PART 274—ISSUANCE AND USE OF PROGRAM BENEFITS Authority: 7 U.S.C. 2011-2036. Source: 75 FR 18381, Apr. 12, 2010, unless otherwise noted. Editorial Note: OMB control numbers relating to this part 274 are contained in § 271.8. § 274.1 Issuance system approval standards. (a) Basic issuance requirements. (b) System classification. (1) An on-line Electronic Benefit Transfer (EBT) system in which Program benefits are stored in a central computer database and electronically accessed by households at the point of sale via reusable plastic cards. (2) An off-line EBT system in which benefit allotments can be stored on a card or in a card access device and used to purchase authorized items at a point-of-sale (POS) terminal without real-time authorization from a central processor. (c) Alternative benefit issuance system. (2) The cost of documents or systems which may be required as a result of a permanent alternative issuance system pursuant to this section shall not be imposed upon retail food firms participating in the Program. (d) Contracting or delegating issuance responsibilities. (1) Any assignment of issuance functions shall clearly delineate the responsibilities of both parties. The State agency remains responsible, regardless of any agreements to the contrary, for ensuring that assigned duties are carried out in accordance with these regulations. In addition, the State agency is strictly liable to FNS for all losses of benefits, even if those losses are the result of the performance of issuance, security, or accountability duties by another party. (2) All issuance contracts shall follow procurement standards set forth in part 277 of this chapter. (3) The State agency shall not assign the issuance of benefits to any retail food firm. (e) Ownership rights and procurement requirements. (2) The State agency shall comply with the procurement standards prescribed under § 277.18(c)(2)(iii) of this chapter. Under service agreements, the procurement of equipment and services which will be utilized in the SNAP EBT system shall be conducted in accordance with the provisions set forth under § 277.18(e) of this chapter. (f) Advance planning documentation. (1) Pilot project approval requirements. (i) The State agency shall comply with the two stage approval process for submitting an EBT system proposal to FNS for approval. The Planning APD shall contain the requirements specified under § 277.18(d)(1) of this chapter, including a brief letter of intent, planning budget, cost allocation plan, and schedule of activities and deliverables. (ii) The State agency shall implement EBT systems in a pilot area prior to expansion statewide or to other project areas. The areas of pilot operation and full scale operation shall be identified in the planning APD when submitted to FNS for approval. (A) Pilot project site and expanded site descriptions. (B) A description of major contacts. (iii) Pilot project reporting. (iv) Expansion requirements. (2) EBT Implementation APD. (i) Functional demonstration. (ii) An acceptance test plan. (A) The types of testing to be performed; (B) The organization of the test team and associated responsibilities, test database generation, test case development, test schedule, and the documentation of test results. Acceptance testing shall include functional requirements testing, error condition handling and destructive testing, security testing, recovery testing, controls testing, stress and throughput performance testing, and regression testing; (C) A “what-if” component shall also be included to permit the opportunity for observers and participants to test possible scenarios in a free-form manner. (D) The Department reserves the right to participate and conduct independent testing as necessary during the acceptance testing and appropriate events during system design, development, implementation and operation. (iii) An acceptance test report. (iv) A prototype food retailer agreement. (v) An implementation plan. (A) A description of the tools, procedures, detailed schedules, and resources needed to implement the project; (B) The equipment acquisition and installation requirements, ordering schedules, and system and component testing; (C) A phase-in-strategy which permits a measured and orderly transition from one EBT system to another. In describing this strategy, the plan shall address schedules that avoid disruption of normal shopping patterns and operations of participating households and food retailers. Training of SNAP households, State agency personnel and retailers and/or their trainers shall be coordinated with the installation of equipment in retail stores; (D) A description of on-going tasks associated with fine-tuning the system and making any corrective actions necessary to meet contractual requirements. The description shall also address those tasks associated with ongoing training, document updates, equipment maintenance, on-site support and system adjustments, as needed to meet Program requirements; and, (E) A plan for orderly phase-out of the project and/or for continuing benefit issuance operations if it is demonstrated during the pilot project or conversion operations that the new system is not acceptable. (vi) A contingency plan. (3) EBT Implementation APD budget. (g) EBT system administration. (2) All EBT systems within a State must follow a single EBT APD and system architecture submitted by the State agency. Multiple EBT designs will be acceptable only if such designs can be fully justified by the State agency; the system differences are transparent to participating households that move within the State; operating costs are the same or lower; and the different systems have the ability to readily communicate (transaction interchange) with one another. (3) The State agency shall indicate how it plans to incorporate additional programs into the EBT system if it anticipates the addition of other public assistance programs concurrent with or after implementation of the SNAP EBT system. The State agency shall also consult with the State agency officials responsible for administering the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) prior to submitting the Planning APD for FNS approval. (4) The State agency shall ensure that a sufficient number of authorized food retailers have agreed to participate throughout the area in which the EBT system will operate to ensure that eligible SNAP households will not suffer a significant reduction in their choice of retail food stores and that a sufficient number of retail food stores serving minority language populations are participating. (h) Master issuance file. (i) The master issuance file shall be kept current and accurate. It shall be updated and maintained through the use of documents such as notices of change and controls for expired certification periods. (ii) Before entering a household's data on the master issuance file, the State agency shall review the master issuance file to ensure that the household is not currently participating in, or disqualified from, the Program. If benefits are issued under the expedited service requirements of §§ 273.2(i) of this chapter and 274.2(b), the State agency shall complete as much of the master issuance file review as possible prior to issuing the benefits. Any uncompleted reviews shall be completed after issuance and appropriate corrective action shall be taken to recover overissuance. (2) State agencies should divide issuance responsibilities between at least two persons to prevent any single individual from having complete control over the authorization of issuances and the issuances themselves. Responsibilities to be divided include maintenance of inventory records, the posting of benefits to an EBT account and preparation of EBT cards and PINs for mailing. If issuance functions in an office are handled by one person, a second-party review shall be made to verify card inventory, the reconciliation of the mail log, and the number of mailings prepared. (3) State agencies shall establish controls to prevent a household from concurrently receiving benefits through expedited and normal issuance services. (4) State agencies shall clearly identify issuances in their accountability systems as initial, supplemental, replacement, or restored benefits. (i) State monitoring, examinations, and audits. (2) The State agency must obtain an examination by an independent auditor of the transaction processing of the State EBT service provider regarding the issuance, redemption, and settlement of Program benefits. The examination must be done at least annually and the report must be completed ninety days after the examination period ends. Subsequent examinations must cover the entire period since the previous examination. Examinations must follow the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 70, Service Organizations (SAS No. 70), requirements for reports on controls placed in operation and tests of the operating effectiveness of the controls. (i) The examination report must include a list of all States whose systems operate under the same control environment. Auditors conducting the examination must follow EBT guidance contained in the 2 CFR part 200, subpart F and Appendix XI, Compliance Supplement, and USDA implementing regulations 2 CFR part 400 and part 415 to the extent the guidelines refer to SNAP benefits. (ii) The State agency must retain a copy of the SAS No. 70 examination report. (iii) The State agency shall respond to written requests from the Food and Nutrition Service (FNS), USDA Office of the Inspector General (OIG), or the Government Accountability Office (GAO) for completed SAS No. 70 examination reports by providing the report within thirty days of receipt of the written request. (iv) The State agency shall respond to written requests from FNS, OIG, or GAO to view auditor's workpapers from SAS No. 70 reports by arranging to have workpapers made available