra charge. That's one less deadline for our clients. Could you use one less deadline too?