With increased concern about recent bank failures, PayrollOrg’s Government Relations Task Force (GRTF) engaged with the federal government and other partners regarding paying workers on time. PayrollOrg sent a letter to the leadership of the House Financial Services Committee as legislation begins to move on bank failures.
When the banking institution an employer uses fails, the employer might be unable to process payroll on normal dates, leading to other delays with employees’ paychecks. Payroll banking accounts operate like other business-related accounts, so the standard Federal Deposit Insurance Corporation (FDIC) insurance amount of $250,000 fails to cover many employers’ payroll accounts.
Follow up With the House
On May 1, the FDIC released a report, Options for Deposit Insurance Reform. The report is now in Congress for consideration. With legislation on bank failures in the preliminary stages of development, Ranking Member Rep. Maxine Waters (D-Calif.) and other House Financial Services Committee Democrats hosted a Roundtable on Deposit Insurance Reform. PayrollOrg was pleased that the FDIC report considered payroll accounts or “business payment accounts” and that these accounts were further highlighted by Rep. Waters during the roundtable.
In PayrollOrg’s letter to the FDIC and its letter to Financial Services Chair Rep. Patrick McHenry (R-N.C.), the GRTF Federal Issues and Electronic Payments subcommittees said they would be happy to work with the House Financial Services Committee when it undertakes a review of the FDIC’s report.
Nacha Letter to FDIC on Bank Failures
PayrollOrg also signed onto a letter by Nacha to the FDIC regarding impacts of bank failures on the automated clearing house and direct deposit. Most payroll direct deposits are processed by third-party payment processors that aggregate funds from multiple employers through a single account for purposes of originating direct deposit disbursements. The impacts of a bank failure on payroll are significant.
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Alice P. Jacobsohn, Esq., is Director of Government Relations at PayrollOrg.