NACHA 2026: THE RULE CHANGES RESHAPING PAYROLL SECURITY

There’s quite a bit that PEOs need to know and understand about Nacha’s new fraud monitoring requirements including operational impacts and how to prepare before the March 20, 2026, effective date.

The ACH network is the financial backbone of payroll, taxes, benefits, and countless employer-related transactions processed by PEOs every day. As fraud grows more sophisticated, Nacha is implementing a broad set of risk management rule amendments that take effect March 20, 2026. These changes aim to strengthen fraud detection, improve visibility into ACH activity, and enhance the industry’s ability to recover funds when fraud occurs.

For PEOs, who sit at the center of employer payroll operations, these rules represent more than a compliance update. They introduce new expectations around monitoring, data visibility, and internal controls that require preparation well before the effective dates.

This article outlines what’s changing, why it matters, and what PEOs can do now to be ready.

WHY NACHA IS UPDATING ACH REQUIREMENTS

The ACH Network has experienced exponential growth in volume and speed, including same-day and near real-time payments. With that growth has come a parallel rise in:

• Business email compromise (BEC)
• Payroll impersonation and redirection
• Vendor fraud
• Account takeover schemes
• Fraudulent credit-push transactions

Historically, many instances of frauds weren’t detected until after funds had settled, making recovery extremely difficult. Nacha’s new rules focus on earlier detection, stronger monitoring obligations, and improved tools for identifying suspicious transactions before they’re processed.

3 KEY NACHA RULE CHANGES

1. Expanded Fraud Monitoring Requirements

Under the new rules, several ACH participants must implement risk-based fraud monitoring across all ACH entries—not only WEB debits or micro-entries.

Requirements impact:

• ODFIs, large Originators, TPSPs, and TPSs (6M+ ACH entries in 2023)
• RDFIs (10M+ incoming ACH receipts in 2023)

This marks a major shift: monitoring must now occur for all transactions regardless of SEC code or transaction type.

Annual reviews now become mandatory. All entities covered by the rule must review their monitoring processes at least annually, documenting updates and validating effectiveness. Annual fraud review requirements mean PEOs must treat ACH monitoring the same way they treat payroll accuracy: consistently, proactively, and with documentation.

PEO Impact: PEOs that originate payroll files or partner with third-party providers must ensure these monitoring capabilities exist—either internally or through their financial partners.

2. Updated Definition Of “False Pretenses”

Nacha expanded the definition of unauthorized transactions to include payments induced by: misrepresentation of identity, authority, and account ownership. This updated terminology more accurately covers modern fraud methods, including payroll redirection, vendor impersonation, BEC schemes, and account takeovers.

PEO Impact: Payroll departments are prime targets for impersonation-based fraud, especially those processing high volumes on behalf of multiple employers.

3. Standardized Company Entry Descriptions

Two new standardized entry descriptions will be required: payroll (for wage and compensation credits), and purchase (for e-commerce WEB debits).

These standardized labels increase transparency for receiving institutions, aiding fraud detection and funds-availability decisions.

PEO Impact: Standardized descriptors allow banks to better identify unusual payroll activity, such as unexpected frequency changes, which often signal payroll redirection attempts.

OPERATIONAL CHALLENGES PEOS MAY ENCOUNTER

While these changes strengthen the ACH ecosystem, they introduce several operational challenges that PEOs must prepare to address.

Comprehensive Fraud & Transaction Monitoring. PEOs will need visibility into a broader range of ACH activity, covering velocity spikes, duplicate entries, irregular transaction patterns, SEC code inconsistencies, and out-of-band payment attempts. This level of monitoring may require new tools or enhancements to existing processes.

AML/KYC-Related Expectations. Though Nacha does not regulate AML laws, its expectations now mirror several AML/KYC principles: account behavior monitoring, risk-based profiling, and suspicious pattern identification. PEOs may need to work more closely with financial institutions to align monitoring practices.

Detecting Batch-Level Discrepancies. Many fraud schemes hide within batch structures. PEOs will need to identify: mismatched totals, duplicate batches, unusual batch volumes, and missing entries. These issues must be flagged before processing—not after settlement.

Payroll Frequency Anomalies. Payroll fraud often begins with subtle deviations in established patterns. Nacha’s rules emphasize monitoring for percentage-based change in payroll volume, transaction count variances, and unexpected off-cycle or one-off payrolls. This is particularly important for PEOs managing multiple employer groups with varied pay cycles.

Meeting Annual Compliance Review Requirements. The required annual reviews will demand documentation, testing, and validation. PEOs must account for this increased workload without slowing down payroll operations.

HOW PEOS CAN PREPARE

The most successful organizations will treat ACH risk management as a strategic priority rather than an isolated compliance task. Here are a few steps PEOs can take now.

1. Reviewing ACH workflows end-to-end. Mapping every touchpoint reveals gaps and vulnerabilities.

2. Strengthening internal fraud awareness. Most fraud begins with social engineering; better training reduces risk.

3. Confirming provider readiness. Ensure banks or ACH processors are preparing for new 2026 monitoring requirements.

4. Implementing payroll pattern monitoring. Systems should detect both percentage-based and transaction-based anomalies.

5. Updating client communication processes. Employer contacts must understand red flags and verification expectations.

6. Treat 2025 as a “test year.” Conduct mock audits and practice annual reviews before the deadline.

Nacha’s 2026 rule changes represent one of the most significant updates to ACH risk management in years. For PEOs that manage payroll and payments at scale, these new requirements call for enhanced monitoring, stronger internal controls, better data visibility, and closer collaboration with financial partners.

By preparing early and strengthening fraud detection workflows now, PEOs can protect employers, employees, and payroll operations while stepping confidently into 2026 and beyond.