Eastern OfficeConnect SM ACH Guide for Payroll and Tax Payment Table of Contents Section Page What is ACH, NACHA, and NEACH 3 • WhatisACH? 3 • WhatisNACHA? 4 • WhatisNEACH? 5 ACH Processing via OfficeConnect at Eastern Bank 5 • DailyProcessingforACH PayrollandTaxPayments via 5 OfficeConnect • ACHProcessingTimeSchedule 5 • BusinessDayCalendar 5 ACH Returned and Notification of Change (NOC) Reporting 6 • ReturnEntries andNotificationofChange(NOC)Information 6 • ACHReturnReport –ReturnEntries 6 Return Reason Codes 7 ACH Return Report – Notification of Change (NOC) 9 Notification of Change (NOC) Codes 10 Standard Entry Class Codes 11 Procedure for Payroll and Tax Payment Reversal 12 Important NACHARules and Regulations 13 Sample Authorization Agreement 14 Glossaryof Terms 15 Rev. 02/2014 2 Eastern’sOfficeConnectonlinebankingplatformprovidesbusinesseswiththeabilitytosendpayrollandtax paymentsviatheACHNetwork. Ourpaymentserviceforpayrollprovidesanefficientandcosteffectivewayfor businessestotransmitpayrolldirectlytotheemployees'accountattheirfinancialinstitution. Similarly,businesses mayalsoutilizethetaxpaymentservicetosendfederalandstatetaxpaymentselectronically. ThepurposeoftheEasternOfficeConnectACHGuideistoprovideyou,ourbusinesscustomer,withessential informationabouttheAutomatedClearingHouse(ACH)Network,ACHprocessingguidelinesspecifictoEastern BankandimportantNACHArules,regulationsandcodestoensureaclearunderstandingoftheprocessandyour rolesandresponsibilities. What is ACH, NACHA, and NEACH WHAT IS ACH? The AutomatedClearingHouse(ACH)Network TheACHNetworkisahighlyreliableandefficientnationwidebatch-orientedelectronicfundstransfersystem governedbytheNACHAOPERATINGRULES,whichprovidefortheinterbankclearingofelectronicpaymentsfor participatingdepositoryfinancialinstitutions.TheAmericanClearingHouseAssociation,FederalReserve, ElectronicPaymentsNetwork,andVisaactasACHOperators,centralclearingfacilitiesthroughwhichfinancial institutionstransmitorreceiveACHentries. ACHpaymentsinclude:  DirectDepositofpayroll,SocialSecurityandothergovernmentbenefits,andtaxrefunds  DirectPaymentofconsumerbillssuchasmortgages,loans,utilitybillsandinsurancepremiums  Business-to-businesspayments  E-checks  E-commercepayments  Federal,stateandlocaltaxpayments Originator Anyindividual,corporationorotherentitythatinitiatesentriesintotheAutomatedClearingHouseNetwork OriginatingDepositoryFinancialInstitution(ODFI) AparticipatingfinancialinstitutionthatoriginatesACHentriesattherequestofandby(ODFI)agreementwithits customers.ODFI'smustabidebytheprovisionsoftheNACHAOperatingRulesandGuidelines ReceivingDepositoryFinancialInstitution(RDFI) AnyfinancialinstitutionqualifiedtoreceiveACHentriesthatagreestoabidebythe NACHAOperatingRulesand Guidelines Receiver Anindividual,corporationorotherentitywhohasauthorizedanOriginatortoinitiateacreditordebitentrytoa transactionaccountheldatanRDFI. Rev. 02/2014 3 StandardEntryClassCodesusedforPayrollandTaxPayments ThesethreecharactercodeswithinanACHRecordidentifythepaymenttypescontainedwithinanACHbatch. Type Consumer Applications Definition Payroll PPD Application Directdepositisacreditapplicationthattransfersfunds Prearranged intoaconsumer'saccountattheReceivingDepository Paymentand FinancialInstitution.Thefundsbeingdepositedcan DepositEntry representavarietyofproducts,suchaspayroll,interest, pension,dividends,etc. Preauthorizedpaymentisadebitapplication.Companies withbillingoperationsmayparticipateintheACHthrough theelectronictransfer(directdebit)ofbillpaymententries. Throughstandingauthorizations,theconsumergrantsthe companyauthoritytoinitiateperiodicchargestohisorher