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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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ERISA Advisory Council Plans Review of Unclaimed Property Practices

Posted By Administration, Thursday, June 13, 2019

The Advisory Council on Employee Welfare and Pension Benefit Plans recently announced it will study permissive transfers of uncashed checks from ERISA plans to state unclaimed property funds. Also known as the ERISA Advisory Council, the group’s purpose is to provide recommendations to the Department of Labor on matters related to Employee Retirement Income Security Act.

 

Many employee benefit plans have been established under ERISA. A common position for companies to take is that because federal law dictates how benefit plans should be administered under ERISA, states are preempted from claiming the money associated with those plans. 

 

Announcing its plans to study the issue, the advisory council wrote, “The department has consistently applied a broad view of ERISA preemption of state unclaimed property and escheat laws. However, that guidance does not limit the extent to which a plan representative may voluntarily transfer uncashed checks to a state unclaimed property fund. The 2019 Council’s objective is to review the treatment and procedures utilized by state unclaimed property funds, which may vary significantly between states.”

 

The council does not plan to address what steps are appropriate to locate missing plan participants. Rather, it intends to explore whether circumstances exist in which voluntary transfers of uncashed distribution checks to a state unclaimed property fund advances the Department of Labor’s goal of reuniting missing participants with their retirement savings. 

 

The ERISA Advisory Council is scheduled to take up this issue during its next meeting, scheduled for June 25-27, 2019. The council will accept public comments through June 18. 

 

 

 

 

Tags:  employee benefits  ERISA  retirement accounts 

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Benefit Soup

Posted By Administration, Thursday, February 18, 2016

Most companies with established unclaimed property compliance processes know that payroll checks are one of the most common property types requiring escheatment to the states. However, many companies offer employment benefits beyond a simple paycheck, like health insurance, retirement savings options, and disability insurance. So, do companies have a responsibility to report those property types as well? Unfortunately, unlike with payroll checks, the answer isn’t quite so clear.

 

During the “Benefit Soup” session at the 2016 UPPO Annual Conference, Samantha Petersen, west region unclaimed property practice leader for KPMG’s state and local tax practice, will discuss the nuances surrounding employee benefits as unclaimed property and explore arguments on both sides of the issue, helping holders consider whether they have an obligation to report.

 

Because companies often employ third parties to administer their benefits, they may believe the responsibility for reporting those unclaimed property types falls to their administrators. However, that is not the case. Even when companies have contracts in place requiring their third-party administrators (TPAs) to handle their unclaimed property, the states still consider the employer to be the holder and, thus, the responsible party.

 

Some TPAs have processes in place, to provide their clients with proper documentation to complete or verify necessary unclaimed property reporting. However, some may not.

 

“Although many states still deem the company responsible for unclaimed property reporting, it often comes down to the contract regarding what the third party is obligated to do from an unclaimed property perspective,” Petersen says. “Even if the contract doesn’t specifically address carrying out unclaimed property reporting, it should at least say the company will receive adequate records to allow them to complete their own unclaimed property reporting.”

 

Once companies are aware of their responsibilities, they are faced with establishing which benefit types must be reported.

 

Many employee benefit plans were established under the federal Employee Retirement Security Act of 1974 (ERISA). A common position for companies to take is that because federal law dictates how benefit plans should be administered under ERISA, states are preempted from claiming the money associated with those plans. Although the states may not have the ability to pursue the property, that doesn’t necessarily erase companies’ obligations.

 

Looking to the courts for answers yields little clarity. Although there has been some litigation related to employee benefits as unclaimed property, decisions have not been consistent.

 

“The arguments on both side are compelling,” Petersen says. “Until there’s more litigation around this, and more definitive direction, this is going to continue to be an area companies struggle with regarding whether they have an obligation to report or they don’t. And if they do, what specifically do they have an obligation to report?”

 

While states usually honor federal preemption when companies can demonstrate with documentation that their benefit programs were properly established under ERISA, some property types, such as most workers’ compensation plans, fall outside of the scope of the federal law.

 

To date, states and auditors have been less aggressive going after employee benefits compared to other property types, perhaps because of its complexity and the lack of consistent court rulings. However, it may well become a target as states and auditor firms seek to expand their reach. Until then, what should holders do?

 

“It’s a Pandora’s Box for holders,” Petersen says. “Presently, the states haven’t been very aggressive coming after it because it’s still an area this is not fully understood. So why would a company start reporting something that it may or may not have an obligation to report, depending on who you ask. That’s the issue.”

 

For a more extensive look at the intricacies of employee benefit issues, attend the “Benefit Soup” session at the 2016 UPPO Annual Conference, March 20 – 23; Palm Springs. Register today.

 

Tags:  compliance  employee benefits  unclaimed property 

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