180000000163.pdf

CONTRACT CHANGE NOTICE

Change Notice Number 6 .

to

Contract Number 180000000163.

C O

N T

R A

C T

O R

JP Morgan Chase Bank, N.A

S T

A T

E

P ro g ra m

M a n a g e r

Jennifer Ruttman Treasury

111 Polaris Parkway 517-636-0631

Columbus, OH 43240 ruttmanj2@michigan.gov

Dawn Stokes

C o n tr a c t

A d m in is tr a to r Julie Collins Treasury

248-839-0004 (517) 643-5732

Dawn.M.Stokes@jpmorgan.com Collinsj17@michigan.gov

STATE OF MICHIGAN PROCUREMENT

Department of Treasury 430 West Allegan Street Lansing, MI 48922

CONTRACT SUMMARY

DESCRIPTION: Lockbox, Tax return Processing Services and Data Capture Services

INITIAL EFFECTIVE DATE INITIAL EXPIRATION DATE

INITIAL AVAILABLE

OPTIONS

EXPIRATION DATE BEFORE

CHANGE(S) NOTED BELOW

November 1, 2017 October 31, 2022 5 – 1 Year October 31, 2027

PAYMENT TERMS DELIVERY TIMEFRAME

NET 45 N/A

ALTERNATE PAYMENT OPTIONS EXTENDED PURCHASING

☐ P-card ☐ Payment Request (PRC) ☐ Other ☐ Yes ☒ No

MINIMUM DELIVERY REQUIREMENTS

N/A

DESCRIPTION OF CHANGE NOTICE

OPTION LENGTH OF OPTION EXTENSION

LENGTH OF

EXTENSION

REVISED EXP. DATE

☒ 5 years ☐ October 31, 2027

CURRENT VALUE VALUE OF CHANGE NOTICE ESTIMATED AGGREGATE CONTRACT VALUE

$101,783,529.50 $0 $101,783,529.50

DESCRIPTION:

1. Effective October 31, 2022, five (5) option years on this contract are hereby exercised for Unemployment Insurance Agency (UIA) use. The revised expiration date is October 31, 2027.

2. Revised Statement of Work for UIA use only attached.

3. Pricing percentages have been changed for the next five years.

4. The contract administrator for UI is updated to Debbie Ciccone, CicconeD@Michigan.Gov

All other terms, conditions, specifications, and pricing remain the same. Per contractor and agency agreement, DTMB Central Procurement approval, and State Administrative Board approval on 10/25/2022.

CHANGE NOTICE NO. 180000000163 TO CONTRACT NO. 6

FOR THE CONTRACTOR:

JP Morgan Chase Bank, N.A Company Name

Authorized Agent Signature

Dawn Stokes Authorized Agent (Print or Type)

Date

FOR THE STATE:

Signature

Julie Collins / Purchasing Manager Name & Title

Treasury Agency

Date

STATE OF MICHIGAN

Banking Services for the Department of Talent and Economic Development, Unemployment

Insurance Agency (UIA)

SCHEDULE A STATEMENT OF WORK CONTRACT ACTIVITIES

BACKGROUND

The Unemployment Insurance Program was established under the Social Security Act of 1935 to provide income insurance for unemployed workers when suitable jobs are not available, thereby helping the workers to maintain purchasing power. Except for limited standards in the federal laws, the

State develops its own programs and has wide latitude in administering them. The administrative expenses of State Unemployment Insurance laws are borne by the federal government, which provides technical assistance and oversees the use of granted funds. The Department of Talent and Economic

Development, Unemployment Insurance Agency (UIA) administers the Unemployment Insurance program for the State of Michigan.

The UIA levies an Unemployment Insurance (UI) tax against employers' payrolls to fund

Unemployment Insurance benefits. Employers are required to file their quarterly tax returns electronically with the UIA. However, there are some temporary exceptions that permit the submission of paper returns.

Although not required, most employers utilize electronic payment options in lieu of paper checks. The

UIA also collects restitution payments from claimants that were overpaid UI Benefits. To facilitate the collection of UI taxes, restitution and occasionally other unemployment assessments, penalties and/or interest, the UIA utilizes contractual banking/lockbox services to process money (remittance), no money

(non-remittance), and current or prior year(s) tax returns.

This Statement of Work is for Banking Services, Lockbox, Tax Return Processing, and Data Capture

Services to expedite the depositing of remittances received by the UIA. This process involves sorting various documents (e.g., tax forms, payment vouchers, communications, etc.), batching tax returns/vouchers, depositing the accompanying payments, data collection, imaging and reporting.

Electronic benefit payments are processed by a third-party vendor; however, all paper check benefit payments and all refunds will be drawn against one of the three accounts covered in this contract. In addition, scannable (Optical Character Recognition (OCR)) and non-scannable vouchers must be processed. These vouchers include payment coupons for UI Tax payments and restitution payments.

SCOPE

This Contract includes all services required to establish and maintain the following:

• U.I. Benefit Payment Account

• U.I. Tax Clearing Account

• Restitution Clearing Account

• Restitution & Garnishment Lockboxes

• U.I. Tax Lockbox

• Garnishment – Electronic Lockbox

• U.I. Tax - Electronic Lockbox

In addition, UIA may remove or add additional banking or payment processing services to this contract based on legislation or determined need.

