Electronic Payments/EFT: Working with Private Sector Employers
Remitting Child Support Payments Electronically to State Disbursement Units
All state child support agencies (except South Carolina) accept payments at their SDU by Electronic Funds Transfer (EFT)/Electronic Data Interchange (EDI), the primary method of sending payments electronically. The EDI portion of the transmission includes identifying information so that the payment can be properly credited to the payor's case.
The SDUs centralize the collection and disbursement of specified child support payments. SDUs are required to process all payments on child support orders in both IV-D cases and non IV-D (private) orders in which the support order was initially issued in the state on or after January 1, 1994, and in which the income of the noncustodial parent is subject to withholding.
The initial effort required to begin using EFT/EDI is well worth it. Employers and state agencies that switch to electronic payments will enjoy lower costs, fewer errors, and faster processing.
Benefits of Remitting Electronically:
- Eliminates the cost to employers of printing paper checks and supporting documents,
- Eliminates the cost to employers of postage and delays due to lost or misdirected mail,
- Reduces check handling and processing costs,
- Reduces data entry errors, and
- Speeds child support payments to custodial parents.
Getting Started With EFT/EDI
There are three steps employers can take to use EFT/EDI for quicker, easier child support withholding.
Step 1: Determine whether your payroll/accounting system supports electronic payments for child support. If it does not, there are three possible sources of help:
- In-house information technology (IT) staff may be able to make programming changes so that you can produce electronic payments for child support, including the EDI (electronic data interchange) DED child support addendum record that states need in order to identify the payments.
- Your payroll/accounting software developer may have an enhancement that supports electronic payments for child support. Contact your user's group or software representative.
- Your bank may have a software package that will enable you to produce the file formats necessary for electronic payments. Contact your bank and ask for someone in "Cash Management", "Treasury Management" or "Treasury Services."
Step 2: Contact the appropriate state child support enforcement agency's state disbursement unit (SDU).
- This is not always the child support agency or SDU where you are located. It is the agency or SDU in the state that collects the child support from your employee, i.e., where you send the funds.
- Find out the EFT/EDI start-up procedures from the state to which you send funds. Do not attempt to transmit child support withholdings electronically without this information.
Step 3: Conduct the EFT/EDI start-up procedures for each state to which you send child support income withholdings. These procedures will typically include:
- An exchange of basic banking information, bank routing codes, bank account numbers, Federal Employer Identification Number (FEIN) and Federal Information Processing Standards (FIPS) code information with the state child support enforcement agency.
- A reconciliation between state records and employer records of names, Social Security numbers, and case identification numbers so that each employee's withholdings are properly credited.
- A transmission of an initial test file, or pre-note, to ensure that the automated clearing house (ACH) records are formatted and transmitted properly.
Third Party Senders and SDUs
User Guide: The National Automated Clearinghouse Association (NACHA) established the Task Force on Electronic Child Support Payments in 2002 to assist the Federal Office of Child Support Enforcement's promotion of electronic payments for child support. The Task Force developed a publication for employers to use when implementing electronic payments. This publication, User Guide for Electronic Child Support Payments is available on the NACHA website. If this link doesn't work, go to www.NACHA.org, click on News and Resources, then click on Legal and Regulatory Resources. You will then see the link for the Child Support User's Guide.
Case Reconciliation: Before you begin sending electronic payments to a state disbursement unit (SDU), you must contact the state and perform case reconciliation so they have a chance to correct any case data.
Banking Information: After you perform case reconciliation the SDU will give you its routing transit number (RTN) and bank account number. Please do not share this information with an employer client until they have performed case reconciliation with the state EFT contact.
Format Issues: SDUs need to know who the actual employer is as well as who is sending the payment. We are asking third party senders to identify themselves and their employer clients in the Company/Batch Header Record (5 record) as follows:
- Company Name (field 3): name of employer client. The NACHA ACH 2012 Rules state: "In a transaction in which the Originator of a credit Entry is not the payor of the transaction (the party from which payment is ultimately being directed), the Company Name field of the credit Entry must contain the name by which the payor is known to and readily recognized by the Receiver of the Entry."
- Company Discretionary Data (field 4): federal employer identification number (FEIN) (without dashes or any preceding numbers) of the employer client. The NACHA ACH 2012 Rules state: "This field in the Company/Batch Header Record allows Originators and/or ODFIs to include codes (one or more) of significance only to them, to enable specialized handling of all Entries in that batch. There is no standardized interpretation for the value of the field."
Company Identification (field 5): federal employer identification number (FEIN) (without dashes) of the third party provider/sender, preceded by the number 1. The NACHA ACH 2012 Rules state: "The Company Identification is an alphameric [alphanumeric] code used to identify an Originator. The Company Identification Field must be included in all Entries. The Company ID may begin with an ANSI one-digit Identification Code Designator (ICD) followed by the identification number. The ANSI Identification Numbers and related Identification Code Designators (ICD) are:
- IRS Employer Identification Number (FEIN) '1'
- Data Universal Numbering Systems (DUNs) '3'
- User Assigned Number '9'"
- Company Entry Description (field 7): name of your company. The NACHA ACH 2012 Rules state: "The Originator establishes the value of this field to provide the Receiver with a description of the purpose of the Entry." If you enter your name, we will know who is sending the payments.
Batches: If you are sending payments in the CCD+ or CTX 820 file format, please prepare a separate batch per employer client.
Report Changes: If you make a change to your data, for example, one required by your bank that affects the data in the Company Batch Header record, you are strongly encouraged to notify the SDUs of those changes in advance so there is minimal impact to e-payment processing.
Reversals: If you make a mistake in your e-payment transmission, please do not reverse the payment. Instead, contact the SDUs immediately so they can try to stop the payments from being disbursed.
Questions? Contact the Employer Services Team at firstname.lastname@example.org.
Employers and third party senders may also learn more about remitting child support payments electronically by linking to the Department of Treasury's Bureau of the Fiscal Servicec web site at http://www.fiscal.treasury.gov/.
National Automated Clearinghouse Association (NACHA)
The National Automated Clearinghouse Association (NACHA), the trade association that promotes electronic payments, helped establish the DED [Deduction] Child Support Addendum Record as the Electronic Data Interchange (EDI) record of case information when sending an electronic payment.