CHAPTER 4. RETURNED PAYMENT, HOLD PAYMENT, AND PAYMENT INTERCEPT PROCEDURES
SECTION A. RETURNED PAYMENT
4A.01 GENERAL
These procedures cover the handling of returned payments. Although processing of returned checks by the Education system is similar in most respects to the processing by the C&P system, the differences are explained under each system.
4A.02 PAYMENTS RETURNED TO THE TREASURY REGIONAL FINANCIAL CENTER (TRFC)
a. All payments applicable to the compensation and pension system and those applicable to the Chapter 31 system, when returned to the Department of the Treasury, will be returned to the Austin TRFC. Those checks applicable to the education system will be returned to the Kansas City TRFC.
b. The TRFC's will produce a magnetic tape of returned payments and forward the tape to the Hines DPC for processing. Return payments will be coded to reflect the reason for return as follows:
Numeric Code Reason for Return
0-Nonentitlement Unavailable Check Cancellation
Credit
1-Undeliverable Moved or unclaimed.
No such city.
Wrong address.
Whereabouts unknown.
DD/EFT account closed or no
account.
2-Nonentitlement Reportedly remarried.
3-Nonentitlement Reportedly deceased.
4-Nonentitlement Income limitation involved.
5-Nonentitlement VA request (Includes payments
or entitlement returned by postmaster or
undetermined financial organizations for
Direct Deposit cases as
requested by regional office).
Voluntary return by payee.
6-Nonentitlement Other.
7-Nonentitlement Chapters 34, 35 advance payments.
8-Nonentitlement Courtesy Disbursement Hold Check.
9-Nonentitlement Returned Courtesy Disbursement
Check.
[B Limited Payability Cancellation.]
c. [Returned Payments will be displayed on the Payment History File (Target TINQ Screen).]
4A.03 COMPUTER PROCESSING OF RETURNED PAYMENTS-CP&E SYSTEMS
a. General. All payments returned to the TRFC's are canceled. Hines DPC processing of the SF 1098, Schedule of Canceled Checks or Undelivered Checks, RO-145, Schedule of Canceled EFT Items, and the returned payment tapes results in the cancellation and voiding of the payments in the applicable systems.
b. Control of Processing. When multiple payments for the same payee are returned for different reasons and are processed in the same cycle, the reason for return will control the processing according to the following priority:
(1) Nonentitlement-Codes 2, 3, 4, 6, and 7.
(2) VA request or voluntary return-Code 5.
(3) Undeliverable-Code 1.
For example, should returned payments for an individual payee with reason for return codes 1, 3 and 5 be processed in the same cycle, nonentitlement will control the processing.
c. Returned Payment Messages. VA Form 20-6560, Notice of Benefit Payment Transaction, or VA Form 20-8271, Notice of Exception, will be generated for all returned payments, except for the first undeliverable payment. These messages will contain applicable message codes and legends depending on the reason for return and the status of the account. Reference should be made to MP-6, part IV, supplement No. 6.1, for explanations of these message codes and for specific actions to be taken as a result of the returned payments. One VA Form 20-6560 or 20-8271 will be generated for all returned payments (not to exceed 10) processed in a cycle for each individual payee. The applicable check or trace numbers will be reflected, together with information as to disposition made of each returned payment. In lieu of check or trace numbers, the following legends may appear on the messages:
(1) "PREV CHK"-Represents returned payments previously processed.
(2) "PREM REF"-Represents insurance premium refund made by Philadelphia Insurance activity.
(3) "PFOP"-Represents a portion of a consolidated payment returned by VA medical centers.
d. Explanation of "Application" of Returned Payment Proceeds. The following applicable explanations will appear in the "Application" block of the VA Form 20-6560 generated with messages pertaining to returned payments:
(1) Proceeds Segment Established.
(2) DLP (Date Last Paid) Backed up 1 Month.
(3) Undeliverable-Pending Address.
(4) Applied to Accounts Receivable-Partial.
(5) Applied to Accounts Receivable-Full.
(6) Unapplied Returned Payment.
(7) Applied to Accrual Segment.
(8) Return of PFOP Withdrawal.
