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A Guide to Federal Government ACH Payments
4
Returns
Overview
This chapter describes the return process for federal payments.
In this chapter…
A: General Information on Returns ......................................................................................................... 4-2
Return Reason Codes (ACH Credits) ................................................................................................................... 4-2
Death Notification Entry .......................................................................................................................................... 4-3
Effect of Returning a Payment ............................................................................................................................... 4-4
Notice of Misdirected Payment ............................................................................................................................. 4-4
Manual Posting of Payments .................................................................................................................................. 4-4
No Holding of Payments in Suspense Accounts ............................................................................................. 4-4
Recipients Without Current Accounts ................................................................................................................ 4-4
B: Returning Payments Through the ACH.............................................................................................. 4-5
ACH Correct Preparation of Returns .................................................................................................................. 4-5
Claim Number Structure Table ............................................................................................................................. 4-5
C: Returning Partial Payments in Response to Notices of Reclamation ...................................... 4-6
D: Dishonored Returns ................................................................................................................................ 4-7
Most Common Errors ................................................................................................................................................ 4-7
E: Payments Returned in Error; Obtaining a Refund due from the Government
..................... 4-8
W
hat to do if a Payment was Returned in Error ............................................................................................ 4-8
Additional Information on TreasuryDirect Payments made in Error/Duplicate .............................. 4-9
SSA Program Service Centers ................................................................................................................................ 4-9
What to do if there are Duplicate Returns ...................................................................................................... 4-10
Restoring Funds ........................................................................................................................................................ 4-10
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A Guide to Federal Government ACH Payments
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A: General Information on Returns
All ACH Payments must be returned in accordance with Nacha Operating Rules & Guidelines. An
ACH payment must be returned if:
x
An enrollment has been terminated and a new enrollment for the same recipient has not been
completed,
x
The financial institution receives a benefit payment after it has actual or constructive
knowledge of the death or legal incapacity of a recipient, including a representative payee,
x
The financial institution is honoring a Death Notification Entry (DNE) or other notification of
death from a federal agency,
x
The account has been closed by the recipient, or the financial institution has closed an account
to which benefit payments are being delivered after giving the recipient 30 days written notice
(except where fraud is suspected; then the account may be closed immediately),
x
There is no current account for the recipient, and
x
For any other reason the financial institution is unable to credit the payment to the account.
Return Reason Codes (ACH Credits)
The government can accept all Nacha-approved return reason codes. Following is a list of some of
the more common return reason codes that RDFIs use to return government credits:
x R02 Account Closed
x R03 No Account/Unable to Locate Account
x R04 Invalid Account Number Structure
x R06 Returned per ODFI’s Request
x R14 Representative Payee Deceased or Unable to Continue in that Capacity
x R15
Beneficiary or Account Hold (Other Than a Representative Payee) Deceased
x R16
Account Frozen/Entry Returned Per OFAC Instruction
x R17
File Record Edit Criteria (Specify)/Entry with Invalid Account Number Initiated Under
Questionable Circumstances/Return of Improperly-Initiated Reversal
x R20
Non-Transaction Account
If you must return a federal payment for any reason not listed, use reason code “R20” on the return.
RDFIs that learn of the death of a recipient of benefit payments from a source other than the agency
are encouraged to use reason code R15 (Beneficiary or Account Holder Deceased) or R14
(Representative Payee Deceased) to notify government agencies of the death. By using these return
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A Guide to Federal Government ACH Payments
codes, the RDFI will satisfy both the requirement to return post-death payments that it receives
after actual or constructive knowledge of the death, and the requirement to notify the agency of the
death of the recipient.
RDFIs are able (but not required) to use Return Reason Code R17 – (File Record Edit Criteria /
Entry with Invalid Account Number Initiated Under Questionable Circumstances / Return of
Improperly-Initiated Reversal) to indicate that the RDFI believes an ACH Credit containing invalid
account information was initiated under questionable circumstances. This use of R17 is optional at
the discretion of the RDFI. Those RDFIs that elect to use R17 for this purpose are required to use the
description “QUESTIONABLE” in the Addenda Information field of the return. This description in an
R17 return differentiates returns that appear to be suspicious to the RDFI from those due to routine
account number issues.
Note: The existing Nacha-coordinated opt-in programs with federal and state tax agencies that allow
RDFIs to return questionable tax refund ACH credits using R17 will continue unchanged. These
programs will not be impacted by this additional optional use of the R17 Return Reason Code. Fiscal
Service and the IRS participate with Nacha in this program for IRS tax refund credit entries returned
as questionable. The Return Reason Code R17 will also continue to be used in its standard form for
returns involving required field errors. For more information-
https://www.nacha.org/content/irs-
refund-return-opt-program
Death Notification Entry
The Death Notification Entry (DNE) allows federal agencies to notify financial institutions of a
benefit recipient’s death. Only an agency of the federal government may originate a DNE. Currently,
SSA, OPM, and RRB originate DNEs. Other federal benefit agencies may originate DNEs at a future
date. The DNE is a zero-dollar entry with an addenda record. The addenda record contains the date
of death, the deceased individual’s SSN, and the amount of the next scheduled benefit payment.
