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ACH Payroll Rule Changes Effective March 20, 2026

Running A Business 4 min read
Beginning March 20, 2026, a new Nacha rule will apply to payroll‑related ACH transactions. ACH payments to any employee (W2 or 1099) for wages, salaries, or other employee compensation (including pre-tax deductions like payments to HSA accounts) must include “PAYROLL” in the Company Entry Description field.
This update helps strengthen fraud prevention by making payroll transactions easier to identify across the ACH network.

Helpful Resources for ACH Payroll Originators

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At a Glance: Frequently Asked Questions
Starting March 20, 2026, ACH transactions used to pay wages, salaries, or other similar types of compensation must include “PAYROLL” in the Company Entry Description field. This applies regardless of the worker’s status (covering both W-2 employees and 1099 contract employees. Additionally, pre-tax deductions such as contributions to a Health Savings Account (HSA) are also required to use the “PAYROLL” descriptor.
Nacha is the organization responsible for setting and enforcing the rules that govern the ACH Network in the United States. Read this article to learn more about Nacha
Businesses that use ACH transfer services to pay employees (both W2 and 1099) wages, salaries or other forms of compensation (including pre-tax deductions like HSA contributions) will need to ensure they are entering “PAYROLL” in the Company Entry Description field. If you upload a file to process your ACH payroll transactions, you will need to ensure that your file upload meets this new “PAYROLL” requirement.
Many First Bank customers do not. Payroll transactions processed through Payroll Templates will be updated automatically to comply with this new rule change. If you prepare a file outside of First Bank online banking and upload it into our system, you’ll need to update your file so that the Company Entry Description field is “PAYROLL”.
After March 20, 2026, payroll files that do not meet the new requirement may result in returned payroll items, and originators may receive a Notice of Change.

Understanding the New ACH Payroll Rule Taking Effect March 20, 2026

If your business uses ACH to pay employees, an important rule change is approaching that may affect how payroll transactions are processed.

Beginning March 20, 2026, updated Nacha requirements will apply to payroll-related ACH transactions. These changes are intended to help reduce payroll fraud and prevent misdirected payments across the ACH network.

This article explains what is changing, how it may apply to First Bank customers, and what steps payroll originators should take to prepare.

What Is Changing?

Starting March 20, 2026, ACH transactions used to pay wages, salaries, or similar compensation must include “PAYROLL” in the Company Entry Description field.

This requirement applies specifically to payroll transactions and does not affect ACH payments for vendors, consumer payments, or other non-payroll activity.

Nacha, the organization that governs the ACH network, introduced this change to make payroll entries easier to identify and monitor. This strengthens risk controls and helps financial institutions detect potential fraud more effectively.

How This Affects First Bank Customers

The impact of this change depends on how payroll ACH transactions are originated.

  • Customers Using First Bank’s Payroll Solutions: If you use First Bank’s Payroll option within online banking, a template, or file upload, no action is required. First Bank will automatically apply the updated Company Entry Description to payroll transactions processed through these tools.
  • Customers Using ACH Pass-Thru: Because ACH Pass-Thru files are generated externally, they will not be automatically updated to meet the new requirement. If this applies to you, contact your payroll provider to confirm that payroll files will include “PAYROLL” in the Company Entry Description field before March 20, 2026.

Payroll files that do not meet the new standard may result in returned payroll items..

Unsure How Your Payroll Is Processed?

If you are not certain which method you use to originate payroll ACH transactions, Business Support can help confirm your setup and explain how the change applies to your business.

Why This Matters for ACH Originators

Businesses that originate ACH transactions are responsible for ensuring those transactions are accurate, authorized, and compliant with Nacha rules. Staying informed about rule changes like this one can help reduce the risk of payment disruptions, avoid delays in employee payroll, and support overall ACH compliance.

Share This Information with Your Team

If payroll is managed by someone else within your organization, such as a payroll processor, accountant, or third-party provider, be sure to share this information so any necessary updates can be made before the March 20 deadline.

Need Help?

First Bank’s Business Support team is available to answer questions and assist with understanding how this change applies to your account.

Phone: 1-866-435-7208
Hours: Monday through Friday, 8:30 a.m. to 5:30 p.m.

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