An article in Plan Sponsor from July reported that the Advisory Council on Employee and Pension Benefit Plans has issued a report to Secretary of Labor Eugene Scalia on transferring amounts from uncashed checks from retirement plans to state unclaimed property programs. In the report, titled “Voluntary Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Programs”, the council found that state unclaimed property programs return property to people as often as 72% of the time. It recommends that the Department of Labor (DOL) issue guidance on these programs. The council-known as the ERISA Advisory Council-states it is up to the individual plans to decide if they want to engage with the state programs. In 2013, the council recommended that the DOL develop best practices for finding missing participants, and, in 2014, the DOL issued a Field Assistance Bulletin stating that, “consistent with their obligations of prudence and loyalty, plan fiduciaries must make reasonable efforts to locate missing participants or beneficiaries”. These efforts include using certified mail, reviewing plan and employer records, running free electronic searches, and reaching out to plan beneficiaries. If plan sponsors are unable to locate the missing participants, they must transfer the benefits to an individual retirement account, taxable account or unclaimed property program.
First State Trust Company (FSTC) acts as a Trustee and fiduciary for various retirement plans. FTSC exhausts all efforts to locate missing participants and return funds to its eligible plans consistent with applicable DOL guidance. Maintaining current contact information with plan administrators assists greatly with this process and can help to avoid a scenario where a check remains uncashed.
According to SPARK (Society of Professional Asset Managers and Recordkeepers), 4.5% of retirement distribution checks, or roughly 225,000 checks, were uncashed. The council estimates that this amounts to up to $100 million a year.
The council has kept in mind that this is not a mandate to transfer unclaimed property to the states program, rather an option that a plan administrator can voluntarily choose to use.
In conclusion, the council recommends that the DOL issue guidance that plans may use state unclaimed property programs.
First State Trust Company welcomes additional guidance from the DOL and believes such clarity will help serve the best interests of retirement plans that may face this complex issue.
James Robinson, Vice President/Trust Officer
The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only. FSTC does not offer tax or legal advice, professional counsel should be sought for tax or legal advice.