ACH reclamation is the procedure for recovering recurring benefit payments, such as pensions, annuities or social security benefits, that were paid by ACH credit into a bank account after the recipient had died and was no longer entitled to them. The payer asks the recipient's bank to send the money back, and the bank's obligation to do so is set by network rules and, for federal payments, by US Treasury regulations.
Reclamation sits apart from an ordinary ACH return, which a receiving bank sends within a short deadline when it cannot or should not post an entry, and from an ACH reversal, which corrects a duplicate or erroneous file. It deals with payments that were correctly posted at the time but later turn out to be unearned, sometimes months afterwards, because the payer only learns of the death later.
Background
Benefit payers in the United States moved almost entirely to direct deposit over recent decades. Because payments arrive automatically, they keep flowing after a death until someone tells the payer. Family members, joint account holders or fraudsters may then withdraw the money. Reclamation rules give payers a structured way to recover these sums from banks, and give banks clear limits on how much they must repay.
How it works for private payers
Under the Nacha Operating Rules, an originator of benefit payments, such as an insurer or pension fund, may send a reclamation entry, which is a debit to the account that received the post-death credits. It may also ask the bank in writing for repayment. Key features include:
- Purpose limit. Reclamation entries may be used only to recover benefit payments made after the death of the recipient, not other kinds of credits.
- Bank response. The receiving depository financial institution (RDFI) may return the reclamation debit, for example if the account is closed or there are insufficient funds.
- Liability limits. The RDFI's liability is generally limited to the funds available in the account, unless it knew of the death and still allowed withdrawals.
- Originator duties. The originator must act within set time limits after learning of the death and must remain responsible for any recovery not made through the bank.
When a bank already knows that the account holder has died, it can return incoming benefit credits itself using an ACH return code such as R14, where a representative payee has died, or R15, where the beneficiary or account holder has died.
Federal government payments
Reclamation of federal benefits, for example from the Social Security Administration or the Department of Veterans Affairs, follows Treasury regulations administered by the Bureau of the Fiscal Service. When an agency reports a death, the Treasury sends the bank a notice of reclamation listing the post-death payments. The bank must then either return the amounts or explain why it cannot, providing details such as the account balance and the names of people who withdrew funds. The rules set out when a bank is fully liable, for example where it had been told of the death, and when its liability is limited. Banks that ignore notices may have amounts debited from their reserve accounts.
Operations at banks
Banks handle reclamation in their deposit operations or returned payment teams. Typical steps include freezing incoming benefit credits when a death is reported, checking whether withdrawals were made by joint holders or authorised users, reviewing the account history and responding to the payer within the required time. Where funds have already gone, the bank passes information to the payer, which may then seek recovery from the people who withdrew the money, and in some cases the bank charges back the customer under its account terms. Reclamation therefore overlaps with estate administration and, where withdrawals look deliberate, with fraud investigation.
Criticism and limitations
Banks argue that reclamation shifts the cost of late death reporting onto them, especially for federal payments where notices may arrive long after the death. Payers argue that without bank cooperation they would have little chance of recovering money from estates. Recovery rates are often incomplete because funds are spent quickly. Better data sharing on deaths, faster notification and wider use of payment recall tools in other countries are seen as ways to cut the volume of reclamations.