(9) Return of Burial Allowance.
4A.04 PROCESSING OF RETURNED PAYMENTS-C&P SYSTEM
a. General. This paragraph explains the results of processing payments in the C&P system that were returned due to the various reasons shown in paragraph 4A.02 above, for specific conditions of the master record and for the various types of payments.
b. Accounts Receivable Exists. The proceeds of returned payments will be applied to an existing receivable in instances shown below. VA Form 20-6560 with message code 603 will be issued:
(1) When processed against an accounts receivable (type D) master record. (Any proceeds remaining will not be retained in the master record.)
(2) When processed against a master record terminated by reason other than death. (Any proceeds remaining will not be retained in the master record.)
(3) When processed against a running award and the reason for return of payment is VA request or voluntary return. (Any proceeds remaining will be retained in the master record or reissued.)
c. Terminated Master Record-No Accounts Receivable
(1) When returned payments are processed against a master record that has been terminated by reason other than death and no accounts receivable exists, an attempt will be made to back up the date of termination. The following conditions must be met in order to back up the termination date:
(a) Effective date of termination is the first of a month.
(b) Amount of the returned payment is equal to the amount previously authorized as net award.
(c) Backup date is either the same or subsequent to the previous effective date.
(2) VA Form 20-6560, with message code 604, will be issued. This message will reflect the status of the master record after processing of the returned payments. It will reflect disposition of each payment and will also reflect the balance of the proceeds not used to back up the termination date. The proceeds are not retained in the master record.
d. Terminated Master Record-Payee Deceased. When returned payments are processed against a master record that has been terminated by reason of death, the amount of the proceeds due and payable is established in the terminated record as an accrual. The termination date is not backed up in these cases. VA Form 20-6560, with message code 605, will be issued to reflect the amount of the proceeds due. If additional returned payments are processed in subsequent cycles, the accrual amount will be increased accordingly. VA Form 20-6560, with message code 606, will be issued and will reflect the increased amount of the accrual.
e. Suspended Master Record-Regular Suspense Status. When processing returned payments against a master record that is in a regular suspense status, all such payments will be processed without regard to the reason for return. In each case, the date of last payment will be backed up or a proceeds segment will be established or increased in the master record. VA Form 20-6560, with message code 601, will be issued reflecting the returned payment information. If a resumed pay transaction is processed, the proceeds will be paid. If an amended award is processed and any amount of the proceeds remains proper for payment, such amount will be paid. If a stop-pay transaction is processed and any amount of the proceeds remains due, it will be paid, except if the stop pay was for reason code 21 (whereabouts unknown) or code 20 (claim withdrawn or benefits renounced). If the reason for termination was for reason code 21 or 20, any proceeds due will be reflected on VA Form 20-6560, with message code 624, but will not be retained in the master record.
f. No Master Record. When processing returned payments for which no master record exists, VA Form 20-8271, with appropriate message code as shown below, is issued:
(1) Code 548-Returned Payment-No Master Record in File (appropriation 36X0102).
(2) Code 548E-Returned Payment-No Master Record in File (appropriation other than 36X0102). When the returned payment pertains to an appropriation or fund other than 36X0102, an unassociated account is established.
(3) Code 548F-Returned Payment-Master Record in File Under Same Claim Number but Different Payee (appropriation 36X0102).
(4) Code 548D-Returned Payment-(appropriation other than 36X0102)-Master Record in File Under Same Claim Number but Different Payee. (When the returned payment pertains to an appropriation or fund other than 36X0102, an unassociated account is established.)
g. Returned Payments for Reason of Death of Veteran. When processing payments returned by reason of death of the veteran, the account, together with any apportionee accounts, will be suspended. VA Form 20-6560, with message code 611, will be issued and will reflect the status of the account after processing the returned payments.
h. Returned Payments for Reason of Death of Person Entitled. When processing returned payments against accounts other than payee 00 and the reason for return is reflected as death, the account will be suspended.VA Form 20-6560, with message code 611, will be issued and will reflect the status of the account after processing the returned payment.
