ERISA Preemptions of State Unclaimed Property and Escheat … Preemptions of State... · 2019. 7....

As Appeared in Benefits Law Journal Vol. 9, No. 1, Spring 1996

ERISA Preemptions of State Unclaimed Property and Escheat Laws By Russell E. Greenblatt, Katten Muchin Zavis Rosenman ©1996 John Wiley & Sons, Inc. All rights reserved.

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ERISA should generally preempt state unclaimed property laws and escheat laws that purport to govern unclaimed assets of an ERISA welfare benefit plan. However, to the extent the state law constitutes a law that regulates insurance and is therefore exempt from ERISA preemption, state statutes should continue to prevail, especially in the case where the property in question is not a plan asset. These same conclusions should be reached irrespective of New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 115 S. Ct. 1671 (1995). Nonetheless, addressing the subject in the governing plan provisions and operation would help assure the inapplicability of such state statutes.

en is p

erally, the purpose of state unclaimed property and escheat laws is to assure that property delivered to the owner of the property or, failing this, to arrange for safekeeping of the roperty until such time as the owner claims it.1 In addition, the statutes provide a vehicle through

which the person with custody over the property can be relieved of ongoing responsibility for its safekeeping. Sponsors, insurers, and administrators of ERISA welfare benefit plans, particularly medical benefit plans but also disability and life insurance plans, should give consideration to such statutes.

State Law Analysis

Set forth in Exhibit 1 is an unclaimed property law compliance chart, which briefly summarizes the requirements of the 50 states and the District of Columbia with regard to unclaimed property. Most states have a five-year waiting period, although the waiting period could be as short as two years (North Dakota) or as long as seven (Arkansas, District of Columbia, Indiana, Kentucky, Missouri, Pennsylvania, Vermont). All states require that upon the expiration of this waiting period, the holder of the property must deliver the property to a state agency and file a report with the state regarding its unclaimed property. In almost all cases, the holder must also take steps to attempt to contact the owner in order to prevent abandonment of the property. Statutes also generally require that records with respect to abandoned property be maintained for a minimum period of time (ranging from five to ten years) and that other procedural requirements be satisfied.

(continued on p.22)

Russell E. Greenblatt is a partner in the Chicago office of the law firm Katten Muchin Zavis Rosenman. He is also a member of the Editorial Advisory Board of Benefits Law Journal.

Benefits Law Journal/Vol. 9, No. 1/Spring 1996 1

RUSSELL E. GREENBLATT

Exhibit 1. Unclaimed Property

State & Department Dormancy

Period Due Diligence When Report Due

AK Department of Revenue Unclaimed Property P.O. Box 110420 Juneau, AK 99811-0420 (907) 465-4653

5 years For property worth $50 or more, not more than 120 days before filing the report, Holder must send written notice to the owner at the last known address.

Before Nov. 1 for the year ending the preceding June 30.

AL Unclaimed Property Section P.O. Box 327580 Montgomery, AL 36132-7580 (334) 242-9614

5 years If Holder knows the whereabouts of the owner, it shall (before filing the annual report) communicate with the owner and take necessary steps to prevent abandonment. Holder shall exercise due diligence to ascertain the whereabouts of the owner.

Before May 1 for the year ending the preceding December 31.

AR Auditor of State Unclaimed Property Division 103 W. Capitol Suite 805 Little Rock, AR 72201 (501) 324-9670

7 years If Holder knows the whereabouts of the owner, it shall (before filing the annual report) communicate with the owner and take necessary steps to prevent abandonment. Holder shall exercise due diligence to ascertain the whereabouts of the owner.


AZ Dept. of Revenue Unclaimed Property 1600 W. Monroe, 6th Fl. Phoenix, AZ 85007 (602) 542-4643

5 years For property worth $50 or more, not more than 120 days before filing its report, Holder shall send written notice to the owner at the last known address.

