NASACT



TOPIC: Debit Cards for PayrollOFFICE: Division of AccountsSTATE: TNDATE: 03/26/2018QUESTION / ISSUE:Over the next few months, the state of Tennessee will be considering offering a bank debit card to the unbanked portion of state employees now receiving checks.? While the total population of this group is under 1,000, we think it may offer convenience to the employees and reduce the possibility of fraud or abuse through missing checks.Before implementing this change, we wanted to poll other states as to their experience, if any, with debit cards for payroll. ?If you could take a few minutes to respond, it would be most appreciated.Does your state offer bank debit cards as an option for state payroll?If so, is there a requirement that direct deposit or a debit card be utilized for payments?? Have there been problems associated with this policy?? Would you be willing to share your policy and/or your direct deposit authorization form?? Have you encountered any problems related to cash access or fees for use?Any other comments that might assist us?ColoradoColorado requires direct deposit and does not use cards.KansasYes.? State of Kansas (SOK) has had a payroll paycard program since 2003.? A paycard is treated just like any other direct deposit for enrollment/processing through payroll.? In today’s environment, we also see employees who are coming to SOK with their own paycards (i.e., Walmart loadable debit card, etc.).Effective October 1, 2010 Kansas implemented a 100% electronic deposit policy for payroll and travel and expense payments.? Kansas has very employer/paycard friendly laws.? Kansas statute K.S.A. 44-314 ?provides the basis for the SOK policy as it allows the employer to pay wages by payroll card and to offer an alternative electronic payment method as a default option for employees that fail to designate a financial institution account for EFT deposit.? It requires that if using a payroll card the employee be allowed at least one means of fund access withdrawal per pay period at no cost to the employee for any amount up to and including the total amount of the employee’s net wages and provides requirements for notification/training for initial roll-out of a program and that no initiation, loading, or participation fee can be charged to the employee with the exception to replace a lost, stolen or damaged card. ?When seeking a vendor for the program, the RFP requirements are drafted to require that there be no cost to the state by the vendor for the paycard program.Paycards are really a benefit (and a non-issue) for Kansas….there have been only a handful of times over 15 years that there has been a reason to contact a vendor.? One issue occurred at the very beginning of the program for one individual when the net pay limit threshold was set at $7,500 for security purposes and the person had a final payout that exceeded that and wanted to transfer the full amount from the card to his bank account and it wasn’t working..? After contacting the vendor, the threshold was waived and the process was completed. The State of Kansas Authorization for Direct Deposit of Employee Pay and/or Employee Travel and Expense form (DA-184) is available at (scroll down to DA-184 and select download)Terms are negotiated with the contract vendor.? Employees have multiple ways to access their funds without fees (Cash back at POS; transaction at any Visa-member bank; In-network ATM; etc.) so the opportunity exists for an employee to avoid fees completely or to make the choice to incur fees per the agreement (i.e., out-of-network ATM, foreign country, expedited mailing of new card).? The card is portable (can be used to receive other payments, used after separation from employment with SOK, etc.) so the agreement is between the employee and the paycard vendor.? For the protection of employees, in the most recent RFP it was specified that the vendor could not enter into agreements with employees to allow overdrafts/extensions of credit by separate agreement with the employees.? Multiple options exist for employees to use text alerts, on-line apps, customer service, etc. to obtain account/balance information before making a purchase, etc.? It also allows a savings feature where they can set aside money from the paycard to a designated ‘savings’ tool, companion cards (for spouse/child), on-line bill pay options, ability to do online purchases/reservations, etc. which are all benefits for individuals who choose to remain unbanked. ? State laws vary significantly in this arena so ensure compliance with state statutes when implementing.At the time of our conversion in 2003 there were 5,000 employees who did not receive pay electronically.? The 100% policy provided an estimated annual cost savings of $230,000 and upon implementation, only 500 of the 5,000 actually ended up on paycards…the others had existing bank accounts but had just never signed up for direct deposit for a variety of reasons (i.e., didn’t want spouse to know how much they got paid, etc.).? The use of paycards (even if some fees are incurred by choice) are reported by the industry to save unbanked employees money from the reduction of check-cashing/money order fees, etc.SOK does still maintain the ability to cut paper checks in very limited, one-time circumstances (i.e., new employee abandons job before completing on-boarding and providing bank information/receiving paycard). Paycards have been great for SOK and employees and even the initial transition was much easier than anticipated…it just works!KentuckyKentucky has a mandatory direct deposit policy which incorporates use of a Payroll Card (pre-paid debit card) when a personal bank account is not available for direct deposit. This policy applies to anyone hired on or after 1/1/15. Those hired prior to that date have the option to receive a paper check; however, that number currently sits right under 100 employees and continues to decline through attrition.Direct deposit is a requirement, though use of the Payroll Card is not. We simply make that available to employees who do not have a personal bank account. (Note: Our system allows for employees to have unlimited banks set-up for direct deposit, so we do have some employees that utilize both a personal account and a Payroll Card as a personal preference.)Have there been problems associated with this policy?? Not related to the actual Payroll Card, but we did experience some push back on stopping paper checks and implementing the direct deposit piece. We regularly monitor to ensure that new hires/rehires are promptly enrolling in direct deposit. When we find an