i. Returned Payments for Reason "'VA Request" or "Voluntary Return by Payee" (Reason Code 5). When processing payments returned by reason code 5, a test will be made for the existence of an accounts receivable. If a receivable exists and the amount of the proceeds of the returned payments exceeds the receivable balance, the receivable will be liquidated. If the receivable balance exceeds the amount of the proceeds of the returned payments, the entire amount of the returned payment proceeds will be applied to the receivable. VA Form 20-6560, with message code 603, will be issued and will reflect application made of the proceeds and the balance, when applicable. If a receivable does not exist, the account will be suspended (regular suspense). An attempt will be made to back up the date of the last payment. In order to accomplish this, the master record must not contain deduction segments; the amount of the returned payment must equal the net award and the revised date must be the same or subsequent to the effective date of the award. VA Form 20-6560, with message code 611, will be issued and will reflect the status of the account after processing the returned payments. If a resume-pay transaction is processed, the proceeds will be paid. If an amended award is processed and any amount of the proceeds remains proper for payment, such amount will be paid.
j. Returned Payments for Reason of Nonentitlement-Other Than Codes 3 and 5. When processing payments returned for nonentitlement reasons (other than codes 3 and 5), the proceeds of the returned payments will not be applied against receivables. Action to suspend the account (regular suspense) will be taken in the same manner as described in subparagraph i above, for code 5 returned payments with no existing receivable. Message code 611 will be issued and will reflect the status of the account after processing the returned payments.
k. Returned Checks for Reason of Undeliverable. (For instructions on Undeliverable DD/EFT Payments, refer to ch. 6.) Reference should be made to paragraph 4A. 03b above regarding the control of processing returned payments based on the reason for return. Based on that factor, the processing of checks returned for reason code 1 (undeliverable) when no payment is returned for other reasons will be as follows:
(1) When only one undeliverable check is returned and no new address is of record, the proceeds of the check will be established in the master record as an undeliverable check. No message is issued. A change of address or award action will result in the check being reissued. If not reissued and if the account remains in a running award status (proceeds of the undeliverable check remain in the master record, no additional checks have been returned or no other transactions have been processed that affect payment), a check for the proceeds will automatically be released to the same address at the close of the month following the month the returned check was processed.
(2) When one or more undeliverable checks are processed in a cycle and the master record contains a later address, a retroactive check will be issued for the total of the returned undeliverable checks. No message is issued.
(3) When more than one undeliverable check is processed in a cycle, or the proceeds of a previous undeliverable returned check exists in the master record and the master record does not contain a new address, the account will be suspended (undeliverable suspense). VA Form 20-6560, with message code 612, will be issued. The processing of a change of address, resume payment or award transaction will result in a check being issued for the amount of the proceeds. If the account is terminated prior to release of the undeliverable proceeds, VA Form 20-6560, with message code 627, will be issued. The proceeds are not retained in the master record for terminated accounts unless the reason for terminatinn is death.
l. One-Time Payments Applicable to Appropriation 36X0102 for Other Than Payment of Compensation or Pension. When returned checks applicable to one-time payments for other than compensation or pension (i.e., burial, etc.) are processed, VA Form 20-6560, with message code 607, will be issued. The message will contain identification of the checks and the amount of the returned checks to be considered for disposition. In burial cases, the processing of the returned checks will cancel the burial payment control maintained in the inactive file. When effecting disposition, if proper, it should be noted that proceeds of returned checks of this type are not in the master pay records. If payable based on an award in the folder, an 06 transaction will be processed to effect payment.
m. One-Time Payments Applicable to Appropriations or Funds Other Than 36X0102. Processing of returned checks applicable to appropriations or funds other than 36X0102 will result in the establishment of an unassociated account unless they pertain to PFOP or FDIB. VA Form 20-8271, with message code 549E, will be issued. If checks applicable to PFOP or FDIB are returned, the proceeds will be added to the existing PFOP or FDIB balances in the master records. VA Form 20-8271, with message code 549E, will be issued but no unassociated account will be established. If there is no existing master record, processing of these returned PFOP or FDIB checks will result in the establishment of unassociated accounts.VA Form 20-8271 will be issued as shown in subparagraph f above.