accountasbillsbecomedue. TaxPayments CCD+ CorporateDebit Thisapplication,CashConcentrationorDisbursement,can orCredit beeitheracreditordebitapplicationwherefundsareeither distributedorconsolidatedbetweencorporateentities.This applicationcanserveasastand-alonefundstransfer,orit cansupportalimitedamountofpaymentrelateddatawith thefundstransfer. CONSUMER VS. CORPORATE PAYMENTS ACHtransactionsaretypicallycategorizedaseitherconsumerpaymentsorcorporatepayments,dependingonthe relationshipofthepartiesinvolvedinthetransactionandthetypeofReceiveraccount.Inaddition,paymentsare distinguishedasFederalGovernmentpayments(representingautomateddisbursementsoriginatingfromthe UnitedStatesGovernment,suchasSocialSecuritybenefits,militaryandcivilianpayrolls,retirementbenefits,tax refunds,anddisbursementsforstateandfederalrevenuesharingprograms)orcommercialpayments(initiatedby bothindividualconsumersandcorporations). ConsumerpaymentscurrentlymadeviatheACHNetworkinclude creditapplicationssuchaspayroll,retirement,dividend,interest,andannuitypayments,inadditiontoeducational benefitreimbursements,paymentsandadvances,andmanyothers.ConsumerACHdebitapplicationsinclude, amongothers,thecollectionofinsurancepremiums,mortgageandrentpayments,utilitypayments,installment payments,avarietyofmembershipdues,andotherrecurringobligations. TheACHNetworkisalsowidelyusedtosettleconsumertransactionsmadeatautomatedtellermachinesand point-of-saleterminals. CorporateACHapplicationsincludecashconcentrationanddisbursement,corporatetrade payments,stateandFederaltaxpaymentsandfinancialelectronicdatainterchange(EDI).Cashconcentrationand disbursementallowscompaniestoachieveefficienciesincashmanagementthroughtimelyintra-companytransfer offunds.Corporatetradepaymentsenablecorporationstoexchangebothdataandfundswithtradingpartners, facilitatinganautomatedprocessofupdatingtheiraccounts receivableandaccountspayablesystems. WHAT IS NACHA? NACHA-TheElectronicPaymentsAssociationistheleadingorganizationindevelopingelectronicsolutionsto improvethepaymentssystem. NACHAdevelopsoperatingrulesandbusinesspracticesfortheAutomatedClearingHouse(ACH)Networkandfor electronicpaymentsintheareasofInternetcommerce,electronicbillandinvoicepresentmentandpayment (EBPP,EIPP),e-checks,financialelectronicdatainterchange(EDI),internationalpayments(IAT),andelectronic benefitstransfer(EBT). Rev. 02/2014 4 NACHA'sMissionistopromotethedevelopmentofelectronicsolutionsthatimprovethepaymentssystemforthe benefitofitsmembersandtheircustomers. NACHAisdedicatedtoimprovingthepaymentssystemthroughitseightprimaryfunctions.Theseare: 1. RulemakingfortheACHNetworkandotherpaymentssystems; 2.Facilitatingthedevelopmentofnewpaymentapplications; 3.Identificationandimplementationofriskmanagementinitiatives; 4.Providingandsupportingeducationprograms; 5.Institutingandmonitoringqualitycontrolsinthepaymentssystem; 6.Improvingmembercommunications/relations; 7.Respondingtoregulatoryandgovernmentrelationsissues;and 8.Marketingelectronicpaymentservices. WHAT IS NEACH? "TheNewEnglandAutomatedClearingHouse”(NEACH)isanon-profitassociationthathelpsmembersoriginate andreceiveACHtransactions,andprovidesproducts,services,educationandmarketingtoincreasethe acceptance,useandqualityofelectronictransactions. ACH Processing via OfficeConnect at Eastern Bank EasternBank,actingastheODFI,isboundbytheNACHArulesandregulations,butday-to-dayprocessing timeframesandprocessesdifferbetweenbanks. Thissectionoftheguidereviewsprocessingguidelinesat EasternBank. DailyProcessing for ACH Payroll and Tax Payments via OfficeConnect