Before Nov. 1 for the year ending the preceding June 30.*

CA State Comptroller Unclaimed Property Division P.O. Box 942850 Sacramento, CA 94250-5873 (916) 445-8318

3 years1


CO Unclaimed Property Division 1560 Broadway, Suite 1225 Denver, CO 80202 (303) 894-2443




ERISA PREEMPTIONS OF STATE UNCLAIMED PROPERTY AND ESCHEAT LAWS

Law Compliance Chart†

When Property Delivered to Department

Maintenance of Records

Penalties for Non-Compliance

Within 6 months after final due date for filing the report.

7 years If Holder fails to deliver property, it may be required to pay interest and civil penalties. Intentional refusal to comply after written demand is a Class A misdemeanor.

Within 20 days after the owner’s last day to claim the property directly from Holder, which is 65 days after the second publication of notice by the state, which occurs within 120 days after Holder files its report.

If Holder willfully fails to render a report, it shall be guilty of a misdemeanor and fined up to $100 a day for each day the report is withheld. If Holder willfully refuses to deliver property, it shall be guilty of a misdemeanor and fined not less than $100 nor more than $1,000, or imprisoned for not more than six months, or both.

At the time the report is filed. 2 years If Holder willfully fails to render a report, it shall be guilty of $100 for each day report is withheld, but not more than $1,000. If Holder willfully refuses to deliver property to the auditor of state, it shall be fined not less than $100 nor more than $1,000, or imprisoned for not more than six months, or both.

At the time the report is filed. 5 years If Holder fails to deliver property, it will pay interest of 1-1/2% per month on the value of the property. If Holder willfully fails to deliver property, it will pay a penalty of 25% of the value of the property. If Holder willfully fails to file a report, it will be fined $100 per day, but not more than $5,000. Knowing refusal to deliver property after receiving a written demand is a Class 2 misdemeanor.

At the time the report is filed.

If Holder fails to file a report, it will be fined $10 per day, to a maximum of $1,000. If Holder willfully refuses to deliver property, it will be fined $500 to $5,000, or imprisoned for up to six months, or both. Holder must pay 12% interest on all amounts it fails to report or deliver.

At the time the report is filed. 5 years If Holder fails to report or deliver property, it shall pay interest of 18% on the value of the property. If Holder willfully fails to deliver property, it will be fined 25% of the value of the property. If it willfully refuses to deliver after written demand, it shall pay civil penalties of three times the value of the property. If Holder willfully refuses to render a report, it will be fined $100 per day, not to exceed $5,000.






CT Unclaimed Property Division Department of Treasury 55 Elm Street Hartford, CT 06102 (203) 566-5516

3 years Within one year before the expiration of the 3-year dormancy period, Holder must notify the owner, by first class mail at the last known address, that the property will be presumed abandoned.

Before March 31 for the year ending the preceding December 31.

DC Unclaimed Property Division 415 12th Street, N.W. Room 408 Washington, DC 20004 (202) 727-0063

7 years Holder shall (not more than 120 days prior to filing its report) send written notice to the owner at the last known address.


DE State Escheator P.O. Box 8931 Wilmington, DE 19899 (302) 577-3349

5 years

Before March 1 for the year ending the preceding December 31.

FL State of Florida Abandoned Property Section State Capitol Tallahassee, FL 32399-0350 (904) 487-0510

5 years Not more than 120 days before filing its report, Holder shall send written notice to the owner at the last known address.


GA Unclaimed Property Section 270 Washington Street, S.W. Room 404 Atlanta, GA 30334 (404) 656-4244

5 years2 Holder shall communicate with the owner before filing its annual report and shall take the necessary steps to prevent abandonment. For property worth $50 or more, Holder shall exercise due diligence at least 60 days but no more than 120 days prior to submitting its report to ascertain the whereabouts of the owner.


HI Unclaimed Property Section P.O. Box 150 Honolulu, HI 96810 (808) 586-1589

5 years For property worth $50 or more, not more than six months before filing its report, Holder shall send written notice to the owner at the last known address.