employee who has not, we simply advise the agency HR office to contact the employee and have them enroll by a specified date. If they are not enrolled by that date, we create/order a Payroll Card for them. Aside from needing to address a few technical issues (see #3), there have been no problems with the Payroll Card.All information is available on our website at: , select Payroll Card (option #2) for those specific details.Cash Access/Fees: Our vendors’ fees are minimal and the card can easily be used without incurring any. Our vendor expanded their original network of fee-free ATMs for us, to include All-Point ATMs. Additionally, VISA branded banks offer fee-free teller assistance. A couple employees confused the two, assuming that an ATM outside of a VISA branded bank would always fee-free. We had to clarify this was not the case and that employees should confirm the type of ATM before assuming fee-free use.Timing of Payroll Card creation/delivery versus set-up for direct deposit. Payroll cards are typically requested by the employee, through their agency HR office. That office routes said request to the Personnel Cabinet for processing. In most cases, we offer same-day processing by accessing our vendor’s online system to submit the request. Requests are processed same day if submitted during business hours. Payroll Cards are created by the vendor and delivered directly to the employee’s home address within 7-10 business days. Depending on the day we receive and process the request and the upcoming payroll calendar, we can’t always guarantee that the employee will have received the Payroll Card by pay day. After a few lessons learned, we do not set-up a Payroll Card for direct deposit until we know it has been received by the employee. As a result, we will allow for an employee to receive a paper check until we can get that card in their hands. We had a few instances where direct deposit was set-up immediate after we ordered the card, but the employee never received the card (usually due to the employee providing an incorrect address or accidently throwing away the card packet received in the mail). We were able to work around this by connecting the employee with the vendor to schedule a Western Union transfer while they awaited a replacement card to be delivered. Our direct deposit policy has been successful, and we have been happy with the service provided by our Payroll Card vendor, Bank of America. We currently have around 40,000 individuals being paid via direct deposit twice monthly, with approximately 300 using the Payroll Card. MinnesotaNo.? In the past, we had offered it through our servicing bank; but it was at the initiation of the employee.? We no longer offer this as an option.We have statute, which allows the commissioner of our agency to set policy.? Our policy requires that all state employees have direct deposit.? There are a few specified exceptions.? In addition, an employee may request an exception.? Initially, we had some push back.? We worked with a couple of credit unions who had offices throughout the state, as well as our servicing bank.? Each agreed to open an account for employees if their paycheck was direct deposited even if the individual may have otherwise had difficulty getting an account.? A copy of the direct deposit policy and procedure, as well as the direct deposit and exception forms are attached.? When payroll cards have been used, the employees initiated the application for the card and all fees were the employee’s responsibility.? Our servicing bank had not charged us initially; but usage was low.? We stopped the program rather than incurring any additional fees.There is no way to “enforce” the policy, so one never achieves 100%.? We pushed very hard to get most employees on direct deposit by providing some options.? Employees are told direct deposit is a requirement at hire and the direct deposit form is part of the new hire activity guide.? We maintain over 99% direct deposit.? The number of checks issued is monitored each pay period.? If the number begins to rise, then we contact the agencies who have seen an increase in printed checks (warrants).? Also, when the direct deposit requirement was initiated; we stopped providing the paystub information on the printed check.? Employees needed to access self-service for their paystub.? Employees can request that their paystub be printed and mailed; but we don’t advertise this.? Finally, we do send a memo to agencies twice a year to remind them to run the report and follow up on employees who don’t have direct deposit.\sNevadaNevada does not offer debit cards to state employees in lieu of a negotiable check.New YorkNew York does?not offer?bank debit cards for payroll purposes at this time. However, it's an option that we may pursue in the future for the unbanked.OklahomaYesa. Yes, state statute. ?Not really, we’ve had it in place for over 13 years now.? Yes, the administrative rules are based on statute and can be found at the Secretary of State website under the Oklahoma Administrative Code Title 260, Chapter 25, Subchapter 25. The form at the following link: Not really, as long as the employee understands when fees are charged and when they are not. Our treasurer’s website has our paycard information along with a list of FAQs and fees charged. The employee also gets a list of fee/no fee items when they receive their card. Lots of communication, employees will get nervous. If they don’t have a bank account now for direct deposit, they might be unhappy about getting a paycard. OregonHere is a link to our website with information on the pay card that we offer to state employees.? There is also a link to the “Focus Card” and direct deposit authorization forms that we use. South CarolinaSouth Carolina does not have debit cards for payroll. There is still some concerns and fees that has prevented the State Treasurer’s Office from offering this as an option. South DakotaSouth Dakota has had debit cards for several years as an option for payroll.? We do have mandatory direct deposit and those who do not have bank accounts are required to get a debit card.? They can, of course, claim hardship or other reasons for not using a debit card.? We have very few employees who receive a paper check.? On our last payroll, 9,271 employees were paid and only 71 paper checks were issued.? Employees sign up for debit cards on our employee self-service application.? To my knowledge, we have not had any major issues.? There is no fee to use except for ATM withdrawals.? There is one free withdrawal per deposit made.TexasResponse 1:Texas has a bank