Daily Lockbox Processing includes: retrieving the mail directly from the designated U.S. Postal Office or courier; opening the mail; candling of extracted envelopes; sorting; batching; adding; balancing; and data capturing and/or imaging of returns, vouchers and payments. It also includes creating control sheets and/or reports for the tax returns, vouchers and payments processed; encoding, endorsing, and depositing the funds; transmission of payment files; and delivery of scanned documents and miscellaneous correspondence to the designated Detroit area office of UIA.

This contract also covers the data capture of various forms to facilitate the collection of taxes and claimant payments. Adequate collateral security must be maintained always, and a competitive earnings rate must be provided on the amounts on deposit in UIA’S accounts.

UIA’s, Treasurer-Unemployment Insurance Trust Fund, is the main contact for this Contract as the

Program Manager.

1. REQUIREMENTS

A. Benefit Payment Account: This account is used for the payment of Unemployment Insurance

Benefit payments to claimants. All UI benefit payments issued are drawn against a single

Benefit Payment Account. Most of U.I. Benefit Payments are electronically deposited into the recipient’s account. However, some exception-based paper checks are utilized.

1. Paper benefit checks will be negotiated by payees at various check cashing facilities in

Michigan and other states (some checks are mailed to payees in other states). The

Contractor may not charge a fee to unemployed workers for negotiating an unemployment benefit check.

2. All U.I. electronic benefit payments are processed by a third-party vendor. However, the funds for the payment of those benefits will flow through the Benefit Payment Account via either wire transfer or ACH.

3. Deposits to the account will normally be in the form wire transfers of funds from the

Unemployment Trust Fund through the Federal Reserve System. However, there may also be electronic transfers from other entities and the deposit of paper checks.

4. The descriptive data provided below is intended as a means for evaluating and assessing the activity volume and the extent of service required for the Unemployment

Insurance Benefit Payment Account. The data listed is an estimation based on the monthly or daily activity using calendar year 2021 data. This activity may change significantly because of changes in the economy or from changes in federally funded supplemental benefit programs. The Contractor must be capable of handling sudden changes in volume.

Activity Description

- Average Daily Account balance $1,461,000

- Number of Deposits per month 83

- Number of Incoming Wire transfers per month 1

- Ave. number incoming ACH transfers/month 83

- Ave. number outgoing wires/month 83

- Est. number of checks processed annually* 2,000

B. U.I. Tax Clearing Account: There are approximately 218,000 Michigan employers remitting

$1.8 billion each year. There are also approximately 5200 reimbursing employers submitting quarterly or annual payments. Remittances vary from a few cents to many millions of dollars.

Most remittances are in the one thousand to twenty-five-thousand-dollar range. All tax payments, regardless of the payment method, will be deposited into the Tax Clearing Account, a commercial bank clearing account.

UI Tax processing activities are centralized at UIA’s Main Office location in Detroit, Michigan.

The UIA Tax Office is responsible for collecting and processing employer remittances and returns. Refund checks issued to employers are drawn against this Tax Clearing Account.

The descriptive data in this section is provided as a means for evaluating and assessing the activity volume and extent of service required for the Unemployment Insurance Tax Clearing

Account. Except for the Average daily account balance*, this data is an estimate based on the monthly average for calendar year 2021 and may change because of economic or federal program changes. Note that during the four peak collection months, the average daily account balance is extremely high. The balance declines significantly during the remaining months. The

Contractor must be capable of handling a substantial increase in volume.

Activity Description

• Estimated Average daily account balance* $20,000,000

• Outgoing wire transfers 10

• Incoming ACH deposits

• Number of unencoded checks deposited during peak collection months -

• January, April, July, and October

• Number of unencoded checks deposited

57,000 during non-peak collection months

• Average number of adjustments, intra bank

22,600

Transfers, returned items, etc. for each month 4

• Employer refund checks paid each Month 1,300

C. Restitution Clearing Account: This account is a commercial bank clearing account used for the collection of payments from claimants that have been overpaid for unemployment benefits.

Refund checks issued to claimants will be drawn against this Restitution Clearing Account. The

Contractor may not charge a fee to claimants for negotiating a restitution refund check. Deposits to the account are currently in the form of electronic payments or paper checks, usually processed through the Restitution and Garnishment lockboxes. Excess funds are transferred via wire transfer to either our Unemployment Trust Fund at the Federal Reserve or the Contingent

Fund with the State Treasurer.

The descriptive data provided below is intended as a means for evaluating and assessing the activity volume and extent of service required for the UIA Restitution Clearing Account. This data is an estimate based on the monthly average for calendar year 2021 and may change because of economic or federal program changes. The Contractor must be capable of handling an increase in volume.

Activity Description

Average daily account balance $7,000,000

• Average number of branch deposits 30

• Average unencoded checks deposited each month 239

• Average number of refund checks issued each month

• Est. number of adjustments, intra bank transfers and returned items, etc. for each month 80

• Monthly average number of Lockbox checks

6,374 monthly

76K annual

D. Restitution and Garnishment Lockboxes: Payments received for claimant overpayments

(i.e.: restitution) owed to the U.I. program is processed via a Lockbox for deposit into UIA’s

Restitution Clearing account. Payments received directly from claimants will be processed into the Restitution Lockbox. Payments received from employers for claimants, due to a wage garnishment order, will be processed through the Garnishment Lockbox. Employers may submit payments for a single employee, or multiple employees. The processing for both lockboxes is very similar, except for the default coding for payments without vouchers. (See Appendix F).

Each lockbox will have a unique PO Box address.

The remittance will usually be transmitted with a payment voucher (Form UI 1088 or Form UI

6432) for a single claimant; a multiple employee voucher; or other identifying information.

