1. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Above Group 7--Group 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, or 21.
   2. (2) Annuitant--An individual who receives substantially equal and periodic benefit payments from one or more retirement plans administered by a retirement system.
   3. (3) Authorization form--The form designed by the comptroller that is used in accordance with this section.
   4. (4) Below Group 8--Group 2, 3, 4, 5, 6, or 7.
   5. (5) Classification salary schedule--The classification salary schedule and the detailed listing of all classified positions table in the General Appropriations Act.
   6. (6) Compensation--The salary, wages, and other compensation that a state employee earns as consideration for providing services to a state agency. The term excludes a payment of compensatory or salary per diem; a lump sum payment of accrued vacation leave; a lump sum payment of accrued sick leave; a lump sum payment of accrued vacation and sick leave; a refund of amounts deducted under the Federal Insurance Contributions Act; a reimbursement of meal expenses incurred while conducting official state business; and any payment made pursuant to a supplemental payroll voucher submitted to the comptroller.
   7. (7) Comptroller--The comptroller of public accounts for the State of Texas.
   8. (8) Credit entry--An electronic funds transfer that the comptroller initiates to an EFT account.
   9. (9) Custodial state agency--The state agency to which a state employee or a participating state employee submitted a properly completed authorization form to designate an electronic funds transfer (EFT) account, claim an exemption from the requirement to pay compensation through the electronic funds transfer system, or transfer custodianship of an EFT account from one state agency to another.
   10. (10) Debit entry--A reversal of a credit entry.
   11. (11) EFT account--An account that has been designated in accordance with this section to receive credit entries.
   12. (12) Electronic funds transfer system--The system authorized by the Government Code, §403.016, that the comptroller uses to initiate payments instead of issuing warrants.
   13. (13) Employer--With respect to any particular state employee, the state agency that employs the employee.
   14. (14) Include--A term of enlargement and not of limitation or exclusive enumeration. The use of the term does not create a presumption that components not expressed are excluded.
   15. (15) May not--A prohibition. The term does not mean "might not" or its equivalents.
   16. (16) Participating state employee--A state employee who receives credit entries initiated by the comptroller.
   17. (17) Paying state agency--With respect to a particular credit or debit entry, the state agency that requested the comptroller to initiate the entry.
   18. (18) Retirement system--The Employees Retirement System of Texas or the Teacher Retirement System of Texas.
   19. (19) Rules--The requirements of the National Automated Clearing House Association concerning cash concentration disbursement, the Federal Reserve System's Regulation E, and the sections of this undesignated head.
   20. (20) State agency--A governmental entity that employs one or more state employees. The term includes the comptroller.
   21. (21) State employee--An individual whose compensation either is paid by warrant issued by the comptroller and made payable to the individual or is paid through the comptroller's electronic funds transfer system. The fact that an individual is a head of agency, a part-time employee, an hourly employee, a temporary employee, an employee who is not covered by the Position Classification Act of 1961, a member of a governmental body, an appointed or elected officer or official of the state, a member of the legislature, or a combination of the preceding is irrelevant when determining whether the individual is a state employee. However, the term does not include an independent contractor, the employee of an independent contractor, or an annuitant.

2. (b) Mandatory or voluntary participation.

   1. (1) Mandatory participation.

      1. (A) Except as provided in subparagraph (C) of this paragraph, a state employee who holds a position included in the classification salary schedule must be a participating state employee.
      2. (B) Except as provided in subparagraph (C) of this paragraph, a state employee who does not hold a position included in the classification salary schedule must be a participating state employee.
      3. (C) A state employee is not required to be a participating state employee if subsection (c)(2)-(5) of this section would prohibit the employee's compensation from being paid through the electronic funds transfer system if the employee were a participating employee. An employee who is not required to be a participating state employee under this subparagraph and who does not voluntarily become a participating employee under paragraph (2) of this subsection must claim an exemption for each state agency that pays compensation to the employee in accordance with subsection (c)(6) of this section.

   2. (2) Voluntary participation.

      1. (A) A state employee who is not required by paragraph (1) of this subsection to be a participating state employee may be a participating state employee.

      2. (B) This subparagraph applies only to payments of compensation that are not required by this section to be made through the electronic funds transfer system. A state employee and a state agency that employs the employee may agree on which payments of compensation from the agency will be made through the electronic funds transfer system. Unless the comptroller is a party to the agreement:

         1. (i) the comptroller is not required to take any actions to facilitate or ensure the agency's compliance with the agreement; and
         2. (ii) the comptroller is not liable for any damages that result from the agency's failure to comply with the agreement.