UtilizingOfficeConnecttotransmitACHinformationcanbedoneatanytimeoftheday,however,therearecertain timesduringthedaywheninformationiscollectedfromtheOfficeConnectplatformandprocessedthroughour ACHprocessingsystemfortheACHtransactionsthatareinputasoutlinedintheprocessingtimeschedulebelow. ACH Processing Time Schedule: TheprocessingtimescheduleforACHtransactionsis: 6:15a.m.ET 2:45p.m.ET 10:15a.m.ET 3:45p.m.ET 12:45p.m.ET 6:00p.m.ET ACHtransactionswillbedistributedbytheeffectivedate.Toensuretransactionsareprocessedtimely, transactionsmustbesenttwobusinessdayspriortotheeffectivedate. Anytransactionsorbatchesprocessedafterthe2:45p.m.ETwindowmaynotbeprocessedthesamedayifthere areanydelaysorthefileexceedsthecreditlimitofthecustomer. Business Day Calendar EasternBankoperatesontheFederalHolidaycalendar. AnyACHpayrollandtaxpaymentstransmittedafterthe lastcut-offtime,onaweekendoraholidaywillbeprocessedonthenextbusinessday. Rev. 02/2014 5 ACH Returned and Notification of Change (NOC) Reporting EasternBankreceivesReturnedentriesandNotificationsofChange(NOC)fromRDFI’sonadailybasis.Theyare communicatedtotheOriginatorwithin2businessdaysofthesettlementdate. Return Entries and Notification of Change (NOC) Information EasternBankwillprovideareportviaasecureemailtotheaddressoutlinedontheapplicationformthatwillinform youofanyReturnentriesorNOC’stoACHoriginateditemsthatwereceivefromRDFI’s. Thisreportiscalledthe ACHReturnItemsReport ForanyReturnentriesafinancialadjustmentwillbemadetoyouraccountatEasternBankforeachindividualitem. Itisyourresponsibilityastheoriginatortodeterminethechanges,basedontheReturnorCorrectioncodethat musttobemadeonyoursystem(s)ordatarecords.Ifyoureceivea NOC(notificationofchange)anentrymustnot betransmittedagaincontainingtheincorrectinformationorthechangemustbemadewithin6businessdaysto avoidanyfinesasoutlinedintheNACHArules. ACH Return Report – Return Entries BelowisasampleoftheACHReturnreportwithareturnreasoncodeandalegendonthedatafields. Descriptionsforreturnreasoncodesmaybefoundbeginningonthenextpage. ACH Return ItemNoticeLegend ① Receiving Transaction Account # ⑪ Transaction Type – PPD, CCD, CTX etc. ② Return Transaction Code ⑫ Your ACH ID - Tax ID # ③ Transaction Type – DR/CR ⑬ Return Code – See table for value descriptions ④ Original Transaction Amount ⑭ Original Trace # ⑤ Customer ID Data ⑮ Original Effective Entry Date ⑥ Customer Name ⑯ Originating Bank ABA-Eastern Bank ABA - 01130179 ⑦ Receiving Bank ABA ⑰ Addendum Information Relative to the Return ⑧YourACHCompanyName Rev. 02/2014 6 Return Reason Codes R01 InsufficientFunds.Theavailableand/orcashreservebalanceisnotsufficienttocoverthedollarvalueofthedebitentry. R02 AccountClosed.ApreviouslyactiveaccounthasbeenclosedbyactionofthecustomerortheRDFI. R03 NoAccount/UnabletoLocateAccount.Theaccountnumberstructureisvalidanditpassesthecheckdigitvalidation,but theaccountnumberdoesnotcorrespondtotheindividualidentifiedintheentry,ortheaccountnumberdesignatedisnot anopenaccount. R04 InvalidAccountnumber.Accountnumberstructureinvalidormayfailthecheckdigitvalidation. R05 UnauthorizedentrytoaconsumeraccountbearingaCorporateSECcode. Thoseare:CCD,CTX. R06 ReturnedperODFI'sRequestTheODFIhasrequestedthattheRDFIreturntheACHentry.IftheRDFIagreestoreturn theentry,theODFImustindemnifytheRDFIaccordingtoArticleFive(Return,Adjustment,Correction,and AcknowledgmentofEntriesandEntryInformation)oftheseRules. R07 AuthorizationRevokedbyCustomer(adjustmententries)TheRDFI'scustomer(theReceiver)hasrevokedthe authorizationpreviouslyprovidedtotheOriginatorforthisparticulartransaction.TheReceivermayrequestimmediate