Various other forms and correspondences may also be included. The remittance and the payment voucher are the only media to be processed by the Contractor upon receipt from the claimant. All other media enclosed by the claimant shall be date stamped and delivered to the

UIA’s Benefit Overpayment Collection Unit.

The descriptive data provided below is intended as a means for evaluating and assessing the activity, volume and extent of service required for Lockbox processing. This volume of activity may vary with economic or federal program changes. The Contractor must be capable of handling an increase in volume.

Activity Description

-Restitution - Estimated Annual Number of Payments 153,000

-Garnishment- Estimated Annual Number of Payments 26,300

E. U.I. Tax Lockbox: Michigan employers are required to electronically file their Unemployment

Insurance tax report on or before the 25th of the month following the end of each calendar quarter. Employers must file tax reports for all quarters, even if no tax is due or no payment is being made. Most employers submit their tax payments electronically either via ACH Debit utilizing the UIA’s automated system, MiWAM; or via ACH Credit utilizing the e-Lockbox covered under this contract. The remaining employers submit their UI Tax payment via paper check though the Tax Lockbox.

The tax payment coupon (UIA 4101 or UIA 1763) and remittance are submitted by employers each quarter. Remittances usually decline with each subsequent quarter due to a cap (either

$9,500 or $9,000, depending on the employer) on the taxable wages of each person employed in the state. Following is the average percentage of UI tax dollars that are received for each quarter.

1st Quarter Due April 25th 61%

2nd Quarter Due July 25th 18%

3rd Quarter Due October 25th 12%

4th Quarter Due January 25th 9%

At least 95% of all remitted mail must be deposited in the UI Tax Clearing Account within 48 hours of receipt. The remaining 5% of the remitted dollars shall be deposited within 72 hours of receipt. The Contractor will provide a single lockbox to process all remittances made to the UIA.

This lockbox may be represented by a Post Office Box number. However, for bulk deliveries from service bureaus and accounting organizations that will be made by common carriers such as UPS et al, a street address must be made available.

The narrative information in this section is provided as a means for evaluating and assessing the activity, volume and extent of service required for Lockbox processing. This data is an estimate based on calendar year 2021 activity and may change because of economic or federal program changes. Note that the bulk of the activity occurs within one week during the four peak collection months. The Contractor must be capable of handling a substantial increase in volume.

Activity Description

- Number of checks processed w/out a form 18,450

- Number of checks processed w/UIA 4101 61,598

F. Garnishment - Electronic Lockbox: The UIA anticipates an expansion of our current elockbox operations to permit employers to submit their garnishment payments electronically. This expansion is expected to be implemented during this contract. It is expected that larger employers that currently utilize the U.I. Tax e-lockbox option, would be most likely to utilize this option. However, unlike the U.I. Tax e-lockbox, the activity flowing through the Garnishment elockbox would be consistent from month to month. Estimated volumes are not available.

G. U.I. Tax Electronic Lockbox: UIA implemented an electronic lockbox (ACH Credit) process in

2013. Since then, utilization of this payment option has grown to cover approximately 55% of total employer tax receipts. Employers can authorize payments to the UIA using both the

National Automated Clearance House Association (NACHA) Cash Concentration &

Disbursement (CCD)+ and Corporate Trade Exchange (CTX) standard formats. This option also allows payroll providers to submit payments for multiple UI employer accounts using the

CTX format with multiple addenda records. (See Appendix E).

The narrative information in this section is provided as a means for evaluating and assessing the activity, volume and extent of service required for e-Lockbox processing. This volume of activity is generally centered on the four quarterly due dates, with the bulk of the activity posting within a three-day period each quarter. The Contractor must be capable of handling a substantial increase in volume.

Activity Description

- Annual Number of payments 218,587

- Annual Amount Deposited $703,000,000

2. Work and Deliverables

The Contractor must provide the name and contact information of a primary contact to the Program

Manager that will facilitate the resolution of any processing, reporting, or service issues that may arise within the scope of this contract. Contractor must provide Deliverables/Services and staff, and otherwise do all things necessary for or incidental to the performance of work, as set forth below:

A. Financial Requirements:

1. Net Worth Requirement: Monies deposited for this contract are not to be commingled with any other State Treasurer's account that may be with the Contractor. All funds must be deposited in demand deposit accounts as specified by the Program Manager.

In accordance with Article IX, Section 20 of the Michigan Constitution “No State money shall be deposited in any bank, savings and loan association, or credit union, in excess of 50 percent of the net worth of the bank, savings and loan association, or credit union.”

2. Earnings Credit: The Contractor must provide a detailed narrative description of its methodology for determining the monthly earnings calculation for each account. The

Contractor must include either the specific interest rate that will be used in the calculation; or, in the case of an adjustable rate, a specific indicator (ie: 3-month

Treasury Bill rate published weekly) that will be used to determine the rate.

The Earnings Credit Rate (ECR) is a bank managed rate which is reviewed and updated periodically by J.P. Morgan after considering a range of factors, including the market rate environment (i.e. the Effective Fed Funds Rate, USD Prime Rate, Target

Fed Funds Range and Secured Overnight Financing Rate) and economic conditions.

Using a managed rate helps to maintain pricing flexibility while helping to protect against short-term volatility that could result from an indexed rate. The Earnings

Credit Rate will be made available to UIA via JPM Access and will also be reflected on the monthly bank statements.