   3. (3) Powers and responsibilities of the comptroller and state agencies.

      1. (A) This paragraph applies only to a state employee who is required by paragraph (1) of this subsection to be a participating state employee.
      2. (B) A state agency must ensure that each of the agency's state employees is a participating state employee.
      3. (C) If a state employee is required but refuses or fails to become a participating state employee, then the employee's compensation may be retained by the employee's employer until the employee becomes a participating state employee.

3. (c) Payments by the comptroller.

   1. (1) Payment methods.

      1. (A) Except as otherwise provided in this subsection, the comptroller must pay the compensation of a participating state employee through the electronic funds transfer system.
      2. (B) The comptroller may not pay the compensation of a nonparticipating state employee through the electronic funds transfer system.
      3. (C) The state agency on whose behalf the comptroller pays compensation is responsible for determining whether the payment must be made through the electronic funds transfer system. The comptroller may rely on that determination.

   2. (2) Exemption based on classification.

      1. (A) Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not pay through the electronic funds transfer system the compensation of a participating state employee who holds a position classified below Group 8 of the classification salary schedule unless the employee has been approved to be paid in this way under subsection (b)(2) of this section.
      2. (B) When a participating state employee holds a position classified below Group 8 of the classification salary schedule, the employee holds that position for the purpose of this paragraph even if the compensation paid to the employee exceeds the compensation paid to certain state employees who hold positions classified above Group 7.
      3. (C) When a participating state employee holds a position classified above Group 7 of the classification salary schedule, the employee holds that position for the purpose of this paragraph even if the compensation paid to the employee is less than the compensation paid to certain state employees who hold positions classified below Group 8.

   3. (3) Exemption based on cost. Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not pay the compensation of a participating state employee through the electronic funds transfer system if:

      1. (A) the comptroller determines that paying the compensation by warrant would cost less to the state;
      2. (B) the employee determines that paying the compensation by warrant would cost less to the employee; or
      3. (C) the employer on whose behalf the comptroller would be paying the compensation determines that paying the compensation by warrant would cost less to the agency.

   4. (4) Exemption based on impracticality.

      1. (A) Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not pay the compensation of a participating state employee through the electronic funds transfer system if:

         1. (i) the comptroller determines that paying the compensation through the electronic funds transfer system would be impractical to the state;
         2. (ii) the employee determines that paying the compensation through the electronic funds transfer system would be impractical to the employee; or
         3. (iii) the employer of the employee determines that paying the compensation through the electronic funds transfer system would be impractical to the agency.
      2. (B) Notwithstanding subparagraph (A)(iii) of this paragraph, a state agency must adopt a written policy before it may determine that paying the compensation of any of its state employees through the electronic funds transfer system is impractical to the agency. The policy must clearly state the circumstances under which the agency will find impracticability. The policy must be made available to the comptroller, the state auditor, and the employees of the agency upon request.
   5. (5) Exemption based on inability to obtain an account. Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not pay the compensation of a participating state employee through the electronic funds transfer system if the employee is unable to obtain an account at a financial institution that may be used to receive credit entries.

   6. (6) Claiming an exemption.

      1. (A) The exemption provided in paragraph (2)(A), (3)(B), (4)(A)(ii), or (5) of this subsection does not apply until a state employee or participating state employee properly claims the exemption in accordance with this paragraph.
      2. (B) A state employee or participating state employee may claim an exemption only by properly completing an authorization form and submitting the form to an employer of the employee.
      3. (C) A custodial state agency must retain the authorization forms on which state employees and participating state employees have claimed the exemptions provided by this subsection. The agency may not send the forms to the comptroller. The agency must make the forms available to the state auditor and the comptroller upon request. The agency may destroy a form no earlier than the second anniversary of the employee's termination of employment with the agency.

4. (d) Commencement and termination of participation.

   1. (1) Obtaining authorization forms. Except as provided in subsection (e)(3) and (5) of this section, a state employee or a participating state employee may obtain an authorization form from a state agency that employs the employee.

   2. (2) Becoming a participating state employee.

      1. (A) A state employee who is required or who wants to be a participating state employee must properly designate an EFT account in accordance with subsection (e)(1) of this section.
      2. (B) A state employee is not a participating state employee until the employee has properly designated at least one EFT account and the designation has become effective.