Upon receipt of a DNE, the financial institution is encouraged to “flag” the deceased recipient’s
account to prevent accepting further post-death federal benefit payments. See below form common
errors with flagging.
Example: Flagging Joint Accounts
A married couple own a joint account. One spouse dies. A DNE is sent from the federal benefit
agency to the RDFI. The RDFI receives the DNE and the account is “flagged”. The surviving spouse
becomes eligible for surviving spousal’s benefits, and a benefit payment is sent to the joint account.
Since the account is “flagged,” the RDFI improperly returns the surviving spousal’s benefits with a
reason code of R15 (beneficiary or account holder deceased). The agency receives the returned
benefit and processes an improper death termination for the surviving spouse. The agency also
sends an improper DNE for the surviving spouse to the RDFI.
Solution: To protect joint account holders, the account should be “flagged” with another piece of
identifying information (i.e., deceased name, SSN). This allows the joint account holder to continue
receiving their own payments. If this is not possible, a new account with a new Direct Deposit
authorization should be established.
Example: Flagging Erroneous Report of Death
A recipient is receiving benefits. An erroneous report of death is received by the federal benefit
agency for the recipient. A DNE is sent from the agency to the RDFI and the account is “flagged”. The
recipient discovers the problem and presents proof to the agency and the RDFI of the error in the
fact of death. The RDFI fails to remove the flagging from the account. The agency resends the
benefit payment to the recipient’s account, which is still “flagged”. The RDFI returns benefits with a
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reason code for death of R15 (beneficiary or account holder deceased) to the agency based on the
erroneous flagging. The agency receives the returned benefit and re-processes the death
termination. The agency sends an improper DNE once again to the RDFI.
Solution: Always remember to remove any “flagging” on an account when a report of death proves to
be erroneous.
Note: If a financial institution needs to correct errors in their use of return reason codes when
returning funds, they should contact the agency receiving the return. Please see Chapter 7, Contacts,
for major paying agency contact information.
Effect of Returning a Payment
Any returned payment automatically revokes the Direct Deposit authorization and may stop further
payments from the federal agency to a recipient’s account. The recipient should contact the
authorizing federal agency to resume payments.
Notice of Misdirected Payment
In accordance with 31 CFR part 210, if an RDFI becomes aware that an agency has originated an
ACH credit entry to an account that is not owned by the payee whose name appears in the ACH
payment information, the RDFI shall promptly notify the agency. An RDFI that originates a NOC
entry with the correct account and/or RTN information or returns the original ACH credit entry to
the agency with the appropriate return reason code, shall be deemed to have satisfied this
requirement.
Manual Posting of Payments
Financial institutions may conduct a manual search of their unpostable ACH payments to determine
if the payment can be posted.
RDFIs may be held liable for ACH payments not processed timely or correctly. If the federal
government sustains a loss as a result of a financial institution’s improper handling of an entry, the
financial institution is liable to the federal government for the loss, up to the amount of the entry.
No Holding of Payments in Suspense Accounts
Under no circumstances should a financial institution hold unpostable incoming payments
indefinitely in a suspense account, or by any other means, nor should payments otherwise be held if
any of the conditions apply on when to return a payment. Holding payments may constitute a
breach of the financial institution’s warranty for the handling of federal government ACH payments
under regulations codified in 31 CFR part 210.
Recipients Without Current Accounts
Under normal circumstances a financial institution should not open a new account in response to an
unpostable payment. If the recipient closes the account and opens a new account, the recipient must
establish a new Direct Deposit authorization. If a recipient’s account has been closed, the financial
institution must return any subsequent payments made by the federal agency to the account. However,
when an account is closed due to fraud and a new account is opened at the same financial institution to
replace the account with fraudulent activity, then only an NOC is required."
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A Guide to Federal Government ACH Payments
B: Returning Payments Through the ACH
ACH Correct Preparation of Returns
It is essential that RDFI employees preparing returns have access to data in the original item
originated by the government disbursing office. If a processor is used, RDFIs should be sure that the
return entry is properly formatted to include the data from the original entry.
“When a Return Entry is prepared, the original Company/Batch Header Record, the original Entry
Detail Record, and the Company/Batch Control Record are copied for return to the Originator”
(Nacha Operating Rules & Guidelines). If accurate data is not provided in the return entry, the
government disbursing office will dishonor the return.