debit card for payroll only and has a contract with a vendor for that card.? It is an option for non-banked employees, but participation is very low.Texas adopted a law that required direct deposit, but that law could not be 100%.? Then the law was amended because of issues with requiring direct deposit.? At one time the law addressed payroll but had a threshold salary level wherein it was mandatory, but that law was also loosened such that it still contains the threshold but then allows employees to opt out for various reasons.??The debit card was then sought as an option.Our contract with the bank is very employee friendly.? There are few fees related to the cards and the contract calls for rather generous terms for the employee regarding access to funds.Our model is probably not the best because the terms of our contract could change over time.? The bank may be less willing to meet our wishes about the fees, etc. due to the low utilization by the employees and it may be harder to renew the contract in the future.Response 2:Yes. The state of Texas offers a reloadable VISA branded pay card. Contractually it is currently available to employees of the state for payroll only. With our next RFP for FY19 we anticipate making the cards available to retirees of the state as well. No, state payments are not statutorily required to be issued electronically by direct deposit or pay card. The state utilizes warrants (checks) and electronic methods for issuing payments.Our pay card program currently limits payments loaded to the card to state payroll payments only; no travel or reimbursement payments are allowed. We have not had any issues with the payroll only policy.There is not a direct deposit form for the pay card. We developed an Employee Paycard Authorization Form that the employee’s payroll office provides to the employee to enroll in the program. The form is either processed by the employing state agency or by the Comptroller’s office. The processing involves accessing the contracted bank’s web application to upload the employee’s data. Within minutes of that upload the card is approved, and the routing and account number is issued and accessible by report to the uploading agency. The routing and account number is sent back to the employing agency payroll office and the payroll office is responsible for entering the bank account info into the payroll system. After banking info is established the payments are like any other direct deposit payroll payment. The pay card is mailed from the contract bank directly to the state employee for activation and use. We have not received any calls regarding issues of that nature. The fee structure is very low, or non-existent depending on how the employee uses the card, which was a major requirement of our RFP. The contract itself is at no charge to the state of Texas. Upon enrollment employees are instructed to contact the contracting bank’s customer service line for all issues regarding the card. We are happy to discuss. Contact Kim Strick, Program Specialist/Contract Manager at kim.strick@cpa..UtahResponse 1:We had one a few years ago but the number of employees using it dropped off till it was no longer profitable for the vendor. Since we required all employees to use direct deposit, the ones that were forced into it were very uncooperative. Some went so far as to lie about the problems they were having. If they did have problems they always expected payroll to fix it even though it was a problem between them and the bank.We still prefer and encourage employees to use direct deposit. Employees who say they can't get a bank account are told to get a debit card from Walmart or other store. (99% of our employees are on direct deposit and most of the ones that are not are board members paid infrequently.)?Response 2:Utah started using debit cards (stored value cards) for payroll about 10 years ago. We did it for approximately 5 years until the contract was up for renewal. For various reasons, we didn't renew the contract.?When we first implemented the debit cards, we required all employees (except judges and legislators) to either have direct deposit or a debit card. That definitely helped us to increase the percentage of employees on direct deposit, which was a big plus. Although it should be noted that direct deposit isn't mandated for state employees. I expect our direct deposit rate is now around 96-98%.?Getting the debit card program set up and operating well with our vendor was more difficult than we first anticipated. Also, there were some hassles with cardholders and the vendor that made it more difficult to manage than regular checks or direct deposits. Over time, the use of the debit cards declined to where it wasn't worth the effort. Our payroll manager was somewhat relieved when the program ended. And our payroll manager decided for those employees who wanted the convenience of a stored value card, they could get their own card (like an Amex Bluebird card) and set up a direct deposit onto the card through our ESS system.?WashingtonWashington does offer a payroll card option for its employees.? I don't know how many employees are utilizing payroll cards, but the number is not very high.? Our highest population of users are student employees in higher education.The money is deposited to the payroll card in the same manner as an ACH payroll deposit.? A routing number and account are input into the payroll system in the same manner as an employee paid via direct deposit.I haven't heard of any problems with accessing cash.? The state's current banking contract is with US Bank, and they offered a payroll card to us that reduced or waived some of the fees.We do not mandate direct deposit.? Current law allows for employees to choose to be paid with a warrant.Here is a link to our payroll resource page.? Under "Payment methods and procedures,"?refer to "Payroll card information:"? VirginiaYesYes, the employee must select direct deposit or the pay card.? No problems with the policy. WV State Code 12-3-1b & wvoasis Payroll Direct Deposit form & the WV Pay Card Form.? These forms are available on our website at relating to cash access or fees were very minimal in the beginning.? Those issues were resolved rather quickly with the financial institution and/or educating the employee further on how to access cash.The most important thing to remember when starting a pay card program is to provide advanced notice and as much information as possible to your HR/Payroll departments as well as your employees prior to the go live date. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download