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When to Post ACH Files Annuity Payments

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Question: 
At the beginning of each month we get ACH files containing Annuity payments. Interested to see when others post those files. On the day they come in ie. 31st or the effective date 3rd? If you do one or the other why?
Answer: 

Ask A Guru isn't an effective way for eliciting responses to a poll question. But I can offer my perspective on your question.

Many monthly direct deposits of annuity-type payments (including Social Security benefits in this discussion for purposes of illustration, even though they aren't true annuity payments), arrive one or more days before their Settlement Dates. Your bank doesn't receive any payment for those items until the Settlement Date, and you are not obligated to make the funds available to your customer until the opening of business on the Settlement Date.

That said, some banks have for various reasons decided to post such credits early, perhaps as early as the date on which they are received. In the early days of ACH transactions, it may have been because the banks' processing systems could not effectively warehouse the items until their Settlement Dates. It may also simply be because of a conscious wish to provide faster access to the funds as a customer service.

There can be a problem, however, in the unfortunate event that the annuitant/beneficiary dies before the Settlement Date. In some cases, the annuity or benefit payment would not have been earned, and the individual could have withdrawn the early-posted funds prior to his or her demise. That could be problematic -- particularly for Federal government benefits -- if a reclamation ensues.

First published on 04/14/2014

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