4A.05 PROCESSING OF RETURNED CHECKS-EDUCATION SYSTEM
a. General. This paragraph explains the results of processing in the Education system of checks returned, due to various reasons shown in paragraph 4A.02 above, for specific conditions of the master record and for various types of payments.
b. Accounts Receivable Exist. The proceeds of returned checks will be applied to existing receivables in all instances. For terminated accounts, a check for the amount of the proceeds remaining after liquidation of the receivable will be automatically issued unless the reason for termination was death of the payee.
c. Terminated Master Record-No Accounts Receivable. When returned checks are processed against a master record that has been terminated by reason other than death and no accounts receivable exists, a VA Form 20-6560, with message code 604, will be issued. This message will show the total amount of the proceeds of all such returned checks processed. The proceeds are not retained in the master record.
d. Terminated Master Record-Payee Deceased. When returned checks are processed against a master record that has been terminated by reason of death, the results of processing will be as shown in paragraph 4A.04d.
e. Suspended Master Record-Regular Suspense Status. Returned checks processed against a master record that is in a regular suspense status will be as shown in paragraph 4A.04e.
f. No Master Record. When processing returned checks for which no master record exists, the results of processing will be as shown in paragraph 4A.04f except that wherever reference is made to appropriation "36X0102," substitute "36X0137."
g. Returned Check for Reason of Death. When processing returned checks by reason of death of the veteran or a payee other than the veteran, the account for the applicable payee will be suspended. VA Form 20-6560, with message code 611, will be issued and will reflect the status of the account after processing the returned checks.
h. Returned Checks for Reason "VA Request" or Voluntary Return by Payee (Reason Code 5). When processing checks returned for reason code 5, a test will be made for existence of an accounts receivable. If a receivable exists and the amount of the proceeds of the returned checks exceeds the receivable balance, the receivable will be liquidated and a check will be issued for any proceeds remaining after liquidation of the receivable. VA Form 20-6560 will be issued with message codes 603 and 650. If a receivable does not exist, the account will be suspended (regular suspense).A proceeds segment for the amount of the returned checks will be established in the master record. VA Form 20-6560, with message code 611, will be issued and will reflect the status of the account after processing the returned checks. If a resume-pay transaction is processed, the proceeds will be paid. If an amended award is processed and any amount of the proceeds remains proper for payment, such amount will be paid.
i. Returned Checks for Reason of Nonentitlement-Other Than Codes 3 and 5. When processing checks returned for nonentitlement reasons (other than codes 3 and 5), the proceeds will be applied against any existing receivable. VA Form 20-6560, message code 603, will be issued. If a receivable exists and the amount of the proceeds of the returned checks exceeds the receivable balance, a proceeds segment will be established in the master record for any proceeds remaining after liquidation of the receivable. If a receivable does not exist, action will be taken in the same manner as described in subparagraph h above for code 5 returned checks with no existing receivable.
j. Returned Checks for Reason of Undeliverable. Processing of undeliverable returned checks (code 1) will be as indicated in paragraphs 4A.03b and 4A.04k.
k. Returned Checks-Undeliverable-Lump-Sum Payments (No Existing Receivable). When checks representing lump-sum payments have been returned as undeliverable (code 1) and the account is in a running award status, the proceeds for the returned check will be established in the master record. No message will be issued. The processing of a change of address transaction prior to the termination date will result in the check being reissued. If proceeds remain in the master record at the time the type H future stop is updated and the record is terminated, the proceeds will be removed from the master record. VA Form 20-6560, with message code 627, will be issued. If the returned check is processed against a terminated master record that indicates a change of address was processed subsequent to the release of the check that was returned, a check for the proceeds will be released. If no change of address was processed, VA Form 20-6560, with message code 604, will be issued. The proceeds are not established in the master record in. these instances.