within thirty days of receipt of the written request. (v) FNS and the USDA OIG shall rely on SAS No. 70 reports on EBT transaction processing services provided by contractors to the State. FNS and USDA OIG reserve the right to conduct other reviews or audits if necessary. (vi) EBT services provided directly by the State are not subject to SAS No. 70 examination requirements of this section but remain subject to the single audit requirements at 7 CFR 277.7 and 2 CFR part 200, subpart F and Appendix XI, Compliance Supplement and USDA implementing regulations 2 CFR part 400 and part 415. (j) Compliance Investigations. (1) The State agency is required to provide software and telecommunications capability as necessary to FNS Retailer Investigation Branch Area offices, Regional offices and Field offices so that FNS compliance investigators, other appropriate FNS personnel and USDA OIG investigators have access to the system in order to conduct investigations of program abuse and alleged violations; (2) The State agency must ensure that FNS compliance investigators and USDA OIG investigators have access to EBT cards and accounts that are updated as necessary to conduct SNAP investigations. (k) Federal financial participation. (2) The State agency shall comply with the provisions set forth under § 277.18 of this chapter and 2 CFR part 200, subparts D and E and USDA implementing regulations 2 CFR part 400 and part 415, as applicable. (3) Access to system documentation, including cost records of contractors or subcontractors shall be made available and incorporated into contractual agreements in accordance with § 277.18(k) of this chapter. (4) State agencies may receive one hundred percent Federal funding for the costs they incur for switching and settling all SNAP interstate transactions. For purposes of this section, the term “switching” means the routing of an interstate transaction that consists of transmitting the details of a transaction electronically recorded through the use of an EBT card in one State to the issuer of the card that is in another State; and the term “settling” means movement, and reporting such movement, of funds from an EBT card issuer located in one State to a retail food store, or wholesale food concern, that is located in another State, to accomplish an interstate transaction. The total amount of one hundred percent funding available annually is limited to $500,000 nationwide. Once the $500,000 limitation is exceeded, Federal financial participation reverts to the standard fifty percent program reimbursement rate and procedure. To qualify for this funding, the State agency must: (i) Meet standards of interoperability and portability under § 274.8; (ii) Sign and submit, in each fiscal year for which the State agency requests enhanced funding, an Interoperability Funding Agreement to comply with the administrative procedures established by the Department. The State agency must submit the signed agreement to the Department before the end of the fiscal year in which costs are incurred in order to qualify for payment for that fiscal year, and (iii) Submit requests for payment on a quarterly basis after the end of the quarter in which interoperability costs are incurred, in accordance with the Department's administrative procedures. Requests for payments shall be due February 15 (for the period October through December), May 15 (January through March), August 15 (April through June), and November 15 (July through September). Requests for payment submitted after the required date for a quarter shall not be considered until the following quarter, when such requests for payments are scheduled to be processed. [75 FR 18381, Apr. 12, 2010, as amended at 79 FR 10, Jan. 2, 2014; 81 FR 66498, Sept. 28, 2016] § 274.2 Providing benefits to participants. (a) General. (b) Availability of benefits. (c) Benefit allotments. (2) For those households which are to receive a combined allotment, the State agency shall provide the benefits for both months as an aggregate (combined) allotment, or as two separate allotments, made available at the same time in accordance with the timeframes specified in § 273.2 of this chapter. (d) Ongoing households. (1) State agencies may stagger issuance throughout the month, or for a shorter period. When staggering benefit delivery, however, State agencies shall not allow more than 40 days to elapse between the issuance of any two allotments provided to a household participating longer than two consecutive, complete months. Regardless of the issuance schedule used, the State agency shall adhere to the reporting requirements specified in § 274.4. (2) Upon the request of the Tribal organization that exercises governmental jurisdiction over a reservation, the State agency shall stagger the issuance of benefits for eligible households located on reservations for at least 15 days each month. (3) When a participating household is transferred from one issuance system or procedure to another issuance system or procedure, the State agency shall not permit more than 40 days to elapse between the last issuance under the previous system or procedure, and the first issuance under the new system or procedure. The 40-day requirement does not apply to instances in which actions by recipients, such as failure to submit a monthly report, disrupt benefits. Transfers include, but are not limited to, households being moved into or out of a staggered issuance procedure and households on a fluctuating schedule within a staggered system. If the State agency determines that more than 40 days may elapse between issuances, the State agency shall divide the new issuance into two parts, with one part being issued within the 40-day period, and the second part, or supplemental issuance, being issued on the household's established issuance date in the new system or procedure. The supplemental issuance cannot provide the household more benefits than the household is entitled to receive. (4) Notwithstanding the above provisions, in months in which benefits have been suspended under the provisions of § 271.7 of this chapter, State agencies may stagger issuance to certified households following the end of the suspension. In such situations, State agencies may, at their option, stagger issuance from the date issuance resumes through the end of the month or over a five-day period following the resumption of issuance, even if this results in benefits being issued after the end of the month in which the suspension occurred. (e) Household training. (1) Content which will familiarize each household with the provisions of this section and §§ 274.6 and 274.7; (2) Notification to the household of the procedures for manual transactions and re-presentation as described in § 274.8(d); (3) The appropriate utilization and security of the PIN; (4) Each household's responsibilities for reporting loss or damage to the EBT card and who to report them to, both during and outside business hours. Information on a 24 hour hotline telephone number shall be provided to each household during training; (5) Written materials and/or other information, including the specific rights to benefits in an EBT system, shall be provided as prescribed under 7 CFR 272.4(b) for bilingual households and for households with disabilities. This shall include the statement of non-discrimination found in Departmental Regulation 4300-3 (available from USDA, Office of Civil Rights, Room 326-W, Whitten Building, Washington, DC 20250). Written materials shall be prepared at an educational reading level suitable for SNAP households; (6) Information on the signs or other appropriate indicators located in checkout lanes that enable the household to identify lanes equipped to accept EBT cards. (7) Disclosure information regarding adjustments and a household's rights to notice, fair hearings, and provisional credits. The disclosure must also state where to call to dispute an adjustment and request a fair hearing. (f) EBT cards and Personal Identification Numbers (PINs). (2) The State agency shall permit SNAP households to select their PIN. (i) PIN assignment procedures shall be permitted in accordance with industry standards as long as PIN selection is available to clients if they so desire and clients are informed of this option. (ii) If assigning a PIN by mail in conjunction with card issuance, State agencies shall mail the PIN separate from the card one business day after the card is mailed. (g) Adjustments. (2) A State agency shall make adjustments to an account to correct an auditable, out-of-balance settlement condition that occurs during the redemption process as a result of a system error. A system error is defined as an error resulting from a malfunction at any point in the redemption process: from the system host computer, to the switch, to the third party processors, to a store's host computer or POS device. These adjustments may occur after the availability date and may result in either a debit or credit to the household. (i) Client-initiated adjustments. (ii) Retailer-initiated adjustments. (A) The household shall have 90 days from the date of the notice to request a fair hearing. (B) Should the household dispute the adjustment and request a hearing within 10 days of the notice, a provisional credit must be made to the household's account by releasing the hold on the adjustment balance within 48 hours of the request by the household, pending resolution of the fair hearing. If no request for a hearing is made within 10 days of the notice, the hold is released on the adjustment balance, and this amount is credited to the retailer's account. If there are insufficient funds available in the current month to cover the full adjustment amount, the hold may be maintained and settled at one time after the next month's benefits become available. (3) The appropriate management controls and procedures for accessing benefit accounts