Exemption for distribution of other authorized deductions from employees’ wage or salaries
IN REPLY REFER TO: _________
FILE NO: _________
September 11, 2020
VIA EMAIL & U.S. MAIL
Re: ___________________________________ – Opinion Request
Dear Mr. ________:
Thank you for your letter to the Department of Business Oversight dated July 27, 2020 on behalf of ___________________________________ (“_______”). You request confirmation that the payment processing services conducted by _________ (“______”), a company recently acquired by and merged into _______, are exempt from licensure under the Money Transmission Act (“MTA”).
BACKGROUND
______ offers “____________________” solutions to employers which allow the employers to provide their employees with ______ loan and _______ savings benefits. Specifically, ______ offers two solutions: (1) the ___________________ Benefit and (2) the ____________ Benefit.
Through the ___________________ Benefit, ______ facilitates employer contributions to their employees’ _______ loans. The flow of funds is as follows: The employer’s contributions are transferred from the employer’s bank account to ______’s bank account. ______ then transfers the funds to the relevant _______ loan servicers.
The _____________ Benefit is provided in two ways. First, ______ facilitates employer contributions to their employees’ ________ accounts (“_________________ Benefit”). Second, an employee may authorize the employer to deduct a selected amount from the employee’s pay to be contributed to any ____________ account of the employee’s choice (“__________________ Benefit”). With respect to the _____________________ Benefit, the flow of funds is similar to the description above: The employer’s contributions are transferred from the employer’s bank account to ______’s bank account. ______ then transfers the funds to the relevant ________ accounts.
With respect to the ____________________ Benefit, the flow of funds is as follows: ______ supplies the employer with a file identifying all eligible employees with active ________ accounts and their selected payroll deduction amounts. During the employer’s payroll processing cycle, the payroll administrator uploads the file into the payroll processing system and makes all necessary deductions. The employees’ payroll deduction amounts are transferred from the employer’s bank account to ______’s bank account. ______’s bank then issues check or ACH payments to the relevant ________ based on ______’s arrangement with the ____.
MONEY TRANSMISSION ACT
The MTA prohibits a person from engaging in the business of money transmission in California, unless the person is licensed or exempt from licensure or is an agent of a person licensed or exempt from licensure.[1] Financial Code section 2003, subdivision (q)(3) defines “money transmission” to include receiving money for transmission. Financial Code section 2003, subdivision (u) defines “receiving money for transmission” to mean receiving money or monetary value in the United States for transmission within or outside the United States by electronic or other means.
______ receives money in its bank account for transfer to __________________ and _________ accounts. This constitutes receiving money for transmission pursuant to Financial Code section 2003, subdivision (u).
Financial Code section 2010, subdivision (j) exempts from the MTA a person that delivers wages or salaries on behalf of employers to employees or facilitates the payment of payroll taxes to state and federal agencies, makes payments relating to employee benefit plans, makes distribution of other authorized deductions from employees’ wages or salaries, or transmits other funds on behalf of an employer in connection with transactions related to employees.[2]
With respect to the ___________________ Benefit, ______ facilitates the payment of employer contributions to their employee’s ___________. Employer contributions are transferred to ______ and ______ transfers the contributions to _______ loan servicers. This activity is exempt under Financial Code section 2010, subdivision (j) because ______ is making a distribution of other authorized deductions from employees’ wages or salaries and is transmitting other funds on behalf of an employer in connection with transactions related to employees.
With respect to the _____________________ Benefit, ______ allows an employer to make contributions to a _________ account selected by its employee. Employer contributions are transferred to ______ and ______ transfers funds to the relevant _________ account. This activity is exempt under Financial Code section 2010, subdivision (j) because ______ is making a distribution of other authorized deductions from employees’ wages or salaries and is transmitting other funds on behalf of an employer in connection with transactions related to employees.
Lastly, with respect to the _____________________ Benefit, employees authorize their employers to deduct selected amounts from their pay to contribute to a ____________account of their choice. Employee payroll deduction amounts are transferred to ______. ______’s bank then generates a check or ACH payment to the relevant ________. This activity is exempt under Financial Code section 2010, subdivision (j) because ______ is making a distribution of other authorized deductions from employees’ wages or salaries and is transmitting other funds on behalf of an employer in connection with transactions related to employees.
This opinion is based solely on the facts represented in your correspondence. If any of the facts or circumstances change, the Department’s opinion may also change.
If you have any questions, please feel free to contact me at (___) ________.
Sincerely,
Manuel P. Alvarez
Commissioner
Department of Business Oversight
By
_________________
Counsel
cc: Robert Venchiarutti, Deputy Commissioner, Money Transmitter Division
[1]Fin. Code, §2030, subd. (a).
[2] Fin. Code, § 2010, subd. (j).