3. Collateral: The Contractor must pledge adequate collateral to secure the deposit of all

UIA funds. The amount of collateral required for demand accounts is based on the market value of the collateral posted. For obligations of the United States (bonds, notes, bills) and securities that are100 percent guaranteed by the U.S. Government, with no principal payments, the collateral required is 1.25 times the amount kept on deposit at the financial institution. For General Obligation Bonds of the State of

Michigan and Unlimited Tax General Obligation Bonds of any political subdivision of any state, the collateral required is 1.75 times the amount kept on deposit at the financial institution.

Base collateral required to cover average daily account balances is estimated to be

$25,000,000. However, there are large quarterly tax collections deposited into the U.I.

Tax Clearing Account that currently require additional collateral of up to $750,000,000 for approximately one week during peak collection periods. Collateral needs may fluctuate because of economic changes. The contracting bank must be capable of providing large, short-term increases in collateral coverage. Collateral requirements are as follows:

a. The pledged collateral must be held in the name of the State of Michigan, Department of Labor and Economic Opportunity, Unemployment Insurance

Agency at the Federal Reserve.

b. The collateral must be in the form of transferable obligations, which are fully insured or guaranteed by the United States, or general obligations of the State of Michigan.

c. The Contractor must submit a list of the proposed securities to the Program

Manager or their designee for approval prior to pledging. This list should contain the CUSIP, description, interest rate, maturity date, original par amount, and the current Market Value. The Program Manager retains the right to reject any collateral deemed unsatisfactory. Upon rejection, the Contractor must provide approved substitute collateral within one business day. The

Program Manager also retains the right to set the amount of collateral needed to cover the bank accounts.

d. When the collateral has been approved by the Program Manager and the safekeeping custodian agreed upon, the financial institution shall instruct the custodian to furnish the Program Manger with safekeeping receipts or advices assigning the collateral. (The ownership of the custodian shall be independent from the ownership of the Contractor.)

e. In the case of pledged securities which are not negotiable without the depository's endorsement of assignment, the depository may in lieu of placing its unqualified endorsement on each security, furnish an appropriate resolution and irrevocable power of attorney authorizing the Federal Reserve Bank to assign the securities.

f. The Contractor must have prior approval of the Program Manager for all substitutions.

g. The Contractor must request approval of the Program Manager for the release of a security without replacement.

h. In the event of the depository's insolvency or closure, or appointment of a receiver, liquidator, or other similar officer to terminate its business, the depository agrees that all principal and interest payments on any security pledged due as of the date of the insolvency or closure shall be held separate and apart from any other assets and shall be available to satisfy any claim made by UIA.

B. Service Requirements:

1. Banking Services: The following (sub-sections a through w) represents the minimum banking services that UIA requires for satisfactory maintenance of the three bank accounts:

a. Processing encoded and unencoded deposits.

b. Deposits must be posted daily at the end of the current day’s processing. Deposits must be identifiable by lockbox number.

c. The deposits to their designated bank accounts must reconcile with the daily reported processed total. The processed total must equal the total of the batches and the related daily batch summary reports.

d. The daily deposit must be recorded on the bank statement in total before adjustments can be made for the day.

e. Complete locator information must be provided for adjustments: batch date, batch number, batch item number, batch total, photocopy of item, and deposit ticket.

f. If it is found that a non-State check was deposited in error, the Contractor must contact the Program Manager to obtain permission to refund monies and issue a debit to the UIA’s account.

g. Only adjustments, which can be fully identified, will be accepted by the Program

Manager. Those debits, which are unidentifiable, will be charged to the Contractor.

h. Payments (physical checks or electronic payment) returned unpaid due to nonsufficient funds (NSF) or uncollected funds must be presented twice.

i. Imaging of checks deposited. Images of all checks must be available to the UIA in an electronic format. The Contractor must provide an internet-based product for

UIA staff to access the check images. If the functionality of the Contractor’s product is not acceptable to UIA, the Contractor must provide an image file compatible with

UIA’s current network operations. The image quality must meet the standards required for legal proceedings.

j. Processing Fed Wire, ACH and intra bank transfer of funds.

k. Receive and process a daily check issuance and voided file via FTP transmission;

maintain an outstanding check issuance file. Process ‘Stop-payment’ requests.

l. Processing checks paid daily utilizing a ‘positive pay’ process, where all paid items are verified against the outstanding check file prior to posting to the account.

m. Disbursement of funds to claimants that present a legitimate UIA issued check. The claimant will be expected to provide adequate proof of identification; however, no additional fees may be charged by the Contractor for cashing any check issued by the UIA program.

n. Imaging of paid checks – front and back. Images of all checks paid must be available to the UIA in an electronic format. The Contractor must provide an internet-based product for UIA staff to access the check images. If the functionality of the product is not acceptable to UIA, the Contractor must provide an image file compatible with UIA’s current network operations. The image quality must meet the standards required for legal proceedings.

o. Preparing and transmitting (FTP) an electronic file of the checks paid each month.

See Appendix C for format specifications.

p. Performing the normal bank bookkeeping activities relating to computation of daily account balance, summary daily statement of account, etc., including compliance with the regulatory provisions of the uniform commercial law in the maintenance of the account.

q. Provide supporting documentation for all transactions. For items that cannot be supported within 5 business days after notification by the UIA, the Contractor will adjust the related account until such items can be supported.

r. Facilitating the processing of forgery affidavits, acquiring reimbursement for erroneously cashed items. All credit memos issued in resolution to a forgery claim must be final. Provisional credits will not be accepted.

s. Provide the UIA designated staff on-line access to the daily ledger, available and useable account balances; and the paid check activity each morning by 8:00 A.M.