after the posting shall be instituted to ensure that no unauthorized adjustments are made in accordance with paragraph (j) of this section. (h) Off-line storage. (1) An EBT account is inactive if the household has not initiated activity that affects the balance of the household's SNAP EBT account, such as a purchase or return. (2) Taking benefits off-line means that the household's SNAP EBT account, including all existing benefits in the account and any new issuances deposited into the account, is no longer accessible to the household unless and until the account and its benefits are reinstated upon contact by the household. (3) The State agency shall send written notification to the household up to 10 days prior to or concurrent with the action to store benefits off-line. If an inactive account has a zero balance, a notice to the household is not required. At a minimum, the notice shall include information on: (i) The steps necessary to bring the benefits back on-line; and (ii) The State agency's permanent expungement policy. (4) Benefits stored off-line that have not been expunged in accordance with paragraph (i) of this section shall be reinstated and made available within 48 hours of reapplication or contact by the household. In addition to a specific request for benefit restoration, household contact shall include, but is not limited to: (i) Recertification or reapplication for benefits; and (ii) A general request for assistance. (i) Expungement. (i) Inactive EBT accounts. (A) When the oldest benefit allotment has not been accessed by the household for nine months, the State agency shall expunge benefits from the EBT account or off-line storage at the monthly benefit allotment level as each benefit allotment ages to nine months since the date of issuance or since the last date of account activity, whichever date is later. (B) The State agency shall not expunge any benefits from active accounts even if there are benefit allotments older than nine months. If at any time after the expungement process begins, the household initiates activity affecting the balance of the account, the State shall stop expunging benefits from the account and start the account aging process over again for the remaining benefits. (ii) Unused benefits. (2) Not later than 30 days before benefit expungement is scheduled to begin, State agencies shall provide notice to the household that benefits in their EBT account are approaching expungement due to nonuse/inactivity. At a minimum, the notice shall include: (i) The date upon which benefits are scheduled to be expunged; and (ii) The steps necessary to prevent the expungement, including an opportunity to request that any benefits stored off-line be restored to the household in accordance with paragraph (h) of this section; (3) Expunged benefits shall be removed from the Account Management Agent and shall not be reinstated. (4) Notwithstanding paragraph (i)(1) of this section, in instances when the State agency verifies a death match for all certified members of the household and closes the SNAP case in accordance with § 272.14 of this chapter, the State agency shall expunge the remaining SNAP balance in the household's EBT account at that time. In accordance with § 273.13(b)(2) of this chapter, expungement notices, per paragraph (i)(2) of this section, are not required for these households. (j) Procedures to adjust SNAP accounts. (1) Whenever benefits are stored off-line or expunged, the State agency shall document the date, amount of the benefits, and storage location in the household case file. (2) Issuance reports shall reflect the adjustment to the State agency issuance totals to comply with monthly issuance reporting requirements prescribed under § 274.4. [75 FR 18381, Apr. 12, 2010,, as amended at 78 FR 51657, Aug. 21, 2013; 85 FR 52032, Aug. 24, 2020] § 274.3 Retailer management. (a) Retailer participation. (i) Retailers who do not have immediate access to telephones at the time of authorization shall be accommodated by an alternative system ( e.g., e.g. (ii) Newly authorized retailers shall have access to the EBT system within 2 weeks after the receipt of the FNS authorization notice. However, whenever a retailer chooses to employ a third party processor to drive its terminals or elects to drive its own terminals, access to the system shall be accomplished within a 30 day period or a mutually agreed upon time to enable the third party interface specifications and any State required functional certification to be performed by the State agency and/or its contractor. (2) Authorized retailers shall not be required to pay costs essential to and directly attributable to EBT system operations as long as the equipment or services are provided by the State agency or its contractor and are utilized solely for SNAP. In addition, if Program equipment is deployed under contract to the State agency, the State agency may, with USDA approval, share appropriate costs with retailers if the equipment is also utilized for commercial purposes. The State agency may choose to charge retailers reasonable fees in the following circumstances: (i) Cost for the replacement of lost, stolen or damaged equipment; (ii) The cost of materials and supplies for POS terminals not provided by the State agency; (iii) Telecommunication costs for all non-EBT use by retailers when lines are provided by the State agency. In addition, State agencies may remove phone lines from retailers in instances where there is significant misuse of the lines. (3) The State agency shall ensure that the EBT system provides credits to the financial institution holding the accounts for retailers or third party processors within two business days of the daily cut-over period for retailer settlement. The cut-over period is the time of day established by the system to define the end of a transaction day for settlement and reconciliation. (b) POS deployment. (1) For an FNS authorized retailer with Program benefit redemption amounting to 15 percent or more of total food sales, all checkout lanes shall be equipped; (2) For an FNS authorized retailer with Program benefit redemptions representing less than 15 percent of total food sales, superstores and supermarkets shall, at a minimum, receive one terminal for every $11,000 in monthly redemption activity up to the number of lanes per store. All other food retailers shall receive one terminal for every $8,000 in monthly redemption activity up to the number of lanes per store. However, a State agency may utilize an alternative deployment formula that permits equipment deployment at higher levels than required by this paragraph up to the number of lanes in each store. The State agency shall review terminal deployment on a yearly basis and shall be authorized to remove excess terminals if actual redemption activity warrants a reduction. (3) For newly authorized retailers, the State agency and retailer shall negotiate a mutually agreed level of terminal deployment up to the number of lanes per store. The State agency may consult with the appropriate FNS field office in order to determine the previous SNAP redemption activity that could be utilized in determining the initial number of terminals to deploy in newly authorized retailer firms. State agencies will also need to make accommodations for border stores that are deemed necessary for client access. To do so, State agencies must ensure that procedures are in place to process manual vouchers in instances when the system is down or for those retailers that do not have POS equipment. Redemption information shall remain confidential. Unauthorized release of redemption information is subject to penalties defined in Section 15 of the Food and Nutrition Act of 2008 (7 U.S.C. 2024). (4) Any FNS authorized retailer shall be able to submit further evidence that it warrants additional terminals after the initial POS terminals are deployed. SNAP households may also submit evidence to the State agency that additional POS terminals are needed. State agencies may provide retailers with additional terminals above the minimum number required by this paragraph at customer service booths or other locations if appropriate. (c) Retailer agreements. (1) Describe all terms and conditions with respect to equipment ownership, lease arrangements, handling and maintenance for which the State agency and merchant are liable; (2) Describe the agreed upon procedures and policies for participation and withdrawal from the EBT system; (3) Comply with all Program regulations with respect to retailer participation in the Program and treatment of SNAP households. This shall include specific requirements with respect to the deployment of terminals and the identification of checkout lanes for SNAP customers; (4) Delineate the liabilities during system downtime and the associated responsibilities of each party with respect to the use of off-line and/or manually entered data, paper vouchers, and re-presented vouchers. (d) Third party processors are financial institutions, cardholder authorization processors other than the party with which the State agency has contracted for EBT services, and food retailers driving their own terminals that are capable of relaying electronic transactions to a central database computer for authorization. The State agency shall afford retailers the opportunity to use third party processors and shall provide interface specifications and certification standards in order for the third party processor to participate in the EBT system. (1) In order to participate in a SNAP EBT system, a third party processor must be able to meet all third party interface specifications and certification standards associated with § 274.8. The State agency shall make available to third party processors the third party interface specifications prior to implementation of the EBT system to enable third party processors to access the database. Third