The following four fields must be identical to the original payment data:
1.
Trace number (provided in the entry detail record),
2.
Effective entry date,
3.
Amount of payment, and
4.
Individual ID number (i.e., claim number. See the Claim Number Structure Table below).
Note: Financial institutions using data processors could receive reformatted data which may contain
errors or omissions. The original payment information must be used in its exact format to avoid
rejections.
Financial institutions should carefully track returned benefit payments to ensure that the returns
are not dishonored. This could create an additional liability for the financial institution in a
reclamation case.
Claim Number Structure Table
The following table represents correct claim number structures used in formatting returns.
AGENCY CLAIM NUMBER STRUCTURE EXAMPLE
Social Security Administration 999999999XX
999999999X
999999999
123456789C1
123456789A
123456789
Office of Personnel Management Xb9999999bXb
Xb9999999b9b
F_1234567_W_
A_1234567_0_
Department of Veterans Affairs 999999999b99b99
99999999b99b99
162306890_10_01
12345678_00_06
Railroad Retirement Board
Retirement/Annuity
Unemployment/Sickness
XXX999999999b9b
Xbb999999bbbb9b
XXbZZZZZ9bbbb9b
bbb999999999
WCA123456789_7_
A 123456 1_
WD_000006 8_
123456789
Department of Labor 999999999XXbXXb 123456789LW_MB_
Key: X = alphanumeric, 9 = numeric, b = blank, Z = zero filled, _ = space
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C: Returning Partial Payments in Response to Notices of
Reclamation
Payments should be returned by ACH except in limited circumstances. If a partial payment is being
returned in response to a Notice of Reclamation (FS Form 133), a financial institution can elect to
either have their account debited for the partial payment, or, alternatively, returned by check. In no
other case should ACH returns be made by check, except as described in the Note below. Please
refer to Chapter 5, Reclamations, for more information including how to request an ACH debit
authorization.
Note: If the original payment data is not available, a financial institution may be forced to return an
ACH payment by check. The financial institution will receive credit. However, in these cases, credit will
be delayed due to manual processing. Note that under Nacha Operating Rules & Guidelines, records of
all entries including return and adjustment entries must be retained for six years from the date the
entry was transmitted.
If the financial institution is returning a payment that is beyond 6 years, the financial institution
may do so by mailing the check and related correspondence to the following address:
U.S. Department of the Treasury
Bureau of the Fiscal Service
National Payment Integrity and Resolution Center
P.O. Box 51318
Philadelphia, PA 19115
The table below shows how to return a partial payment by check in response to a Notice of
Reclamation.
STEP ACTION
1 Send the government disbursing office a check payable as indicated on item C-3b on the Notice of
Reclamation.
DO NOT SEND THE CHECK TO THE ORIGINATING FEDERAL AGENCY.
2 Attach a cover letter listing the following information for each payment subject to return:
• effective entry date,
• amount of payment,
• individual identification number (i.e., SSN/claim number), and
• reason for return.
If the above payment information is not available, provide the following information:
• recipient’s name,
• recipient’s SSN or other applicable federal government identification number,
• date of death, and
• name of originating federal agency.
The cover letter must always include:
• recipient’s name, and
• name of originating federal agency.
Provide the name, address, and telephone number of the financial institution contact.
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D: Dishonored Returns
ACH return entries will be dishonored by the government disbursing office if discrepancies exist
between the data on the return item and the data on the original payment.
Most Common Errors
For Treasury-disbursed payments, four fields are read on return items. If any one of these four
fields are not identical to the original payment data, Treasury will dishonor the return.
The following four fields must be identical to the original payment data:
1.
Original Entry Trace Number (provide in the addenda record),
2.
Effective entry date (i.e., payment date),
3.
Amount of payment, and
4.
Individual ID number (i.e., claim number).
The discretionary data field on the return item should be left blank ONLY if it was blank in the
original ACH entry. If the field contains data in the original entry, the exact same data must be
included in the return entry.
Note that a VA claim number may be an 8-digit number with a blank in the leading space of the
individual ID field. If the space is ignored, and the number is left-justified, the return will be
dishonored. (See the claim number structure table on page 4-5.)
If a financial institution receives a dishonored return, the financial institution should correct the
information in the return and originate a contested return in accordance with Nacha Operating
Rules & Guidelines.
Dishonored Return Codes:
x
R61 - Misrouted Return
x
R67 - Duplicate Return
x
R68 - Untimely Return
x
R69 - Field Errors (the error(s) will be identified in the Addenda Information field on the
dishonored file positions 59-79. The two-digit code, separated by an asterisk, will be written
for each error found.)
