With the focus on current events, you may not have noticed that the U.S. Department of the Treasury, Bureau of Fiscal Service (Fiscal Service) made updates to the Green Book (March 2020). The Green Book is a procedure manual for use by financial institutions in the processing of federal government ACH payments, from enrollments to returns and NOCs to reclamations. Many of the updates reflect recent ACH Rules changes implemented under 31 CFR 210, primarily amendments to the Same Day ACH Rules. Thus, bringing ACH payment processing by federal agencies more in alignment with the private sector. Additionally, the Fiscal Service updated definitions, as well as contact phone numbers, and provided some clarifications related to ACH payment processing.

Chapter 5, which covers the reclamation process, is an excellent resource and one of those chapters where clarifications were made. Unfortunately, one clarifying remark has caused some confusion instead.

As you know, by accepting a federal benefit payment, your institution agrees to reclamation actions and the debiting of your Federal Reserve account for any reclamations for which you may be liable. Your liability is the total amount of ALL federal benefit payments received after death or legal incapacity of a recipient unless you have the right to limit that liability. This does not change; however, the clarification italicized below appears to contradict this.

• Section 2, B. Limiting Liability (page 5-4, second bullet) states an RDFI may limit its liability if it “returns all post-death benefit payments it receives after it learns of the recipient’s death (but not post-death benefit payments it received before it learned of the death).”

This same statement is also reiterated in Section 3, Reclamation Procedures, A. Notification of Death on page 5-6. And it might lead an RDFI to believe they are responsible for returning only those post-death benefit payments received after they became aware of the death, and that’s not what was intended. According to the Fiscal Service, the purpose of the added wording was to inform RDFIs to not return payments that are not subject to reclamation. That is, leave federal benefit payments received prior to the date of death in the recipient’s account as these payments will not be reclaimed.

So, don’t be surprised if an updated version of Chapter 5 is released in the future to more clearly convey this point. Until then, remember your institution is fully liable for all federal benefit payments you receive after a recipient’s death. And that means once you have knowledge of a beneficiary’s death, it is your responsibility to act upon it and limit your liability.

Need a refresher on reclamations? Join us for our ACH Reclamations: Understanding Your Liability webinar on July 14th. You will learn about your liability for both commercial and federal government reclamations and what steps to take when you learn of an account holder’s death. We’ll also work through real-life scenarios to determine liability under 31 CFR 210 and the ACH Rules depending on the type of payment received. Register now!