ET.

t. For each bank account, provide a monthly "Statement of Account" to report the daily depositing, debit, credit, paid checks, fund transfers, and any other activities that may impact the account. All exception adjustments to the account must be supported by debit or credit advices and listed individually on the "Statement of

Account".

u. Monthly "Statement of Account" summaries are to be made available to UIA staff in an electronic format by noon of the fifth business day after the date of the statement.

v. Provide a monthly ‘Income and Expense Analysis Report’ for Federal Reporting

Requirements, similar to the BES 8413/8414 (See Appendix G for the report preparation instructions.).

w. Accommodate the UIA’s on-sight review by Agency representatives and auditors of the payment processing activities. USDOL requires the agency’s Tax Performance auditor to perform on sight testing one peak period per year. Depending on results, additional testing may be necessary.

2. Lockbox Services: The following represents the Lockbox services that UIA requires for satisfactory maintenance of the three Lockboxes:

a. On a daily basis, pick-up returns and remittances from the designated P.O. Boxes and the Detroit based offices of UIA.

b. Open, extract, and date stamp contents. Sort mail, batch returns/vouchers, batch and balance remittances, and log batches.

c. Process payments and credit deposits to designated UIA’s account.

d. Endorse all payments received. The endorsement must include UIA’s batch number, batch date, item number, “UIA”, and an identifier unique to the applicable lockbox, such as the lockbox number assigned to this lockbox.

e. Imaging of checks deposited and payment vouchers/coupons. Images of all checks must be available to the UIA in an electronic format. The Contractor must provide

UIA staff with secured access to an internet-based product to view the check images. If the functionality of the Contractor’s product is not acceptable to UIA, the

Contractor must provide an image file compatible with UIA’s current network operations. The image quality must meet the standards required for legal proceedings. If determined by the Program Manager that the image does not meet these standards the Contractor will implement corrective action within two business days.

f. Extract data from the documents and transmit electronic files daily in the designated file layouts to the UIA. Appendix B.

g. Establish a secure data transmission in compliance with State of Michigan specifications. Appendix D

h. Provide boxes for packaging of processed and unprocessed items and deliver to the designated Detroit area UIA office.

i. Prepare Reports as required by UIA.

j. Deliver processed work to UIA’s designated drop-off point(s) by 3:00 p.m. ET each

State business day.

k. Perform any testing that is required based on a mutually agreed upon testing schedule.

3. Public Sector Data Practice:

a. Contractor must data-capture all fields represented in the Unemployment Insurance

Payment Voucher (UI 1088 or Form UI 6432).

b. Key verification of all data-captured fields will be required on all un-scannable documents.

c. All deposited items must be data-captured within 48-72 hours.

d. All processable documents must be imaged.

C. Lockbox Processing Requirements

1. Restitution and Garnishment Lockboxes:

a. Open, Read, Sort, and Batch Mail: On receipt of pick-up or delivery, all envelopes shall be opened, and the contents extracted. A dated mail receipt tag must be put on the work. All contents and envelopes are to be kept together until the initial verification requirement is satisfied. Any correspondence received that does not include a payment will be forwarded to the UIA within one business day.

Note - Date Tagging must be completed prior to any additional processing.

1. The Contractor is responsible for reconciling the following: mail opening, sorting, batching, scanning and file delivery.

2. If these functions are performed incorrectly and the failure is within the direct control of the Contractor, the Contractor will implement corrective actions within two business days. Any failures that cannot be identified and corrected within two business days must be approved by the Program Manager.

3. The Contractor must notify the State immediately when failures are identified.

b. Candling – Empty envelopes are to be packaged, initialed with clerk standard ID and dated by each clerk. Please describe your envelope candling procedure.

c. Remittance and Payment Voucher: A payment voucher, form UI 1088 or Form UI

6432, may be submitted with the claimant’s remittance. The claimant’s name and ten-digit (including leading 0’s) Claimant Identification Number (MIN) are pre-printed on the payment voucher. The voucher includes a space for the entry of the payment amount. All payment vouchers will have index fields required for electronic batch transmission and imaging transmission.

At least 95% of all remitted mail must be deposited in the UIA Restitution Clearing

Account within 48 hours of receipt. The remaining 5% of the remitted dollars shall be deposited within 72 hours of receipt.

d. Initial Verification Requirements: The documents acceptable for processing are sorted from the exception items, which will be forwarded to UIA. Non-acceptable remittances, as well as all enclosed correspondence, forms and notes are to be date stamped and delivered daily to UIA Benefit Overpayment Unit, Cadillac Place, 3024

W. Grand Blvd., Suite 12-650, Detroit, Michigan 48202.

The Contractor will provide a daily register of those exception items involving money.

One copy shall be included with the forwarded items, and one shall be retained by the Contractor. Items will be identified by the Claimant number or Claimant MIN.

1. Acceptable Payees:

Labor and Economic Opportunity LEO

Unemployment Insurance UI

Unemployment Insurance Agency UI

Michigan Unemployment State of Michigan-UI

Michigan Unemployment Agency MUA

State of Michigan-UI State of Michigan – UI

State of Michigan SOM

ANY PAYEE - If the amount on the remittance device is the same as the amount on the Form UI 1088.