party processors shall undergo functional and acceptance tests as specified by the State agency; (2) Third party processors shall be liable for transactions until the transaction has been electronically accepted by the contracted vendor or an intermediate processing facility; (3) The State agency shall ensure that third party processors and food retailers driving their own terminals comply with this section and all applicable Program regulations. (e) Managing retailer participation. (1) Convey retailer authorization information provided by FNS to the system operator using the Retailer EBT Data Exchange (REDE) system. The State agency must access the REDE files to ensure that the FNS retailer files used to authorize valid EBT SNAP transactions are updated on a daily basis. (2) Follow-up on actions taken regarding any disqualification or withdrawal of an authorized retailer from the Program must occur within two business days after receipt; (3) Add newly authorized retailers or third party processors to the EBT system as prescribed under paragraph (a)(1)(ii) of this section. (4) Ensure that only currently authorized retailers can access the system; (5) Monitor retailers to ensure that equipment deployment complies with paragraph (b) of this section; (6) Ensure that equipment and supplies are maintained in working order for retail stores equipped by the State agency or its contractor. Equipment shall be replaced or repaired within 48 hours; (7) Ensure that retail store employees are trained in system operation prior to redeeming benefits. Retailer training shall be offered by the State agency and include the provision of appropriate written and program specific materials. Retailers have the option to waive instruction by the State agency if they desire. State agencies shall direct retailers to confirm in writing that they are waiving their option to training; (8) Conduct adjustments as prescribed under § 274.2(g) of this chapter; § 274.4 Reconciliation and reporting. (a) Reconciliation. (1) Reconciliation. (i) Reconciliation of benefits posted to household accounts on the central computer against benefits on the Issuance Authorization File; (ii) Reconciliation of individual household account balances against account activities on a daily basis; (iii) Reconciliation of each individual retail store's SNAP transactions per POS terminal and in total to deposits on a daily basis; (iv) Verification of retailer's credits against deposit information entered into the automated clearinghouse (ACH) network; (v) Reconciliation of total funds entered into, exiting from, and remaining in the system each day; (vi) Maintenance of audit trails that document the full cycle of issuance from benefit allotment posting to the State issuance authorization file through posting to POS transactions at retailers through settlement of retailer credits. (b) Management reports. (1) Information on how the system operates relative to its performance standards, the incidence, type and cause of system problems, and utilization patterns. (2) Retailer transaction data submitted to FNS on a monthly basis. This data must be submitted in the specified format in accordance with the required schedule. (3) Data detailing by specified category the amount of Program benefits issued or returned through the EBT system shall be provided in a format and mechanism specified by FNS to the FNS Account Management Agent as the benefits become available to recipients. This data will be used to increase or decrease the SNAP EBT benefit funding authorization for the State's Automated Standard Application for Payment (ASAP) account. (c) Required reports. (1) Form FNS-46, Issuance Reconciliation Report, shall be submitted by each State agency operating an issuance system. The report shall be prepared at the level of the State agency where the actual reconciliation of posted benefits and the master issuance file occurs. (i) The State agency shall identify and report the number and value of all issuances which do not reconcile with the master issuance file. All unreconciled issuances shall be identified as specified on this reporting document. (ii) The report shall be received by FNS no later than 90 days following the end of the report month. (2) Form FNS-388, State Issuance and Participation Estimates. (ii) The Form FNS-388 report shall provide Statewide estimated or actual totals of issuance and participation for the current and previous month, and actual or final participation totals for the second preceding month. In addition to the participation totals for the second preceding months of January and July, provided on the March and September reports, non-assistance (NA) and public assistance (PA) household and person participation breakdowns shall be provided. As an attachment to the March and September Form FNS-388 reports, State agencies shall provide project area breakdowns of benefit issuance and NA/PA household and person participation data for the second preceding months of January and July. (iii) State agencies shall submit any proposed changes in their estimation procedures to be used in determining the Form FNS-388 data to the FNS regional office for review and comment. FNS shall monitor the accuracy of the Statewide estimated dollar value of benefits issued and the number of households and persons participating as reported on the Form FNS-388 report against the Statewide actual total participation as reported on succeeding Form FNS-388 reports and against the semiannual project area participation totals attached to the March and September Form FNS-388 reports. The FNS accuracy standards for the issuance and participation estimates are that estimates for the current month be within ( + ) or (−) four (4) percent of actual levels, and the estimates for the previous month be within ( + ) or (−) two (2) percent of actual levels. State agencies shall explain any unusual circumstances that cause benefit issuance and/or participation data to not meet these accuracy standards. If a State agency fails to meet these accuracy standards, FNS shall notify the State agency and assist the State agency in revising its estimating procedures to improve its reporting. (iv) A participating household is one that is certified and has been, or will be, issued benefits (whether or not the benefits are used), and households that have met the eligibility requirements, but will receive zero benefits. § 274.5 Record retention and forms security. (a) Availability of records. (2) In lieu of the records themselves, easily retrievable microfilm, microfiche, or computer tapes which contain the required information may be maintained. (b) Control of issuance documents. (c) Accountable documents. (i) Secure storage; (ii) Access limited to authorized personnel; (iii) Bulk inventory control records; (iv) Subsequent control records maintained through the point of issuance or use; and (v) Periodic review and validation of inventory controls and records by parties not otherwise involved in maintaining control records. (2) For notices of change which initiate, update or terminate the master issuance file, the State agency shall, at a minimum, provide secure storage and shall limit access to authorized personnel. § 274.6 Replacement issuances and cards to households. (a) Providing replacement issuance. (2) Where a Federal disaster declaration has been issued and the household is eligible for disaster SNAP benefits under the provisions of part 280, the household shall not receive both the disaster allotment and a replacement allotment for a misfortune. (3) Replacement restrictions. (ii) No limit on the number of replacements shall be placed on the replacement of food purchased with Program benefits which was destroyed in a household misfortune. (iii) Except for households certified under 7 CFR part 280, replacement issuances shall be provided in the amount of the loss to the household, up to a maximum of one month's allotment, unless the issuance includes restored benefits which shall be replaced up to their full value. (4) Household statement of loss. (ii) If the signed statement or affidavit is not received by the State agency within 10 days of the date of report, no replacement shall be made. If the 10th day falls on a weekend or holiday, and the statement is received the day after the weekend or holiday, the State agency shall consider the statement timely received. (iii) The statement shall be retained in the case record. It shall attest to the destruction of food purchased with the original issuance and the reason for the replacement. It shall also state that the household is aware of the penalties for intentional misrepresentation of the facts, including but not limited to, a charge of perjury for a false claim. (5) Time limits for making issuance replacements. (ii) The State agency shall deny or delay replacement issuances in cases in which available documentation indicates that the household's request for replacement appears to be fraudulent. (iii) The household shall be informed of its right to a fair hearing to contest the denial or delay of a replacement issuance. Replacements shall not be made while the denial or delay is being appealed. (6) Verifying issuance and household misfortune. (ii) Prior to replacing destroyed food that was purchased with Program benefits, the State agency shall determine that the destruction occurred in a household misfortune or disaster, such as, but not limited to, a fire or flood. This shall be verified through a collateral contact, documentation from a community agency including, but not limited to, the fire department or the Red Cross, or a home visit. (7) Documentation and reconciliation of replacement issuances. (ii) The State agency shall maintain, in readily-identifiable form, a record of the replacements granted to the household, the reason, and the month. The record may be a case action sheet maintained in