   3. (3) A participating state employee's termination of the employee's participation.

      1. (A) A participating state employee may terminate the employee's participation if:

         1. (i) the employee voluntarily became a participating state employee under subsection (b)(2) of this section; or
         2. (ii) none of the employee's compensation is still required by law to be paid through the electronic funds transfer system.
      2. (B) A participating state employee may terminate the employee's participation only by terminating the designation of each of the employee's EFT accounts in accordance with subsection (e)(3) of this section.
      3. (C) The comptroller may not initiate a credit entry to a state employee on or after the effective date of the termination of the designation of the employee's last EFT account.

   4. (4) A custodial state agency's termination of a participating state employee's participation.

      1. (A) A custodial state agency may terminate a participating state employee's participation only if the agency is the only state agency that employs the employee.

      2. (B) A custodial state agency may terminate the participation of a participating state employee if:

         1. (i) the agency determines in accordance with subsection (c)(4) of this section that continued participation would be impractical to the agency; or
         2. (ii) the agency no longer employs the employee.
      3. (C) If a custodial state agency is authorized under this paragraph to terminate the participation of a participating state employee, then the agency may do so only by terminating the designation of each of the employee's EFT accounts in accordance with subsection (e)(4) of this section.
      4. (D) The comptroller may not initiate a credit entry to a state employee on or after the effective date of the termination of the designation of the employee's last EFT account.
      5. (E) A participating state employee's participation may be terminated under this paragraph without prior notice to the employee.

   5. (5) Inquiries.

      1. (A) A participating state employee must contact the paying state agency before contacting the comptroller when the employee has a question about a particular credit entry or debit entry.
      2. (B) If a participating state employee receives an unidentified credit entry or debit entry, the employee must first contact the employee's financial institution to obtain necessary information about the entry. If the financial institution is unable to provide the information, then the employee may ask the comptroller for the information.
      3. (C) A participating state employee may contact the employer of the employee if the employee has a question about this section.
   6. (6) Rules. A participating state employee shall comply with the rules as amended from time to time.

5. (e) EFT accounts.

   1. (1) Designating an EFT account.

      1. (A) A state employee or a participating state employee may designate an EFT account if:

         1. (i) the employee properly completes an authorization form and submits the form to an employer of the employee;
         2. (ii) the account to be designated as an EFT account is a checking or savings account of the employee; and
         3. (iii) the account to be designated as an EFT account is at a financial institution that allows credit entries to be made to the account.
      2. (B) A custodial state agency shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      3. (C) If a state employee or a participating state employee properly designates an EFT account, the effective date of the designation is the fourteenth calendar day after the comptroller processes the information on the authorization form. The comptroller may initiate credit entries to the EFT account on or after the effective date.

   2. (2) Multiple EFT accounts.

      1. (A) Notwithstanding anything else in this paragraph, a state employee may require each employer of the employee to be the custodial state agency for one EFT account of the employee. The employee may impose this requirement without obtaining the consent of any employer.
      2. (B) This subparagraph applies when a state employee wants an employer of the employee to be the custodial state agency for more than one of the employee's EFT accounts. The employee may not designate a second or subsequent EFT account unless the employer consents to each account beyond the first account.
      3. (C) Subject to the other requirements of this paragraph, a participating state employee may designate a second or subsequent EFT account by properly completing an authorization form and submitting the form to an employer of the employee.
      4. (D) A state agency may not submit a participating state employee's authorization form to the comptroller if the form would designate an EFT account for the employee that has already been designated by the employee.

      5. (E) A participating state employee that has multiple EFT accounts and an employer of the employee may agree that a certain type of compensation payment will be made only to the account or accounts designated in the agreement. Unless the comptroller is a party to the agreement:

         1. (i) the comptroller is not required to take any actions to facilitate or ensure the employer's compliance with the agreement; and
         2. (ii) the comptroller is not liable for any damages that result from the employer's failure to comply with the agreement.

   3. (3) A participating state employee's termination of the designation of an EFT account.

      1. (A) A participating state employee may terminate the employee's designation of an EFT account if the termination would not result in a violation of subsection (b)(1) of this section.
      2. (B) A participating state employee may terminate the designation of all the employee's EFT accounts if the employee is authorized by subsection (d)(3) of this section to terminate the employee's participation.