2. Acceptable Remittance Devices:

Personal Checks Certified Checks

Money Orders Cashier’s Checks

Cash*

*Cash - Normally, the Contractor will not receive cash; however, if cash is received, the Contractor shall provide appropriate controls for handling of the cash, prepare a credit document to represent the cash, and process that document in the same manner as any other remittance.

3. Non- Acceptable Remittances will meet the following criteria:

▪ Payee other than on the acceptable payee list, if the amount is not the same as the amount on the Form UI 1088 or Form UI 6432.

e. Preliminary Edit: For payments that are received without identifying claimant information, the Contractor will zero fill the claimant ID field, and continue to process the remittance. Any payments received with multiple ID numbers will be processed according to the business rules. (See Appendix F).

f. Batching: UIA uses a batch process in which batch sizes vary among the two types of batches to be processed by the Contractor (with a maximum of 50 items per batch). Each lockbox is assigned a unique batch number range (ie: Restitution

Lockbox, 001-499; Garnishment 500-999), which are assigned sequentially, then reset when the last number in the range is used. The batch date is assigned to the beginning of the batch number, ensuring each batch has a unique number.

g. Scanning/Key Encoding: The Contractor will be required to provide pricing commensurate with the reading of a MICR line to scan required information.

Information from the MICR scan includes the Voucher type, Amount, Claimant ID number (MIN), and check digit. The Contractor is also required to provide keypunch services to key encode the required information if the remittance is received without a scannable payment voucher. If the MIN or Claimant Number cannot be determined, the Contractor will zero fill the claimant ID field and continue to process the remittance.

The Contractor is required to provide an FTP transmission of the required information in a format compatible with the UIA’s automated system (MiDAS).

h. Imaging: Contractor will be required to image all documents and payments processed. Images of all payments must be available to the UIA in an electronic format. The Contractor must provide UIA with an internet-based product to access the check images. If the functionality of the product is not acceptable to UIA, the

Contractor must provide an image file compatible with UIA’s current network operations. The image quality must meet the standards required for legal proceedings.

2. U.I. Tax Lockbox:

a. Open, Read, Sort, and Batch Mail: On receipt of pick-up or delivery, all envelopes must be opened, and the contents extracted, and date stamped with the received date. A dated mail receipt tag must be put on the work. All contents and envelopes are to be kept together until the initial verification requirement is satisfied. Any correspondence received that does not include a payment will be forwarded to the UIA.

Note – Date Tagging must be completed prior to any additional processing.

1. The Contractor is responsible for the following: mail opening, sorting, batching, scanning and file delivery.

2. If these functions are performed incorrectly and the failure is within the direct control of the Contractor, the Contractor will implement corrective actions within two business days. Any failures that cannot be identified and corrected within two business days must be approved by the Program Manager.

3. The Contractor must notify the State immediately when failures are identified.

The remittance will usually be transmitted with a Form UIA 4101 or Form UIA 1763, Employers Quarterly Tax Payment Coupon. Various other forms and correspondences may also be included. The remittance, payment coupons, and

Forms UIA 1028 and UIA 1110 are the only media to be processed by the

Contractor upon receipt from the employer. All other media enclosed by the employer shall be date stamped and delivered to the UIA’s Tax Office.

b. Candling – Empty envelopes are to be packaged, initialed with clerk’s standard ID and dated by each clerk. Please describe your envelope candling procedure.

c. Remittance and Payment Coupon: Employer remittances will usually be transmitted with either a Form UIA 4101, Employers Quarterly Tax Payment

Coupon, or a Form UIA 1763, Reimbursing Employer Billing for Benefit Charges

Payment Coupon.

Form UIA 4101 contains:

▪ The Employer's name,

▪ Federal Employer Identification Number (FEIN),

▪ UI Employer Account number,

▪ Quarter End Date, and

▪ Payment Amount are all reported on the Employers Quarterly Tax Payment

Coupon, UIA 4101.

All data reported is to be processed and key encoded by the Contractor according to the instructions below.

d. Initial Verification Requirements: The documents acceptable for processing are sorted from the exception items, which will be forwarded to UIA. Non-acceptable remittances, as well as all enclosed correspondence, forms and notes are to be date stamped and delivered daily to UIA Tax Office.

The Contractor will provide a daily register of those exception items involving money. One copy shall be included with the forwarded items, and one shall be retained by the Contractor. Items will be identified by the Employer Account number or FEIN.

1. Acceptable Payee’s:

Talent Investment Agency – UI TIA-UI

TIA - Unemployment Unemployment

Unemployment Insurance UI

Unemployment Insurance Agency UIA

Michigan Unemployment State of Michigan-UI

Michigan Unemployment Agency MUA

State of Michigan-UI State of Michigan – UI

State of Michigan SOM

ANY PAYEE - If the amount on the remittance device is the same as the amount on the Form UI 4101.

2. Acceptable Remittance Devices:

Personal Checks Certified Checks

Money Orders Cashier’s Checks

Cash*

*Cash - Normally, the Contractor will not receive cash; however, if cash is received, the Contractor shall provide appropriate controls for handling of the cash, prepare a credit document to represent the cash, and process that document in the same manner as any other remittance.

3. Non- Acceptable Remittance’s – If the payee is not on the acceptable payee list and if the amount is not the same as the amount on the form 4101, return to the department.

4. Non- Acceptable Remittances and Reports will be forwarded to the UIA Tax

Office, along with all enclosed documentation.