the case file, notations on the master issuance file, if readily accessible, or a document maintained solely for this purpose. (iii) When a request for replacement is made late in an issuance month, the replacement will be issued in a month subsequent to the month in which the original benefit was issued. All replacements shall be posted and reconciled to the month of issuance of the replacement and may be posted to the month of issuance of the original benefit, so that all duplicate transactions may be identified. (b) Providing replacement EBT cards or PINs. (1) The State agency shall ensure that a duplicate account is not established which would permit households to access more than one account in the system. (2) An immediate hold shall be placed on accounts at the time notice is received from a household regarding the need for card or PIN replacement. The State agency shall implement a reporting system which is continually operative. Once a household reports that their EBT card has been lost or stolen, the State agency shall assume liability for benefits subsequently drawn from the account and replace any lost or stolen benefits to the household. The State agency or its agent shall maintain a record showing the date and time of all reports by households that their card is lost or stolen. (3) The State agency may impose a replacement fee by reducing the monthly allotment of the household receiving the replacement card; however, the fee may not exceed the cost to replace the card. If the State agency intends to collect the fee by reducing the monthly allotment, it must follow FNS reporting procedures for collecting program income. State agencies currently operating EBT systems must inform FNS of their proposed collection operations. State agencies in the process of developing an EBT system must include the procedure for collection of the fee in their system design document. All plans must specify how the State agency intends to account for card replacement fees and include identification of the replacement threshold, frequency, and circumstances in which the fee shall be applicable. State agencies may establish good cause policies that provide exception rules for cases where replacement card fees will not be collected. (4) Replacement card. (5) State option to withhold replacement card. (i) The State agency shall notify the household in writing when it has reached the threshold, indicating that the next request for card replacement will require contact with the State agency to provide an explanation for the requests, before the replacement card will be issued. The State agency shall also notify the household in writing once the threshold has been exceeded that the State agency is withholding the card until contact is made. These notices must: (A) Be written in clear and simple language; (B) Meet the language requirements described at § 272.4(b) of this chapter; (C) Specify the number of cards requested and over what period of time; (D) Explain that the next request, or the current request if the threshold has been exceeded, requires contact with the State agency before another card is issued; (E) Provide all applicable information on how contact is to be made in order for the client to comply, such as whom to contact, a telephone number and address; (F) Include a statement that explains what is considered a misuse or fraudulent use of benefits and the possibility of referral to the fraud investigation unit for suspicious activity. (ii) Following notification, should another card be requested, the State agency shall require that the household contact the State agency to provide an explanation for the requests. If the client makes contact, the State agency shall make the replacement EBT card available for pick up or place the card in the mail in accordance with § 274.2(f) of this chapter within two business days following household contact with the State agency, regardless of whether or not an explanation was provided. (A) If a household does not contact the State agency in response to the State agency's notice, the State agency shall not issue a replacement card to the household and the case must be referred for investigation. (B) The State agency shall educate the client on the proper use of the card if the explanation is deemed appropriate and the State agency shall not require contact upon subsequent requests, unless the pattern of card activity has changed since the initial contact and indicates possible trafficking activity. (C) The State agency shall refer the individual for investigation in cases where the individual contacts the State agency but refuses to explain the card losses or the explanation provided appears to be indicative of trafficking in accordance with § 271.2 of this chapter. The State agency shall issue a replacement card to any household that makes the required contact so that the household has access to benefits in its EBT account while the investigation is underway and while awaiting a hearing, in accordance with § 273.16(e)(5). (iii) In all cases, a State agency shall act to protect households containing homeless persons, elderly or disabled members, victims of crimes and other vulnerable persons who may lose EBT cards but are not committing fraud. (6) Excessive Replacement Card Notice. (i) The State agency shall be exempt from sending the Excessive Replacement Card Notice if they have chosen to exercise the option to withhold the replacement card until contact is made with the State agency, in accordance with paragraph (b)(5) of this section, as long as the State agency has chosen to use the minimum threshold, which requires sending the first warning notice on the fourth card replacement request within 12 months. If the State agency chooses to use a threshold higher than the fourth card replacement request, the State agency must send the Excessive Replacement Card Notice on the fourth card request in accordance with this section. (ii) The State agency shall notify the household in writing upon their fourth card request that their case is being monitored. This notice shall, at a minimum: (A) Be written in clear and simple language; (B) Meet the language requirements described at § 272.4(b) of this chapter; (C) Specify the number of cards requested and over what period of time; (D) Explain that the transactions of the cardholder's account are being monitored for potential trafficking activity; (E) Include a statement that explains what is considered a misuse or fraudulent use of benefits and the possibility of referral to the State's fraud investigation unit for suspicious activity. (F) Provide contact information, including a telephone number, should the household have questions or concerns regarding the notice. [75 FR 18381, Apr. 12, 2010, as amended at 78 FR 51657, Aug. 21, 2013] § 274.7 Benefit redemption by eligible households. (a) Eligible food. (b) Prior payment prohibition. (c) Transaction limits. (d) Access to balances. (2) The State agency shall ensure that the EBT system is capable of providing a transaction history for a period of up to 2 calendar months to households upon request. (3) Households shall be provided printed receipts at the time of transaction in accordance with § 274.8(b)(7). (e) Access to retail stores. (2) The EBT system shall not result in a significant increase in the cost of food or cost of transportation to authorized retailers for SNAP households. (f) Equal treatment. (1) Retailers shall not establish special checkout lanes which are only for SNAP households. If special lanes are designated for the purpose of accepting other electronic debit or credit cards and/or other payment methods such as checks, SNAP customers with EBT cards may also be assigned to such lanes as long as other commercial customers are assigned there as well. (2) Checkout lanes equipped with POS devices shall be made available to SNAP households during all retail store hours of operation. (g) Households eligible for prepared meals. Meals-on-wheels. (2) Communal dining facilities. (3) Residents of certain institutions. (ii) Eligible residents of a group living arrangement may use Program benefits issued to them to purchase meals prepared especially for them at a group living arrangement which is authorized by FNS to redeem benefits in accordance with §§ 278.1 and 278.2(g) of this chapter. (iii) Residents of shelters for battered women and children as defined in § 278.1(g) of this chapter may use their Program benefits to purchase meals prepared especially for them at a shelter which is authorized by FNS to redeem benefits in accordance with §§ 278.1 and 278.2(g) of this chapter. (4) Homeless households. (ii) Eligible homeless households may use Program benefits to purchase meals from restaurants authorized by FNS for such purpose. (h) Eligible households residing in areas of Alaska determined by FNS as areas where access to authorized retailers is difficult and which rely substantially on hunting and fishing for subsistence may use all or any part of the Program benefits issued to purchase hunting and fishing equipment such as nets, hooks, rods, harpoons and knives, but may not use benefits to purchase firearms, ammunition, and other explosives. (i) State agencies shall implement a method to ensure that access to prepared meals and hunting and fishing equipment is limited to eligible households as described in paragraphs (g) through (h) of this section. (j) Container deposit fees. [75 FR 18381, Apr. 12, 2010, as amended at 80 FR 53243, Sept. 3, 2015] § 274.8 Functional and technical EBT system requirements. (a) Functional requirements. (1) Authorizing household benefits. (ii) Permitting eligible households to select a personal identification number (PINs) at least four digits in length; (iii) Establishing benefit cards and accounts with the central computer database; (iv) Maintaining the master household issuance record file data and current