Purpose

To encourage agencies to promote direct deposit for their employees and to outline OSC guidelines for the Direct Deposit program

Affected Employees

All Employees

Effective Date(s)

Immediately

OSC Direction

Direct deposit is the preferred method for paying State employees and benefits both New York State and the employees. OSC encourages agencies to promote full direct deposit for employees who currently receive a paycheck or receive a paycheck and a direct deposit advice. Direct deposit is cost effective.

Background

Regulations governing the Direct Deposit program are provided in Chapter IV, Part 102 of the Official Compilation of Codes, Rules and Regulations of the State of New York.

Minimizing the Risk of Unrecoverable Overpayments

All employees should be offered the opportunity to participate in direct deposit unless they have demonstrated specific behavior that puts the State at risk of issuing unrecoverable overpayments.

To minimize the risk of unrecoverable overpayments, OSC offers the following guidelines for use by agencies:

• An agency may restrict direct deposit enrollments or cancel an employee's enrollment in direct deposit if there is a high risk of an unrecoverable overpayment. A risk of an unrecoverable overpayment may exist when an employee has a pattern of unauthorized absences or absences without accruals.
• New employees are not considered a risk and should be encouraged to enroll in direct deposit when hired. Additionally, employees returning from LWOP should be allowed to enroll in direct deposit without accumulating time accruals, unless there was a pattern of time abuse prior to the leave.
• Whenever possible, agencies should recover overpayments transmitted through direct deposit from a subsequent payroll instead of canceling an employee's direct deposit or requesting a recovery of direct deposit funds from OSC.

Agency Actions

Enrollments/Changes to Direct Deposit

Refer to Payroll Bulletin No.(s) 390 and 406 for instructions on processing on-line data entry of direct deposit. The direct deposit enrollment form AC 2772 is available on the OSC website.

Instructions for enrollments and changing direct deposit enrollments are printed on page two of the direct deposit enrollment form. The direct deposit form is a legal document and cannot be altered by the agency, employee or financial institution.

If an employee has more than one account, the accounts should be entered on the form and in the Payroll System in priority order. Funds will be deposited to the accounts in the order listed.

The form provides information on the appropriate action to take if the employee needs to change direct deposit account information. Employees should not close current accounts until they receive confirmation of the requested action in their paychecks or on their direct deposit advice.

Promote Direct Deposit

Agencies should review their current direct deposit enrollment and cancellation policies and practices to ensure there is the appropriate balance between promoting direct deposit and protecting New York State assets. The existence of internal controls should not result in unnecessarily discouraging or restricting participation in direct deposit. OSC discourages the following:

• Not offering direct deposit to new employees at the time they are hired.
• Canceling an employee's direct deposit because they didn't pick up their direct deposit advice.
• Requiring excessive levels of accrual balances to initially enroll and maintain enrollment.
• Denying direct deposit for failure to submit travel reimbursements on time.

Promotion is the key to a successful Direct Deposit program. When direct deposit is actively promoted, employee participation increases. All agencies are encouraged to promote direct deposit. The following actions may enhance direct deposit participation:

• Emphasize that direct deposit is the preferred method for paying State employees.
  • Funds are electronically transferred to the employee's account(s) at their designated financial institution and the funds are available on payday.
  • No need to go to the financial institution to deposit a paycheck.
  • No worries about lost or stolen checks.
  • No worries about delivery mix-ups or delays.
• Encourage new employees to enroll in direct deposit at the time of hire. It is not necessary for a new employee to have a minimum level of accruals to be eligible to participate in direct deposit.
• Distribute information to employees with paychecks periodically and ensure enrollment forms are readily accessible.
• Promote direct deposit in agency newsletters and communications with employees at least twice a year.
• Provide Internet links to the OSC Direct Deposit Enrollment Form AC 2772. 

Movement Between Payrolls

Direct deposit data on the employee's payroll system record should be verified for all rehires, concurrent hires and transfers.

OSC Actions

Invalid Accounts

When OSC receives a rejected direct deposit transaction, OSC produces a check for the employee. This process may take one week or more after the original check date. If the direct deposit transaction is rejected due to agency error, the agency should refer to Accounting Bulletin No. A-472 for guidelines on salary advances from Petty Cash advance accounts.

The employee's financial institution rejects the direct deposit transaction when:

• incorrect information is entered into the employee's payroll record; or
• an account is closed prior to recording the cancellation in the employee's direct deposit payroll record.

Automatic Cancellation Procedures for Inactive Employees

As stated in Payroll Bulletin No. 316, after three (3) full pay periods without being paid, OSC automatically cancels direct deposit for employees with a job status of Retired, Leave of Absence Without Pay, Terminated or Deceased. This policy has been implemented in order to ensure that a paycheck is issued (rather than direct deposit) to inactive employees who are eligible for additional payments, since those employees may have closed or made changes to their financial accounts following their separation from State service. The system will only change the status to Inactive on an employee's record, which means that the previous direct deposit account information will be retained. If an employee returns to an agency payroll, the agency only needs to insert a new row with a new effective date, and change the status to Active. Once this is done, the previous direct deposit account information will be activated.

Direct deposit will not be canceled for employees under the Action of Paid Leave of Absence with a status of Workers' Comp Sup (WSP) or Workers' Comp Pt Sup (WPS).

Performance Measures

OSC is exploring adding direct deposit enrollment as a performance measure for the Bureau of State Payroll Services' "Agency Report Card."

Questions

Questions related to promoting direct deposit may be directed to the Payroll Services mailbox.

Question regarding transaction processing may be directed to the Payroll Deductions mailbox.