5. Exception Items: Non-acceptable UIA reports and remittances, as well as all enclosed correspondence, forms and notes are to be date stamped and delivered daily to Cadillac Place, 3024 W. Grand Blvd., UIA Tax Office, Suite

12-600, Detroit, Michigan 48202.

The Contractor is required to provide a daily register of those exception items involving money. One copy shall be included with the forwarded items, and one shall be retained by the Contractor. Items will be identified by UIA employer number. If a UIA number is not available, the FEIN (Federal

Employer Identification Number) will be used.

e. Preliminary Edits:

1. Form UIA 1028 (Employers Quarterly Tax Report) - Only Form UIA 1028’s submitted directly from UIA as “Company Work” or “Number Applied For” should be processed. All other UIA 1028’s should be returned to UIA’s Tax

Office.

2. Form UIA 4101 (Employers Quarterly Tax Payment Coupon) – ALL Form

UIA 4101’s received should be processed.

3. Form UIA 1763 (Reimbursing Employer Billing for Benefit Charges Payment

Coupon) – ALL Form UIA 1763’s received should be processed.

4. One Remittance/Multiple Forms (4101, 1763, or 1028) - Some employers, or their agents, will provide one remittance device which covers a number of tax forms (4101, 1763, or 1028), or more than one remittance device which totals the amount entered on one UI 4101 or UI 1763 (Tax Payment Coupon), or UIA 1028 (Section 3, Amount Enclosed). These items shall be isolated and checked for accuracy.

5. Amount Discrepancy - If the written amount of the remittance device varies from the numerical amount, accept the remittance device for the amount that matches the UIA 4101, UIA 1763, or Form UIA 1028 (Section 3, Amount

Enclosed). If neither the written nor numerical amounts match the amount indicated on the UIA 4101, UIA 1763, or UIA 1028 (Section 3, Amount

Enclosed), accept the numerical amount and change the tax form as indicated below. If the item in question is a remittance device with no tax document, accept the numerical amount.

If a UI tax report, with a single remittance device has different amounts indicated on the remittance device and on the tax report, the Contractor shall assume that the amount indicated on the remittance device is correct, and shall draw a single line through the amount on the tax report, and enter the remittance device amount in the boxes provided at the bottom left of the tax form under the heading "For UIA Use Only, Do Not Write Below Line". Care must be taken when correcting the tax form, as noted above, employers may include one remittance device to cover a number of tax reports, or several remittance devices to cover the remittance amount indicated on one tax report.

6. UI Employer Number - must be included on both the tax document and remittance device. If the employer has not placed the UI employer number on the remittance device, the Contractor shall enter that number on the face of the remittance device.

7. Missing UI Employer Number - Tax forms, UIA 1028, UIA 1763 or UIA 4101 and remittance devices may be received with no UI employer number or with the words “Number Applied For” or some variation of that wording indicated on the document. They must be returned if the account number is missing.

These may be tax documents with remittance devices, tax documents with no remittance devices, or remittance devices alone.

8. UI Employer Number w/Less than 10 digits - The UI employer number on tax documents and remittance devices submitted by some employers may contain less than ten digits. This will most commonly occur with deliveries from service bureaus or accounting firms who are submitting multiple reports and payments.

When this occurs, the reported number, including any leading zeros, will be the first seven digits of the actual employer number. The Contractor will then add three zero’s to the end of the number, to arrive at a ten digit UI employer number.

9. Missing Quarter End date - If the tax form (UIA 4101) does not have a

"Quarter Ending Date" indicated, the field should be left blank and the

Contractor shall process the document.

10. Invalid Quarter End date - If the tax form (UIA 4101) contains an entry that is not a valid Quarter End date, the Contractor shall strike through the reported Quarter End date and process the document with the appropriate quarter end date. Contractor will return any blank process or invalid forms back to UI.

▪ 1st Quarter March 31

▪ 2nd Quarter June 30

▪ 3rd Quarter September 30

▪ 4th Quarter December 31

f. Batch Record Types: The Contractor will process separate batches for each of the forms listed below. The per-unit cost of processing each of the batches must be shown as bid items.

The Contractor is required to process the following UIA forms:

1. Loose Payments (check only)

2. Voluntary Payments (check only)

3. Form 4101 with Remittance

Acceptable reports and payments, payments only and reports only must be batched separately before preparing deposits and key encoding.

Batches should be prepared according to five record types. The UIA forms associated with the various batches and the maximum number of items that can be included in each batch are:

4. UIA 110, FUTA tax credit 35 items

a. NOTE: FUTA will be forwarded from the TIA-UI in an envelope marked

"FUTA, Batch".

5. Remittance Device Only (no UIA 4101) 35 items

6. Voluntary Payment, Remittance Only 35 items

*NOTE: Voluntary will always be forwarded from the UIA in an envelope marked "Batch." The processing dates will usually be between January 1st and April 30th.

**NOTE: Only Form UIA 1028’s that are forwarded from the UIA in an envelope marked "Company Work” should be processed. Any Form UIA

1028’s mailed directly to the lockbox should be sent to UIA for approval.

g. Batching Numbers: Batch numbers are nine digits in length beginning with the

Fiscal Year (FY) designation (e.g., 2018-12345). Batch numbers are assigned sequentially beginning with __00001 on October 1st, the beginning of the UIA’s fiscal year, and ending on September 30th of the following calendar year (e.g., 2018-00001 on October 1, 2017, through 2018-34637 on September 30, 2018).