l. Returned Checks-Deceased and Other Nonentitlement Reasons-Lump-Sum Payments (No Existing Receivable). When checks representing lump-sum payments have been returned due to death of payee or other nonentitlement reasons, and the account is in a running award status, the results of processing will depend on the amount of the returned check as compared to the amount of the lump-sum payment. If the amount of the check is equal to the computed lump-sum payment (plus or minus $1), the account will be terminated retroactively to the date of enrollment. The entitlement will be restored accordingly. The proceeds of the returned check will not be established in the master record. VA Form 20-8270a, with message code 958, "Returned Lump-Sum Check-Term Eff. Date of Enrollment," will be issued. If the amount of the check differs from the computed lump-sum payment by more than $1, the account will not be terminated, and the entitlement will not be restored. The proceeds of the returned check will not be established in the master record. VA Form 20-8270a, with message code 959, "Returned Check Does Not Equal Lump-Sum Payment," will be issued. If the account is in a terminated status, the processing will be accomplished in a similar manner.
m. Returned Advance Payment. When checks representing advance payments have been returned due to nonattendance, and the account is in a running award status, the account will be terminated retroactively to the date of enrollment. The entitlement will be restored accordingly. The proceeds of the returned check will not be established in the master record. VA Form 20-6560 will be issued.
n. Returned Checks-Hardship Payments. When a check representing a hardship payment is returned, the proceeds will be used to liquidate the class code A receivable regardless of the reason for return. If no class code A receivable exists, the reason for return will control the processing which will be accomplished in the same manner as those covering regular or retroactive payments under the Education system.
o. Returned Checks-Annual Reporting Fees. Returned checks representing payments to training institutions for annual reporting fees are not processed in the Education system. These represent payments from appropriation 36_0151 (General Operating Expenses, VA) and reference should be made to chapter 10 for procedures relative to the returned checks.
SECTION B. HOLD PAYMENT
4B.01 GENERAL
Hold-payment actions as described herein pertain to those hold-payment actions processed through the computer. The Education system does not generate or process such hold-payment actions.
4B.02 COMPUTER-GENERATED HOLD-PAYMENT ACTIONS
[a.] When adjudication, fiscal, administrative or other information is received at the Hines DPC (including teletype requests from regional offices that are received in sufficient time) and processed through the computer indicating a need to hold payments, the computer will generate hold-payment actions [on certain cycles and at end of month (EOM)]. The computer processing will not only consider these hold actions completed but, for the purpose of completing the transaction, treat the payments as having been canceled. If the Treasury regional financial center is unable to locate and hold the payment, the Hines DPC will be notified and will be furnished punched cards representing the payments not held. These cards will be converted to computer input cards (transaction code 04H) by the Hines DPC and introduced into the computer as receivables. VA Form 20-6560, with message code 657, will be issued to notify the regional office. Additional instructions may be found in chapter 2.
[b. After EOM processing, a Check Intercept tape and a DD/EFT Recall tape are generated from the C&P System and sent to Treasury. These tapes have been scheduled to arrive at Treasury in sufficient time for them to hold and cancel additional erroneous payments prior to their release to the Postal Service or Federal Reserve System. For VA processing, records on the Check Intercept tape are not considered as completed hold actions until a returned check transaction is processed from Treasury. Records on the DD/EFT Recall tape are considered as completed hold actions, and the payments are automatically treated as canceled.]
SECTION C. PAYMENT INTERCEPT
4C.01 GENERAL
Automated check intercept processing for compensation and pension (C&P), and education payments via the Target System was implemented on September 26, 1988. For C&P payments, only recurring and irregular check payments (not Direct Deposit) are subject to the automated procedures. For education payments, both recurring and nonrecurring payments are subject to the automated procedures.
4C.02 INTERCEPT OF CHECK PAYMENTS
Most intercept requests to the Postal Service for C&P and education checks will be accomplished through the above automated procedures. However, when the automated system can not generate an intercept request, the procedures in M21-1, chapter 17, and M22-2, part IV, chapter 6, must be used by Adjudication to manually prepare a request.
4C.03 INTERCEPT OF DD/EFT (DIRECT DEPOSIT/ELECTRONIC FUNDS TRANSFER) PAYMENTS
All intercept requests to financial organizations for DD/EFT payments must be processed manually by Adjudication in accordance with M21-1, chapter 17. Finance may be contacted for clarification of depositor account number and routing number information.