authorization information; (v) Training households and other users in system usage; (vi) Authorizing benefit delivery; (vii) Posting benefits to each household's account for regular and supplemental issuances; (viii) Providing households with access to information on benefit availability; (ix) Ensuring the privacy of household data and providing benefit and data security; (x) Inventorying and securing accountable documents; and (xi) Zeroing out benefit accounts and other account authorization activity. (2) Providing food benefits to households. (ii) Verifying the PIN and/or PIN off-set, primary account number (PAN), terminal identification number and retailer identification number; (iii) Determining the sufficiency of the household's account balance in order to debit or credit household benefit accounts at the point of sale; (iv) Sending messages authorizing or rejecting purchases; (v) Providing back-up purchase procedures when the system is unavailable; (vi) Ensuring that benefits are available and carried over from month-to-month. (vii) Responding to issuance problems in a timely manner. (3) Crediting retailers and financial institutions for redeemed benefits. (ii) Creating and maintaining a file containing the individual records of EBT transactions; (iii) Totaling all credits accumulated by each retailer; (iv) Providing balance information to retailers or third party processors from individual POS terminals, as needed; (v) Providing each retailer information on total deposits in the system on a daily basis; (vi) Preparing a daily tape in a National Automated Clearinghouse format or other process approved by FNS with information on benefits redeemed for each retailer and in summary; (vii) Transmitting the ACH tape to a financial institution for transmission through the ACH or other method approved by FNS; (viii) Transferring the information on the ACH tape or other process approved by FNS containing daily redemption activity of each retailer to the FNS Minneapolis Computer Support Center at least once weekly. Transmittal may be by tape, disc, remote job entry or other means acceptable to FNS. (4) Managing retailer participation in accordance with § 274.3(e). (b) Performance and technical standards. (1) System processing speeds. (ii) The EBT system shall provide re-ports, as determined by the State agency, that document transaction processing response time and the number and type of problematic transactions that could not be processed within the standard response time. (2) System availability and reliability. (ii) The system central computer shall permit no more than 2 inaccurate EBT transactions for every 10,000 EBT transactions processed. The transactions to be included in measuring system accuracy shall include all types of SNAP transactions permitted at POS terminals and processed through the host computer, manual transactions entered into the system, credits to household accounts, and funds transfers to retailer accounts. (iii) Reconciliation reports and other information regarding problematic transactions shall be made available to the State agency by the system operator, individual retailers, households or financial institutions as appropriate. Reports on problematic transactions, including inaccurate transactions shall be delineated by the source of the problem such as card failure, POS terminal failure, interruption of telecommunications, or other component failure. Errors shall be resolved in a timely manner. (3) System security. (i) Storage and control measures to control blank unissued EBT cards and PINs, and unused or spare POS devices; (ii) Measures to ensure communication access control. Communication controls shall include the transmission of transaction data and issuance information from POS terminals to work-stations and terminals at the data processing center. The following specific security measures shall be included, as appropriate, in the system design documentation, operating procedures or the State agency Security Program: (A) Computer hardware controls that ensure acceptance of data from authorized terminals only. These controls shall include the use of mechanisms such as retailer identification codes, terminal identifiers and user identification codes, and/or other mechanisms and procedures recognized by the industry; (B) Software controls, placed at either the terminal or central computer or both, that establish separate control files containing lists of authorized retailers, terminal identifying codes, and user access and identification codes. EBT system software controls shall include separate checks against the control files in order to validate each transaction prior to authorization and limiting the number of unsuccessful PIN attempts that can be made utilizing standard industry practices before the card is deactivated; (C) Communications network security that utilizes the Data Encryption Standard algorithm to encrypt the PIN, at a minimum, from the point of entry. Other security may include authentication codes and check-sum digits, in combination with data encoded on the magnetic stripe such as the PIN and/or PIN offset, to ensure data security during electronic transmission. Any of the network security measures may be utilized together or separately and may be applied at the terminal or central computer as indicated in the approved system design to ensure communications control; (D) Manual procedures that provide for secure access to the system with minimal risk to household or retailer accounts. Manual procedures may include the utilization of manager identification codes in obtaining telephonic authorization from the central computer system; requirements for separate entry with audio response unit verification and authorization number; and/or the utilization of 24 hour hotline telephone numbers to authorize transactions. (iii) Message validation shall include but shall not be limited to: (A) Message format checks for completeness of the message, correct order of data, existence of control characters, number and size of data fields and appropriate format standards as specified in the approved system design; (B) Range checks for acceptable date fields, number and valid account numbers, purchase and refund upper limitations in order to prevent and control damage to the system accounts; (C) Reversal of messages that are not fully processed and recorded. (iv) Administrative and operational procedures shall ensure that: (A) Functions affecting an account balance are separated or dually controlled during processing and when requesting Federal reimbursement through a concentrator bank under the provisions of paragraph (i) of this section. These functions may include but are not limited to the set up of accounts, transmittal of funds to and from accounts, access to files to change account records, and transmittal of retailer deposits to the ACH network or other means approved by FNS for crediting retailer bank accounts; (B) Passwords, identity codes or other security procedures must be utilized by State agency or local personnel and at data processing centers; (C) Software programming changes shall be dual controlled to the extent possible; (D) System operations functions shall be segregated from reconciliation duties; (v) A separate EBT security component shall be incorporated into the State agency Security Program for Automated Data Processing (ADP) systems where appropriate as prescribed under § 277.18(m) of this chapter. The periodic risk analyses required by the Security Program shall address the following items specific to an EBT system: (A) EBT system vulnerability to theft and unauthorized use; (B) Completeness and timeliness of the reconciliation system; (C) Vulnerability to tampering with or creating household accounts; (D) Erroneous posting of issuances to household accounts; (E) Manipulation of retailers' accounts such as creation of false transactions or intrusion by unauthorized computer users; (F) Capability to monitor systematic abuses at POS terminals such as debits for a complete allotment, excessive manual issuances, and multiple manual transactions at the same time. Such monitoring may be accomplished through the use of exception reporting; (G) Tampering with information on the ACH tape or similar information utilized in a crediting method approved by FNS; and, (H) The availability of a complete audit trail. A complete audit trail shall, at a minimum, be able to provide a complete transaction history of each individual system activity that affects an account balance. The audit trail shall include the tracking of issuances from the Master File and Issuance File, network transactions from POS terminals to EBT central computer database and system file updates. (vi) The State agency shall incorporate the contingency plan approved by FNS into the Security Program. (4) System ease-of-use. (A) Minimizes the number of separate steps required to complete a transaction; (B) Minimizes the number of codes or commands needed to make use of the system; (C) Makes available clear and comprehensive account balance information with a minimum number of actions necessary; (D) Provides training and instructions for all system users especially those persons with disabilities; (E) Makes available prompts on POS terminals or balance only terminals, where appropriate; (F) Identifies procedures for problem resolution; (G) Provides reasonable accommodation for the needs of households with disabilities in keeping with the Americans with Disabilities Act of 1990. (ii) In addition to the requirements of paragraph (h)(4)(i) of this section, the State agency shall ensure that retailers utilizing the EBT system: (A) Have available manual backup procedures; (B) Can obtain timely information on daily credits to their banks; (C) Have available deposit information in a format readily comparable to information maintained in the store; and (D) Have available