Batch Date New Fiscal Year Exception:

Each year on 10/01/YY, the batch date must be changed to reflect the present calendar year plus 1 preventing a failed batch-date error. The following January 1st

(01/01/yy) the date must be changed back to the present year. This process is repeated again on 10/01.

h. Batching Process:

1. All items in a batch must share the same received date.

2. Assign batch numbers consecutively to each batch processed.

3. The following must be included on the UIA 4101:

i. Batch Number

ii. Received Date

iii. Remittance Amount. If the remittance amount on the report does not match the amount of the check: See

‘Preliminary Edit instructions’ above.

4. If there is a remittance, the following information must be included on the face of the remittance device:

i. Batch Number

ii. Received Date

5. Batch Header, must be prepared for each batch. The batch header includes:

i. Batch number,

ii. Received date,

iii. Number of payments in the batch,

iv. Total payment amount of the batch, and

v. Spaces for the initials of Clerk Standard ID:

6. Assembles the batch,

ii. Runs report tapes,

iii. Runs check tapes and

iv. Balances the batch.

7. For batches with remittances, prepare a proof tape of the dollar amounts of the remittance devices. Enter the number of checks listed on the tape below the total amount of the payments. Indicate the total number of payments on the batch header under “NO. OF PAYMENTS” and the dollar amount on the batch header under “TOTAL PAYMENT

AMOUNT”.

8. For FUTA Batches (Form UIA 1110) circle the year indicated following the words “APPLICATION FOR STATE UNEMPLOYMENT

TAX CREDIT”.

Prepare a proof tape of the credit amounts indicated on the UIA 1110 form above the words:

• “20XX FUTA Tax Penalty” or

“Figure A (additional FUTA taxes paid).”

Prepare electronic documented proof tape of the credit amounts indicated on the UIA 1110’s. In the area below the total of the individual credit amounts, enter the count of reports listed on the tape. Enter this number under “TOTAL

NUMBER OF REPORTS” on the batch header. Enter the total of the credit amounts under “TOTAL PAYMENT AMOUNT” on the batch header.

9. Endorse all remittance instruments using a standard endorsement that includes, "For Deposit Only", " UIA " and the UIA’s

Tax Clearing Account number.

10. Assemble batch for key encoding to FTP:

i. UIA 1110s

▪ Batch Header, Proof tape of amounts at:

▪ “20XX FUTA Tax Penalty” or

▪ “Figure A (additional FUTA taxes paid).”

ii. Remittance Only/Voluntary Payments

▪ Batch Header, Photo copies or electronic images of remittance devices, Remittance Proof Tape

iii. UIA 4101’s and UIA 1763’s

▪ Batch Header, Remittance Proof Tape, Report Proof Tape

iv. UIA 1028’s

▪ Batch Header, Remittance Proof Tape, Report Proof Tape

12. Key encode batch header and tax report information to FTP

(see Appendix B for key encoding format and instructions).

13. All tax reports, photocopies or electronic images of the remittance devices, and proof tapes must be returned to UIA with the batch header at the front of each batch. Batches may either be returned to UIA in standard batch folders or utilizing a UIA approved batch separator. Tax reports may be loosely rubber-banded. Do not rubber-band photocopies or batch headers, and do not use staples.

14. A standard batch folder shall be prepared for each batch. The batch number shall be annotated at the right side of the tab of the folder.

A proof tape of both reports and remittances shall be stapled on the inside back of the folder at the left side of the tab.

15. Deliver batches and file transmissions to UIA Tax Office, within

48 hours of original document receipt at the lockbox.

i. Batch Processing Steps for each Record Type:

1. UIA 1110s FUTA Credit Forms

Processed using steps 1 through 3, 5, 7, and 13 though 18 a Remittance Only – No Forms

Processed using steps 1, 2, 4, 5, 6, 10, 11, 12 and 14 though 18 b Voluntary Payments – ALWAYS sent to Contractor by UIA, in envelope labeled ‘Voluntary Payments’

Processed using steps 1, 2, 4, 5, 6, 10, 11, 12 and 13 though 18 c UIA 4101’s With Remittance Documents

Processed using steps 1 through 6, 8, 9, 11 and 13 though through 18

j. Key Encoding: The Contractor will be required to provide keypunch services to key encode required information, and to provide a FTP transmission of that information in a format compatible with the UIA’s automated system (MiDAS).

k. Remittance Deposits:

1. An electronic deposit must be prepared for each day to the UIA Clearing

Account. The electronic deposit or a detail listing containing each batch number and the "Total Payment Amount" must be prepared.

2. Remittance documents dishonored for NSF or uncollected funds must be presented for payment twice. Returned items shall be sent electronically via email to the Trust Fund Accounting Section.

3. Garnishment Electronic Lockbox (e-Lockbox): The UIA anticipates an expansion of our current e-lockbox operations to permit employers to submit their garnishment payments electronically. This expansion is expected to be implemented within the duration of this contract. The contractor is required to provide pricing for this service.

The Contractor shall agree to and comply with the rules governing Automated Clearing House and

Wire Transfer transactions. In addition, the Contractor shall:

a. Receive payments via CCD+ and CTX formats

b. Provide the UIA, within 24 hours, with a detail listing of all the transactions contained in the posting file.

c. Provide the UIA, within 24 hours, with a Transmittal Report summarizing the transactions contained in the posting file. This will provide the Total Dollar Amount

(credits and debits) and item count.

d. No Debit transactions, except for reversals, will be permitted.

e. The total amount of electronic transactions will be deposited to the Restitution

Clearing account.

f. The posting file will be…