Handling of Health & Welfare Plan Forfeitures

[Guest Benny Comply]

A self-funded health plan has received uncashed claim reimbursement checks from the Claims Administrator. The cover letter from the TPA advised Plan Sponsor (Employer) that this unclaimed property may be subject to state escheat laws. The information I've been able to obtain regarding this issue is conflicting.

I have found documentation of 2 old lawsuits involving Aetna and BCBS in which it appears that the escheat laws are NOT preempted by ERISA. However, other commentary seems to indicate the generally accepted practice is to consider the funds forfeited and returned to the plan to apply against future plan costs (claims).

Can anyone please offer guidance or resources regarding this issue?

Thanks in advance,

Benny

[vebaguru]

Whether the funds reduce future contributions or are held in suspense, the plan/employer) would have a liability to the lost participant(s) when they turn up. Simply writing off the amounts would violate the employer's and Administrator's fiduciary duties to the participant.

Use of the state escheat laws permits the employer to get the liability off its books, and the participant is more likely to learn of the funds due him/her by going to state unclaimed property website than by remembering that he/she used to work for someone that may owe him/her some money.

[Guest JWB19]

The only problem with using the state escheat laws is that the money must be forfeited to the state of the payee's last known address. That can be a nightmare if the payees are located all across the country. I think the whole ERISA preemption question is unclear—in my view, though, it’s a defensible position that the funds are plan assets and as such cannot be forfeited to the states.