The 2019 Advisory Council on Employee Welfare and Pension Benefit Plans, a body that provides support and advice to the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA), has said that it will be reviewing transfers of uncashed checks from ERISA plans to state unclaimed property funds and the procedures states use with those funds. The review is relevant to the effort to locate plan missing participants and provide them their funds.
The council calls it “inevitable” that pension plans will owe benefits to plan participants and beneficiaries who simply cannot be found or do not respond to communications despite “the reasonable efforts of plan representatives.” If a plan cannot deliver the benefits to a missing participant after plan representatives have “exhausted reasonable efforts” to find them, the plan has the following options regarding the uncashed checks:
- rollover to an IRA or annuity;
- forfeiture with right of restoration;
- transfer to a federally insured benefit account; or
- voluntary distribution to a state unclaimed property fund.
Unless a missing participant is found or responds to efforts to communicate with her or him, the council says that some of those options “will ultimately result in transfer to a state unclaimed property fund.”
The council notes that from state to state there may be differences in the procedures their unclaimed property funds use, including:
- rates of return credited to unclaimed property;
- period before escheatment to states;
- steps states use to locate missing participants;
- success rates of matching missing participants with unclaimed property;
- tax treatment, i.e., are the distributions eligible for rollover treatment; and
- issues for plans with participants in multiple states.
The council says that in its review, it does not intend to address what steps are necessary or appropriate in locating missing participants; rather, it seeks to review the treatment and procedures states use regarding their unclaimed property funds. Through the review, the council seeks to explore whether there are circumstances in which voluntary transfers of uncashed distribution checks to a state unclaimed property fund advance the DOL’s goal of reuniting missing participants with their retirement savings.