Lesson 1: The Direct Deposit Process

ACH Process Overview

Direct deposit is an electronic method of payment that transfers funds directly into a payee’s account. The automated clearing house (ACH) network is the processor of financial transactions, and Nacha administers the ACH rules and guidelines. The Comptroller’s direct deposit program includes payments for:

• State employee payroll and travel reimbursements.
• State retirees.
• Individuals.
• Business and governmental entities.

The steps for creating a direct deposit payment are:

• A state agency submits a payment request to the statewide accounting systems.
• When the payment request is processed, the Comptroller’s office transmits the payment information to a contracted bank, referred to as an originating depository financial institution (ODFI), the next business day.
• The ODFI sends the payment information and funds through the ACH network to the Federal Reserve Bank, the ACH operator.
• The Federal Reserve Bank sends the payment information and funds to the payee’s financial institution, referred to as the receiving depository financial institution (RDFI), which then credits the payee’s account.

Direct Deposit Payment Dates

The date a direct deposit payment posts to the payee’s account is referred to as the settlement date. It is the date the RDFI makes the funds available to its customers.

When bimonthly and monthly employee payroll and monthly retirement payments process through the statewide systems, they include the pay date authorized by law for each payment type. These payments:

• Are sent through the ACH network two banking days before payday.
• Post to the payee’s account on payday, which is displayed on the Payee Payment Information (PYWRNT) screen as the issue date.

Supplemental employee payroll (non-bimonthly, non-monthly), supplemental retirement, vendor and employee travel reimbursement payments post two banking days from the date the payments process in the statewide system. For these payments:

• The issue date displayed on PYWRNT is the date the payment processed.
• Add two banking days to the PYWRNT issue date to determine the settlement date of the payment when it will post to the payee’s account. Exclude federal holidays when financial institutions are closed.

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