creditfromtheRDFIforanunauthorizeddebit.Therequestmustbemadeinwritingwithinfifteen(15)daysaftertheRDFI sendsormakesavailabletotheReceiverinformationpertainingtothatdebitentry. R08 PaymentStoppedorStopPaymentonItem R09 UncollectedFundsSufficientbookorledgerbalanceexiststosatisfythedollarvalueofthetransaction,butthedollarvalue oftransactionsintheprocessofcollection(i.e.,uncollectedchecks)bringstheavailableand/orcashreservebalance belowthedollarvalueofthedebitentry. R10 CustomerAdvisesNotAuthorized;ItemIsIneligible,NoticeNotProvided,SignaturesNotGenuine,orItemAltered (adjustmententries). R11 CheckTruncationEntryReturn(Specify)Tobeusedwhenreturningachecktruncationentry.Thisreasonforreturn shouldbeusedonlyifnootherreturnreasoncodeisapplicable.TheRDFIshouldusetheappropriatefieldintheaddenda recordtospecifythereasonforreturn(i.e.,"exceedsdollarlimit,""nomatchonARP,""staledate,"etc.). R12 BranchSoldtoAnotherDFI[AccountSoldtoAnotherDFI] R14 RepresentativePayeeDeceasedorUnabletocontinueinthatcapacity. Representativepayeeisapersonorinstitution authorizedtoacceptentriesonbehalfofoneormoreotherpersons,suchaslegallyincapacitatedadultsorminorchildren. Representativepayeeiseitherdeceasedorunabletocontinueinthatcapacity.Beneficiaryisnotdeceased. R15 BeneficiaryorAccountHolder(OtherThanaRepresentativePayee)Deceased(1)Thebeneficiaryisthepersonentitledto thebenefitsandisdeceased.Thebeneficiarymayormaynotbetheaccountholder;orTheaccountholder(actingina non-representativepayeecapacity)isanowneroftheaccountandisdeceased. R16 AccountFrozenThefundsintheaccountareunavailableduetospecificactiontakenbytheRDFIorbylegalaction. R17 FileRecordEditCriteria(Specify)SomefieldsthatarenoteditedbytheACHOperatorareeditedbytheRDFI.Iftheentry cannotbeprocessedbytheRDFI,thefield(s)causingtheprocessingerrormustbeidentifiedintheaddendarecord informationfieldofthereturn. R20 Non-TransactionAccount.TheACHentrydestinedforanon-transactionaccount,asdefinedinRegulationD,would includeeitheranaccountagainstwhichtransactionsareprohibitedorlimitedorapass-throughwheretheentryisfora creditunionorthriftorganizationandRegulationEdescriptiverequirementscannotbemet. R22 InvalidIndividualIDNumber. TheIndividualIDNumberofCIEorMTEtypeentriesisusedbytheReceiver(non- consumer)thataspecifictransactionhasnotbeenauthorizedbytheReceiver. Rev. 02/2014 7 Return Reason Codes (continued) R23 CreditEntryRefusedbyReceiver.TheReceivermayreturnacreditentrybecauseoneofthefollowingconditionsexists: (1)aminimumamountrequiredbytheReceiverhasnotbeenremitted;(2)theexactamountrequiredhasnotbeen remitted;(3)theaccountissubjecttolitigationandtheReceiverwillnotacceptthetransaction;(4)acceptanceofthe transactionresultsinanoverpayment;(5)theOriginatorisnotknownbytheReceiver;or(6)theReceiverhasnot authorizedthiscreditentrytothisaccount. R24 DuplicateEntry.TheRDFIhasreceivedwhatappearstobeaduplicateentry;i.e.,thetracenumber,date,dollaramount and/orotherdatamatchesanothertransaction.Thiscodeshouldbeusedwithextremecare.TheRDFIshouldbeaware thatifafilehasbeenduplicated,theOriginatormayhavealreadygeneratedareversaltransactiontohandlethesituation. R29 CorporateConsumerAdvisesNotAuthorized. TheRDFIhasbeennotifiedbytheReceiver(non-consumer)thataspecific transactionhasnotbeenauthorizedbytheReceiver. R31 PermissibleReturnEntry(CCDandCTXonly).TheRDFIhasbeennotifiedbytheODFIthattheODFIagreestoaccepta CCDorCTXreturnentryinaccordancewithArticleSeven,section7.3(ODFIAgreestoAcceptCCDorCTXReturn). R62 IncorrectTraceNumberTheTraceNumberfoundinpositions07-21intheAddendaRecordofthereturnentryisdifferent fromthetracenumberoftheoriginalentry. R63 IncorrectDollarAmountThedollaramountintheEntryDetailRecordofthereturnentryisdifferentfromthedollaramount oftheoriginalentry. R64 IncorrectIndividualIdentificationTheIndividualIdentificationNumberreflectedintheEntryDetailRecordofthereturn entryisdifferentfromtheIndividualIdentificationNumber/IdentificationNumberusedintheoriginalentry. R65 IncorrectTransactionCodeTheTransactionCodeintheEntryDetailRecordofthereturnentryisnotthereturnequivalent oftheTransactionCodeintheoriginalentry.