      3. (C) A participating state employee may terminate the employee's designation of an EFT account only by:

         1. (i) obtaining an authorization form from the custodial state agency for the account;
         2. (ii) properly completing the form; and
         3. (iii) submitting the form to the agency.
      4. (D) A custodial state agency shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      5. (E) The comptroller may not initiate a credit entry to an EFT account on or after the date on which the comptroller processes the information on the authorization form that terminates the designation of the account.

   4. (4) A custodial state agency's termination of the designation of an EFT account.

      1. (A) A state agency may terminate the designation of an EFT account if:

         1. (i) the agency is the custodial state agency for the account;
         2. (ii) the agency properly completes an authorization form and submits the form or the information on the form to the comptroller in accordance with the comptroller's requirements; and
         3. (iii) the termination would not result in a violation of subsection (b)(1) of this section.
      2. (B) The comptroller may not initiate a credit entry to an EFT account on or after the date on which the comptroller processes the information on the authorization form that terminates the designation of the account.
      3. (C) The designation of an EFT account may be terminated under this paragraph without prior notice to the state employee or the participating state employee that owns the account.

   5. (5) Modifying information about an EFT account.

      1. (A) A participating state employee may modify information about an EFT account of the employee only by:

         1. (i) obtaining an authorization form from the custodial state agency for the account;
         2. (ii) properly completing the form; and
         3. (iii) submitting the form to the agency.
      2. (B) A custodial state agency shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      3. (C) New information about an EFT account applies to credit entries that the comptroller initiates on or after the fourteenth calendar day after the comptroller processes the information on the authorization form that provides the new information.

   6. (6) Interagency transfers.

      1. (A) A participating state employee who transfers from one state agency to a second state agency must properly complete an authorization form and submit the form to the second state agency. The employee must complete an authorization form for each EFT account of the employee for which the first state agency was the custodial state agency.
      2. (B) A state agency to which a participating state employee transfers shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      3. (C) A state agency to which a participating state employee transfers becomes the custodial state agency for an EFT account of the employee if the employee submits an authorization form for the account under subparagraph (A) of this paragraph. The agency becomes the custodial state agency on the date on which the comptroller processes the information on the form.
   7. (7) Number of custodial state agencies. An EFT account has only one custodial state agency at any given time. A state agency that is not the custodial state agency for an EFT account may nevertheless request the comptroller to initiate credit entries to the account.

6. (f) The comptroller's powers and responsibilities.

   1. (1) Initiating debit entries.

      1. (A) The comptroller may initiate a debit entry to an EFT account of a participating state employee if the appropriate paying state agency determines that an erroneous credit entry has been made to the account.

      2. (B) The comptroller may initiate a debit entry to an account of a state employee if:

         1. (i) the appropriate paying state agency determines that an erroneous credit entry has been made to the account;
         2. (ii) the erroneous credit entry was made to the account when it was an EFT account; and
         3. (iii) the erroneous credit entry was made when the state employee was a participating state employee.
      3. (C) The comptroller may initiate a debit entry without prior notice to a state employee or a participating state employee.
   2. (2) Compliance with the rules. The comptroller must comply with the rules when initiating credit entries and debit entries.
   3. (3) Contacts. The comptroller may contact a state agency or a participating state employee if the comptroller has a question about a credit entry or debit entry.

   4. (4) Termination of a participating state employee's participation.

      1. (A) The comptroller may terminate the participation of a participating state employee at any time if the termination would not result in a violation of subsection (b)(1) of this section.
      2. (B) The comptroller may terminate participation under this paragraph without providing prior notice to the participating state employee.

   5. (5) Termination of the designation of an EFT account.

      1. (A) The comptroller may terminate the designation of an EFT account at any time if the termination would not result in a violation of subsection (b)(1) or (c)(1)(A) of this section.
      2. (B) The comptroller may terminate the designation of an EFT account without providing prior notice to the participating state employee that owns the account.
   6. (6) Stop payments. The comptroller's authority to stop the payment of a credit entry is equivalent to the comptroller's authority to stop the payment of a warrant.

7. (g) Acceptance and return of credit entries.

   1. (1) Voluntary acceptance of credit entries. Neither a participating state employee nor a participating state employee's financial institution is required to accept a credit entry. However, a rejected credit entry must be returned in accordance with the rules.

   2. (2) Liability resulting from the rejection of credit entries.