instructions on resolving problems with equipment and retailer accounts. (5) Minimum card requirements. (ii) State agencies that implement the photo EBT card option in accordance with paragraph (f) of this section must print on the EBT cards the text “Any user with valid PIN can use SNAP benefits on card and need not be pictured.” or similar alternative text approved by FNS. (iii) FNS reserves the right to require State agencies to place a Department logo on the EBT card and/or sleeves or jackets. (iv) EBT cards and/or sleeves or jackets shall not contain the name of any State or local official. EBT informational materials shall not indicate association with any political party or other political affiliation. (v) State agencies may require the use of a photograph of one or more household members on the card. If the State agency does require the EBT cards to contain a photo, it must establish procedures to ensure that all appropriate household members or authorized representatives are able to access benefits from the account as necessary. (6) POS terminals. (i) Balance information shall not be displayed on the screen of the POS terminal except for balance-only inquiry terminals; (ii) PINs shall not be displayed at the terminal; and (iii) PIN encryption shall occur from the point of entry in a manner which prevents the unsecured transmission between any point in the system. (7) Transaction receipts. (i) State the date, merchant's name and location, transaction type, transaction amount and remaining balance for the SNAP account; (ii) Comply with the requirements of 12 CFR part 205 (Regulation E) in addition to the requirements of this section; and (iii) Identify the SNAP households member's account number (the PAN) using a truncated number or coded transaction number. The households' name shall not appear on the receipt except when a signature is required when utilizing a manual transaction voucher. (8) Performance bonding. (9) Minimum transaction set. (10) Interoperability. (i) EBT system connectivity. (ii) Message format. (iii) Card Primary Account Number (PAN) Requirements. (iv) Third Party Processor requirements. (v) REDE File. (c) Concentrator bank responsibilities. (1) The minimum functions of the concentrator bank are: (i) Preparing a daily ACH tape or other crediting process approved by FNS with information on benefits redeemed and creditable to each retailer; (ii) Transferring the ACH tape or other crediting process approved by FNS to the Federal Reserve or other entity approved by FNS; (iii) Initiating and accepting reimbursement from the appropriate U.S. Treasury account through the ASAP system or other payment process approved by FNS. At the option of FNS, the State agency may designate another entity as the initiator of reimbursement for SNAP redemptions provided the entity is acceptable to FNS and U.S. Treasury; (iv) Cooperating in the reconciliation of discrepancies and error resolution when necessary. (2) With the approval of FNS, another procedure, other than the ACH system, may be utilized to credit retailer accounts and/or debit FNS' account, if it meets the needs of FNS and the EBT system. (3) The State agency shall be liable for any errors in the creation of the ACH tape or its transmission. The State agency may transfer the liability associated with creation of the ACH tape, its transmission or another crediting process approved by FNS as appropriate to the EBT system operator or the concentrator bank. Appropriate system security administrative and operational procedures shall be instituted in accordance with paragraph (h)(3) of this section. (d) Re-presentation. (1) Under certain circumstances, when a manual transaction occurs due to the inaccessibility of the host computer and the transaction is rejected because insufficient funds are available in a household's account, the State agency may permit the re-presentation of the transaction during subsequent months. At the State agency's option, re-presentation may be permitted within the EBT system as follows: (i) Re-presentation of manual vouchers when there are insufficient funds in the EBT account to cover the manual transaction may be permitted only under the following circumstances: (A) The manual transaction occurred because the host computer was down and authorization was obtained by the retailer for the transaction; or (B) The manual transaction occurred because telephone lines were down. (ii) Re-presentation of manual vouchers shall not be permitted when the EBT card, magnetic stripe, PIN pad, card reader, or POS terminal fails and telephone lines are operational. Manual transactions shall not be utilized to extend credit to a household via re-presentation when the household's account balance is insufficient to cover the planned purchase. (iii) The State agency may debit the benefit allotment of a household following the insufficient funds transaction in either of two ways: (A) Any amount which equals at least $10 or up to 10 percent of the transaction. This amount will be deducted monthly until the total balance owed is paid-in-full. State agencies may opt to re-present at a level that is less than the 10 percent maximum, however, this lesser amount must be applied to all households. (B) $50 in the first month and the greater of $10 or 10 percent of the allotment in subsequent months until the total balance owed is paid-in-full. If the monthly allotment is less than $50, the State shall debit the account for $10. (2) The State agency shall establish procedures for determining the validity of each re-presentation and subsequent procedures authorizing a debit from a household's monthly benefit allotment. The State agency may ask households to voluntarily pay the amount of a represented transaction or arrange for a faster schedule of payment than identified in paragraph (d)(1)(iii) of this section. (3) The State agency shall ensure that retailers provide notice to households at the time of the manual transaction that re-presentation may occur if there are insufficient benefits in the account to cover the transaction. The statement shall be printed on the paper voucher or on a separate sheet of paper. The State agency shall also provide notice to the household prior to the month when a benefit allotment is reduced when a re-presentation is necessary. Notice shall be provided to the household for each insufficient transaction that is to be re-presented in a future month. The notice shall be provided prior to the month it occurs and shall state the amount of the reduction in the benefit allotment. (4) The Department shall not accept liability under any circumstances for the overissuance of benefits due to the utilization of manual vouchers, including those situations when the host computer is inaccessible or telecommunications lines are not functioning. However, the State agency, in consultation with authorized retailers and with the mutual agreement of the State agency's vendor, if any, may accept liability for manual purchases within a specified dollar limit. Costs associated with liabilities accepted by the State agency shall not be reimbursable. (5) The State agency shall be strictly liable for manual transactions that result in excess deductions from a household's account. (e) Store-and-forward. (1) State agencies may opt to allow retailers, at the retailer's own choice and liability, to perform store-and-forward transactions when the EBT system cannot be accessed for any reason. The retailer may forward the transaction to the host one time within 24 hours of when the system again becomes available. Should the 24-hour window cross into the beginning of a new benefit issuance period, retailers may draw against all available benefits in the account. (2) State agencies may also opt, in instances where there are insufficient funds to authorize an otherwise approvable store-and-forward transaction, to allow the retailer to collect the balance remaining in the client's account, in accordance with the requirements detailed in this section. (i) State Agencies may elect to allow store-and-forward to provide remaining balances to retailers as follows: (A) The EBT processor may provide partial approval of the store-and-forward transaction, crediting the retailer with the balance remaining in the account through a one-step process; (B) The transaction should be in accordance with the standard message format requirements for store and forward; and (C) Re-presentation, as described in paragraph (d) of this section, to obtain the uncollected balance from current or future months' benefits shall not be allowed for store-and-forward transactions. (ii) In States that elect not to give retailers the option described in this paragraph, all store-and-forward transactions with insufficient funds will be denied in full. (f) State agency requirements for photo EBT card implementation Prior to implementation, State agencies must demonstrate to FNS successful administration of SNAP based on SNAP performance standards. Successful program administration will take into account at a minimum the metrics related to program access, the State's payment error rate, the State's Case and Procedural Error Rate, application processing timeliness, including both the 7-day expedited processing and the 30-day processing standards, timeliness of recertification actions, and other metrics, as determined by the Secretary, that may be relevant to the State agency's implementation of photo EBT cards. (2) Function of issuance. (3) Mandatory vs. voluntary. (ii) Under mandatory implementation, State agencies must exempt certain clients, as stated in paragraph (f)(4) of this section. State agencies must establish which member(s) of the household would be required to be photographed and the procedures that allow eligible nonexempt household members who do not agree to the photo to come into compliance at a later time. (iii) Under voluntary