Why do some employees on direct deposit have their money earlier than others?
Some institutions post funds to accounts at the beginning of the bank business day, this is not a universal practice. Other institutions post funds in the afternoon instead of the morning. Some institutions even post funds prior to receiving the funds from the State as a customer service. It is strongly recommended that you check with your financial institution to determine when your funds will be available. If you are not satisfied with their processing schedule, you may wish to consider using another financial institution.
Why isn't my direct deposit payment available the same day paper warrants are handed out?
The issue with posting dates is driven by the collision of a State regulation and the nationwide system for Electronic Fund Transfer (Direct Deposit).
The great majority of employers have a payroll system with a lag. Usually employees are paid every two weeks, but with a one to two week lag from the time they complete the work, until their payday. Our pay system is one of the rare ones with, for most employees, pay day is equal to the last day of the pay period. Here's where the problem comes in.
There is a long-standing State regulation that says employees should not be given their pay until they have completed their work for the pay period (this intuitively makes sense). This is why typically departments pass out warrants in the afternoon on payday. Now we layer on the direct deposit program. “Posting” date is when the banks get the money and also when they are required to have it available to employees. Although it varies, most financial institutions post early in the day on the posting date. When/if we make the posting date the same as payday, the banks and employees have the payments prior to the end of the pay period. Our general approach is to have the posting date the day after payday. Sometimes this works fine, but the direct deposit systems require that a “posting date” be a regular banking day (these are defined by the Federal Reserve Board). They must be a non-holiday weekday. As you can see, the delays come when payday is followed by a weekend and/or a holiday.
For many employees the problem is solved because some financial institutions choose to post the funds on payday as a service to their customers. (Essentially fronting the money, providing an interest-free loan).
What happens if a person had direct deposit and closed their account, but didn't cancel direct deposit first?
The financial institution will return the money to the State Controller's Office (SCO) within 5 to 7 days as "account closed". The SCO will cancel your direct deposit account, redeposit the payment and contact the employee's personnel/payroll office to either re-key the pay or advise that SCO will re-issue the pay. Before an account is closed, the employee should contact their employer's Payroll Office immediately to cancel their direct deposit enrollment.
What happens if I am overpaid through direct deposit?
If you receive an overpayment through direct deposit, the State has the option of either recovering the funds directly from the account you designated for direct deposit or recovering the funds from future salary payments. If the State chooses to recover the overpayment from future salary warrants, it may be necessary to remove you from direct deposit.
Am I the only one who can cancel my direct deposit authorization?
No. The State may remove you from direct deposit under the following conditions:
- Your direct deposit payment is returned (e.g., due to a closed account or invalid routing number); or
- You have requested a disability benefit; or
- It is necessary to recover/prevent overpayments
- An employee is frequently on dock status (e.g. leave without pay)
The Payroll Office will notify you as soon as possible if you are removed from the program.