01 - Return Contains Incorrect DFI Account Number
02 - Return Contains Incorrect Original Entry Trace Number
03 - Return Contains Incorrect Dollar Amount
04 - Return Contains Incorrect Individual Identification Number/Identification Number
05 - Return Contains Incorrect Transaction Code
06 - Return Contains Incorrect Company Identification Number
07 - Return Contains an Invalid Effective Entry Date
x
R70 - Permissible Return Entry Not Accepted
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E: Payments Returned in Error; Obtaining a Refund due from
the Government
If a financial institution needs to correct errors in their use of reason codes when returning funds,
they should contact the agency receiving the return. Please see Chapter 7, Contacts, for major
paying agency contact information. Any payment returned for “death” will cancel both the Direct
Deposit authorization and the recipient’s entitlement to that payment.
If you are due a refund from the government under ACH, regardless of whether you have returned
too much, returned the wrong item(s), or the government debited you too much (e.g., on an ACH
reclamation), follow these instructions to claim your refund.
Please note that the RDFI is not required to advance credit to the recipient for a payment returned
in error. However, if the RDFI did advance credit, it should state this in any communication with the
federal agency.
What to do if a Payment was Returned in Error
ACTION STEPS
1. Contact the federal agency that authorized the payment. Do not contact the government
disbursing office.
Payment Type Contact
OPM Annuity
(formerly Civil Service Retirement)
“CIVIL SERV”
U.S. Office of Personnel Management
P.O. Box 45
Boyers, PA 16017
(724) 794-2005
Social Security
“SOC SEC”
SSA Program Service Center (Refer to SSA Program Service
Centers section in this chapter for appropriate addresses).
Supplemental Social Security Income
“SUPP SEC”
Social Security Administration
Certification and Accounting Branch, Analyst
Room 3-A-2 East High Rise Building
6401 Security Boulevard
Baltimore, MD 21235
(410) 966-5353
Fiscal Service
“TreasuryDirect”
Bureau of the Fiscal Service
Treasury Retail Securities Services
P.O. Box 9150
Minneapolis, MN 55480-9150
(844) 284-2676
Note: Include with your letter a debit advice, Return Item- Credit Form, and any other documents that
confirm the duplicate or erroneous return.
VA Compensation or Pension
“VA BENEFIT”
None.
Note: Payments returned to the VA in error cannot be recalled. They will be reissued to the recipient’s
home address.
Railroad Retirement Board Railroad Retirement Board Direct Deposit Coordinator
(312) 751-4704
For all other payment types The federal agency’s local office listed in the telephone
directory.
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2. Promptly notify the recipient of the error.
If you erroneously reported death on the ACH return, advise the recipient to contact the
originating federal agency immediately to reactivate payments.
Advise the recipient that the returned payment may be sent via check to their home. The
recipient should contact the federal agency to ensure their current home address is on record
and that payments are handled properly.
3.
Be aware that your incorrect notification of death to a federal authorizing agency (OPM,
SSA, RRB) may result in a DNE being sent by the agency.
If a DNE is received, be sure to remove any electronic indicator or flag that would automatically
return future payments to the account.
4.
Initiate a new enrollment to reactivate ACH payments. Please see Chapter 1, Enrollments,
for more information.
Note: A copy of the financial institution’s original enrollment form may be sent to the federal agency if all the
information is still correct.
Additional Information on TreasuryDirect Payments made in
Error/Duplicate
If a payment is made in error, or if a duplicate payment is made, the financial institution will receive
either a written or electronic notice from TreasuryDirect that will include the following:
x
deposit account name,
x
deposit account number,
x
date of the improper payment, and
x
amount of the improper payment.
SSA Program Service Centers
The Social Security Administration provides a listing of their regional Program Service Centers,
which includes each service centers telephone number at this link:
www.ssa.gov/representation/pct_contact_info_54older.htm.
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What to do if there are Duplicate Returns
The table below shows what to do if there are duplicate returns.
IF . . . THEN . . . AND . . .
two identical ACH returns are
made for the same payment
the government disbursing office will
automatically return the duplicate return
no further action is required
by the financial institution.
an ACH return was sent, and the
same payment was returned by
check
the financial institution should promptly write a
letter of explanation to the federal agency that
authorized the payment and include copies of
the following:
x financial institution’s claim for a refund
x debit advice
x other documentation that confirms the
duplicate return/debit action
the financial institution awaits
further notification from the
authorizing federal agency.
Note: Only the federal agency
that authorized the payment
can make a refund.
the financial institution has been
debited (TFS, Notice of Debit) for
a payment that was already
returned
Restoring Funds
The authorizing federal agency will restore the funds after researching and verifying the request.
The restoration will be made by the method agreed upon by the federal agency, the financial
institution, and the recipient, with ACH being the preferred method.