implementation, clients must be clearly informed of the voluntary nature of the option. All applicant members of households, whether or not they are in an exempted category, must opt in to have a photo on their EBT card. States shall not require a photo be taken if the State is implementing a voluntary option. (4) Exemptions. (5) Serving clients with hardship. (6) Issuance of photo EBT card. (ii) Regardless of whether the State's photo EBT card policy is voluntary or mandatory, if a household meets expedited criteria, the State must issue the EBT card without a photo and provide the full benefit allotment to the entire household without delay. The State agency may require a nonexempt head of household member to comply at the next recertification. (iii) Card issuance procedures for new SNAP households must ensure adherence to application processing standards as required at 7 CFR 273.2(g) and (i) and benefit issuance standards at § 274.2(b). (iv) State agencies shall not store photos that are collected in conjunction with its photo EBT card policy but are not placed on an EBT card. (v) The process for issuing and activating photo EBT cards must not disrupt, inhibit or delay access to benefits nor cause a gap in access for ongoing benefits for eligible households. (vi) Any card issued as part of the implementation of the photo EBT card option may not count against the household with respect to card replacement fees or the card replacement threshold defined in § 274.6(b). (7) Prorating household benefits when photo EBT cards are mandatory. (8) Benefits held for noncompliance. (9) Household and authorized representative card usage. (10) Client and staff training. (i) All staff and client training materials must clearly describe the following statutory and regulatory requirements: (A) Retailers must allow all appropriate household members and authorized representatives (including individuals permitted by the household to purchase food or meals on its behalf), regardless of whether they are pictured on the card, to utilize the card without having to submit additional verification of identity as long as the transaction is secured by the use of the PIN; (B) EBT cards with or without a photo are valid in any State; and (C) Retailers must treat all SNAP clients in the same manner as non-SNAP clients; (ii) State agencies may not specifically reference which categories of individuals are exempt from the photo EBT requirement in any materials to retailers. (11) Retailer education and responsibility. (i) All household members and authorized representatives (including individuals permitted by the household to purchase food or meals on its behalf) are entitled to use the EBT card regardless of the picture on the card if the EBT card is presented with the valid PIN; (ii) Retailers must treat all SNAP clients in the same manner as non-SNAP clients in accordance with 7 CFR 278.2(b); (iii) Retailers must not prohibit individuals who have a EBT card and valid PIN, including but not limited to authorized representatives (including individuals permitted by the household to purchase food or meals on its behalf), from using an EBT card because they are not pictured on the card or there is no picture on the card; (iv) EBT cards from any State are valid with or without a photo. (12) Interoperability. (13) Advance Planning Document. (14) Implementation Plan. (ii) State agencies must demonstrate successful administration of SNAP based on SNAP performance standards as established in paragraph (f)(1) of this section. State agencies shall not issue EBT cards with photos before the State's Implementation Plan is approved and the State agency has also received FNS authorization to proceed to issue photo EBT cards. (iii) The Implementation Plan shall include but not be limited to: (A) A description of card issuance procedures; (B) The text required at paragraph (b)(5)(ii) of this section; (C) A detailed description of how client protections and ability to use SNAP benefits will be preserved; (D) Specific information about exempted recipients, the State agency's exemption criteria, and how it will address the needs of household members with hardships; (E) A description of how the State agency will obtain photographs for the EBT card; (F) The procedures for opting into a voluntary photo EBT card policy and how the State agency will document that a household voluntarily chose to have a photo on its EBT card; (G) Training materials and training plans for State agency staff; (H) A description of any planned stakeholder assistance with implementation; (I) Communication plans for informing clients, retailers and other stakeholders of the State agency's photo EBT card policy, including copies of letters and other materials communicating the policy to clients, retailers, and other stakeholders. Communication plans must describe compliance with language requirements at 7 CFR 272.4(b); (J) A timeline for the implementation; and (K) Draft memoranda of understanding if the State agency plans to share SNAP client data in accordance with 7 CFR 272.1(c) for purposes of implementing its photo EBT card option. The memoranda of understanding must state how any information collected will be securely stored and that the information can only be shared for the purpose of SNAP in accordance with 7 CFR 272.1(c). (iv) The Implementation Plan shall also address the anticipated timetable with specific action steps for the State agency and contractors, if any, that may be involved regarding implementation of the photo EBT card option, the State agency's capacity to issue photo EBT cards, and the logistics that shall allow for activation of the photo EBT card simultaneously or followed by deactivation of the active non-photo EBT card. This shall also include the description of the capacity at the facility where the photo EBT cards will be produced, both for transition and ongoing production, and confirmation that the State agency and any contractor will continue to meet regulatory time requirements for all EBT card issuances and replacements, including for expedited households. The Implementation Plan must also include indicators related to the photo EBT card implementation that the State will collect and analyze for the post implementation evaluation required by paragraph (f)(16) of this section in addition to the State's approach for continued oversight, which may include activities as such as the use of test shoppers. (v) The State agency shall provide all applicable proposed written policy for staff to implement the photo EBT card option to FNS for review. State agencies shall include copies of all materials that will be used to inform clients, retailers and other stakeholders regarding photo EBT card implementation. In addition, the State agencies shall provide a detailed description of how the notifications, communication, policies, and procedures regarding the implementation of any new photo EBT card option will comply with applicable civil rights laws specified at 7 CFR 272.4(b)and 272.6(a). (vi) The State agency's Implementation Plan shall also include: (A) An education component for retailers and clients to ensure all eligible household members and authorized representatives (including individuals permitted by the household to purchase food or meals on their behalf) are able to use the EBT card, and understand the timeframes associated with the implementation and rollout. (B) A description of the resources that will be in place to handle comments, questions and complaints from clients, retailers, and external stakeholders, and (C) A description of procedures to address unexpected events related to the photo EBT card option. (vii) Upon approval of the Implementation Plan by FNS, the State may proceed with tasks described in the Implementation Plan, as modified by the approval, but may not proceed to issuing actual cards until it receives FNS authorization to do so. FNS may also require the State to implement in a phased manner, which may include criteria as determined by the Secretary. (15) Authorization to issue photo EBT cards. (16) Post implementation assessment and evaluation. (i) This report shall be delivered to FNS within 120 days of implementation. This report shall cover the first 90 days of implementation. The Department also reserves the right to conduct its own review of the State agency's implementation. The State agency's post-implementation report shall include at a minimum: (A) A survey of clients conducted by an independent evaluator to demonstrate the clients' clear understanding of the State agency's photo EBT policy; (B) A survey of retailers conducted by an independent evaluator that demonstrates evidence that at least 80 percent of retailers, including smaller independent retailers, demonstrate a full understanding of the policies related to the photo EBT card, which may include the use of test shoppers; (C) The amount and percent of benefits held for noncompliance if mandatory; (D) The number and percent of households with photo EBT cards; (E) The number of households affected by withholding for noncompliance, if mandatory; (F) The number and percent of households exempt from the photo EBT card requirement if mandatory; (G) The number and percent of exempted households who opted for photo EBT cards if mandatory; (H) The number and scope of complaints related to the implementation of the policy; (I) The State agency's Case and Procedural Error Rate; and (J) SNAP performance metrics as established in paragraph (f)(1) of this section and other SNAP performance metrics that may have been adversely affected by the implementation of the State agency's photo EBT card option, as determined by the Secretary. (ii) [Reserved] (17) Ongoing monitoring. (18) Modifying implementation of photo EBT card option. [75 FR 18381, Apr. 12, 2010, as amended at 79 FR 11, Jan. 2, 2014; 81 FR 89840, Dec. 13, 2016; 85 FR 52033, Aug. 24, 2020]