Escheating money to state for missing participants. Anyone done it?

[TPAVP]

We are to the point in a major plan termination that we have exhausted all possible means to locate 6 remaining participants and are ready to escheat their money to the state of their last known address. Just wondering if anyone has actually done this and how they found the process to be. I understand it could be different depending on the state. Also, how would the 1099-R be handled?

[mbozek]

Its easier to use the funds to pay plan expenes. Some states will not accept money from a qual plan because of preemption concerns. Also there is a time period of 1-3 yrs that usually runs from the date the check is issued to the participant before the state will accept the funds as abandoned property. Trying to figure out state laws for escheat is a very time consuming process even if you use a web site to fidn the rules for accepting funds.

[TPAVP]

All expenses were paid up front so there are no remaining expenses. The Employer no longer exists and I have been working with someone from their home to try and get this wrapped up for 2 years now. They desparately want the money out of the plan by the end of the year so as not to prolong this another year and require an additional 5500.

[mbozek]

I dont know if the funds can be given directly to the state before the expiration of the statutory period for unclaimed funds since the funds are held in the name of the trust not the participant prior to issuing the check.

[Demosthenes]

Is the someone you are working with officially associated with the Plan? Just wondering if the orphan plan service offerred by the DOL could help.

[TPAVP]

The person I'm working with is a trustee of the plan, but no longer an employee since the employer went out of business. I can look in to the orphan plan with the DOL. Maybe they can offer some help. I know this man is extremely anxious to get this behind him.

[mbozek]

You really need to review the laws of each state. Assuming that the state will take qual plan funds, some states, E.g. NY requires that there be newspaper publication directed to the owner of the abandoned property by the holder of the property which can be paid from the property. Its easier to forfeit the funds of missing part. and use them to pay some expense, e.g legal opinion to permit forfeiture of the funds than to go though the escheat procedure for multiple states.