      1. (A) The comptroller, the state treasurer, and a state agency are not liable for the consequences of the rejection of a credit entry by a participating state employee or the employee's financial institution.

      2. (B) When a credit entry is rejected, the State of Texas and its state agencies:

         1. (i) are not in default on any obligation; and
         2. (ii) shall not incur any penalty, interest, or late charge by reason of the rejection.

   3. (3) Rejection of credit entries. Even if a participating state employee or the employee's financial institution does not reject a credit entry in accordance with the rules, the employee does not accept a credit entry as being in the correct amount if:

      1. (A) the employee ensures that the paying state agency receives written notice by no later than the thirtieth calendar day after the employee's financial institution receives the credit entry; and
      2. (B) the written notice clearly states that the amount of the credit entry is erroneous.

8. (h) Credit for paying state agencies.

   1. (1) Applicability. This subsection applies unless a participating state employee returns a credit entry in accordance with subsection (g) of this section.
   2. (2) When credit required. A participating state employee shall credit the paying state agency for the amount of a credit entry on the effective date of the credit entry, regardless of when the employee's financial institution posts the credit entry to the employee's account.
   3. (3) Accrual of interest and other charges or fees. The accrual of interest or other charges or fees payable with respect to the amount of a credit entry shall cease when a participating state employee credits the paying state agency for the credit entry.

9. (i) Liability.

   1. (1) Liability for actions of certain parties. A participating state employee, the State of Texas, a state agency, a paying state agency, the comptroller, the state treasurer, and a custodial state agency are not liable for the act or omission of any automated clearinghouse, financial institution, or other person or entity except as specified in the rules.
   2. (2) Liability for actions of state agencies or paying state agencies. Neither the comptroller nor the state treasurer is liable for damages arising out of delays caused or errors committed by a state agency or a paying state agency.
10. (j) Compensatory per diem, salary per diem, travel expense and subsistence payments. The comptroller intends to adopt rules at a later date concerning compensatory per diem, salary per diem, travel expense, and subsistence payments to state employees through the electronic funds transfer system. Until then, the comptroller has determined that it would be impractical to make those payments through the electronic funds transfer system.

11. (k) Miscellaneous provisions.

    1. (1) General effective date. Except as otherwise provided in this subsection, this section first took effect on June 10, 1992.
    2. (2) Applicability of section. This section applies to all state employees whose compensation is paid through the electronic funds transfer system, including employees whose compensation was first paid through the electronic funds transfer system before June 10, 1992.

    3. (3) Existing accounts.

       1. (A) This subparagraph applies to each account of a state employee that received a payment of the employee's compensation through the electronic funds transfer system before June 10, 1992. Each account is an EFT account for the purpose of this section unless:

          1. (i) the employee properly notified the employer of the employee before June 10, 1992, that the account would no longer be available to receive electronic funds transfers; and
          2. (ii) the notification was still in effect on June 10, 1992.
       2. (B) A state employee that had one or more EFT accounts under subparagraph (A) of this paragraph on June 10, 1992, is a participating state employee on that date for the purpose of this section.
       3. (C) An employer of a state employee that is the custodial state agency for more than one EFT account of the employee on June 10, 1992, may terminate the designation of one or more of those accounts only if subsection (e)(4) of this section authorizes the termination. The requirement in subsection (e)(2) of this section to obtain the consent of an employer before designating a second or subsequent EFT account does not apply to the accounts that are EFT accounts under subparagraph (A) of this paragraph on June 10, 1992.

    4. (4) References to payments by the comptroller. When this section refers to the comptroller paying an individual or entity, the reference means:

       1. (A) the comptroller's issuance of a warrant or initiation of a credit entry in accordance with a payment voucher submitted to the comptroller by another state agency; or
       2. (B) the comptroller's payment of an individual or entity in satisfaction of obligations owed to the individual or entity by the comptroller as a result of the fulfillment of the comptroller's constitutional or statutory duties.
    5. (5) Conflicts. If a provision of this section irreconcilably conflicts with a law of the United States or the State of Texas, a requirement of the National Automated Clearing House Association concerning cash concentration disbursement, or the Federal Reserve System's Regulation E, then the law, requirement, or regulation prevails over the provision.

Source Note:The provisions of this §5.13 adopted to be effective June 10, 1992, 17 TexReg 3909; amended to be effective December 6, 1996, 21 TexReg 11520.