(SeelistofTransactionCodesinAppendixTwo(ACHRecordFormat Specifications).Allentriesmustbereturnedasreceived:e.g.,creditascredit,debitasdebit,demandasdemand,savings assavings.) R66 IncorrectCompanyIdentificationTheCompanyIdentificationnumberusedintheCompany/BatchHeaderRecordofthe returnentryisdifferentfromtheCompanyIdentificationnumberusedintheoriginalentry. R67 DuplicateReturnTheODFIhasreceivedmorethanonereturnforthesameentry. R68 UntimelyReturnThereturnentryhasnotbeensentwithinthetimeframeestablishedbytheserules. R69 MultipleErrorsTwoormoreofthefollowingfields--OriginalEntryTraceNumber,Amount,IndividualIdentification Number/IdentificationNumber,CompanyIdentification,and/orTransactionCode--areincorrect. Rev. 02/2014 8 ACH Return Report – Notification of Change (NOC) ACHReturnItemsReport –Notificationof Change (NOC) Legend ① Receivers Account Number ⑪ Origination Date ② Return Trace Number ⑫ Your ACH Company ID ③ Transaction Code and Type (DR/CR) ⑬ Correction Reason Code – See attached definition listing ④ Customer ID ⑭ Original Transaction Trace Number ⑤ Customer Name ⑮ Correction Posting Effective Date ⑥ Receiving Customers Bank ABA Number ⑯ Receiving Bank ABA Number ⑦ Your ACH Company Name ⑰ Addendum Information Field – Contains correct ⑧ Entry Description information that caused the error ⑨ Correction Settlement Date ⑩ SEC Type - COR Rev. 02/2014 9 Notification of Change (NOC) Codes ANotificationofChangeiscreatedbyanRDFItonotifytheODFIthatpreviouslyvalidinformationcontainedina postedentryhasbecomeoutdatedorthatinformationcontainedinapre-notificationorlivetransactioniserroneous andshouldbechanged. Change Codes C01 IncorrectDFIAccountNumber C02 IncorrectRoutingNumberCorrectRoutingNumber(includingCheckDigit)appearsinfirstninepositionsofthe CorrectedDataField. C03 IncorrectRoutingNumberandIncorrectDFIAccountNumber.CorrectRoutingNumber(includingCheckDigit Example:Duetomergerorconsolidation,aoncevalidRoutingNumbermustbechanged,andinmostinstances thischangewillcauseachangetotheaccountnumberingstructure. C04 IncorrectIndividualName/ReceivingCompanyName.CorrectIndividualName/ReceivingCompanyName C05 IncorrectTransactionCodeExample:Anitem,whichtheRDFIdeterminesshouldbepostedtotheirDemand DepositAccount(DDA)System,containsaSavingsTransactionCode. C06 IncorrectDFIAccountNumberandIncorrectTransactionCode.Example:Anentrypostingtoasavingsaccount shouldactuallybegoingtoademandaccountorviceversa,andtheaccountnumberisalsoincorrect. C07 IncorrectRoutingNumber,IncorrectDFIAccountNumber,andIncorrectTransactionCode C09 IncorrectIndividualIdentificationNumber.Example:Individual'sIdentificationNumberwithintheCompanyis incorrect,eitheroninitialinputorthroughmergerorconsolidation. Note:ChangeCodesC10throughC12cover informationcontainedintheBatchHeaderRecordandthereforewillrequirethecreationofadummyEntryDetail Record(s)tomeetthesoftwarerequirements. C11 Duetomergerorconsolidation,theCompanyIDisnolongervalid. C13 AddendaFormatErrorInformationintheEntryDetailRecordwascorrectandtheentrywasabletobeprocessed andpostedbytheRDFI.However,informationfoundintheAddendaRecordwasunclearorwasformatted incorrectly. Rev. 02/2014 10