Law Compliance Chart (cont’d)





If Holder fails to report or deliver the abandoned property, it will pay 15% interest on the value of the property.


10 years If Holder fails to render a report, it shall pay a civil penalty of $100 per day, but not more than $1,000. If Holder willfully refuses to report or deliver property, it shall be punished by a fine of not more than $300, or imprisoned for not more than 90 days, or both.

Within 90 days after the report is filed.

If Holder intentionally or negligently fails to deliver property, it will pay a penalty of .5% of the amount due per month to a maximum of 10% of the amount due. If Holder fails to file a report, it will pay a penalty of .5% per month on the amount.


10 years If the report is not filed by the due date, Holder shall pay $10 per day, not to exceed $500. If Holder fails to report or pay, it shall pay interest at 15% on the value of the property. If Holder willfully fails to report or deliver property, it is guilty of a misdemeanor of the 2nd degree.

At the time the report is filed. 10 years If Holder willfully fails to report, it shall pay a civil penalty of $100 per day, but not more than $5,000. If Holder willfully fails to deliver property, it shall pay a civil penalty equal to 25% of the value of the property. If Holder willfully refuses to deliver property after written demand, it is guilty of a misdemeanor, and can be punished by a fine not to exceed $1,000, or by imprisonment not to exceed six months, or both.


5 years If Holder fails to deliver property, it shall pay interest on the value of the property. If Holder willfully fails to report, it shall pay a civil penalty of $100 per day, not to exceed $5,000. If Holder willfully fails to deliver property, it shall pay a civil penalty equal to 25% of the value of the property. If Holder willfully refuses after written demand to deliver property, it is guilty of a misdemeanor.






IA Treasurer of State of Iowa Unclaimed Property Division Hoover Building Des Moines, IA 50319 (515) 281-5366

3 years Holder shall, before filing its report, communicate with the owner and take necessary steps to prevent abandonment. Holder shall exercise due diligence to ascertain the whereabouts of the owner.


ID Unclaimed Property Division P.O. Box 36 Boise, ID 83722-2240 (208) 334-7623

5 years Before filing its report, Holder shall communicate with the owner and take necessary steps to prevent abandonment. For property worth $50 or more, not more than 120 days before filing its report, Holder shall send written notice to the owner at the last known address.

Before May 1 for the year ending the preceding December 31.*

IL Unclaimed Property Division Department of Financial Institutions P.O. Box 19495 Springfield, IL 62794-9495 (217) 782-6692

5 years At least 120 days prior to filing its report, Holder must provide notice to the owner at the last known address, and must take steps to avoid abandonment.


IN Unclaimed Property Division 402 West Washington Street Room C533 Indianapolis, IN 46204-2794 (317) 232-6348

7 years If Holder knows the whereabouts of the owner, it shall (before filing its report) attempt to communicate with the owner to prevent abandonment. Holder shall exercise due diligence to ascertain the whereabouts of the owner.


KS Unclaimed Property Division 900 S. W. Jackson Suite 201 Topeka, KS 66612-1235 (913) 296-4165

5 years For property worth $25 or more, not more than 120 days or less than 60 days before filing its report, Holder must send written notice to the owner at the last known address.


KY Department of the Treasury Abandoned Property Section Suite 183 Frankfort, KY 40601 (502) 564-2100

7 years

Before August 1 for the year ending the preceding July 1.*








If Holder fails to deliver property, it shall pay interest of 10% on the value of the property. If it willfully refuses to deliver, it shall pay a civil penalty equal to 25% of the value of the property.

At the time the report is filed. 10 years If Holder fails to deliver property, it shall pay interest of 12% on the value of the property. If Holder negligently fails to deliver property, it shall pay a penalty of 5% of the value of the property. If Holder willfully refuses to deliver property, it shall be guilty of a misdemeanor, and may be punished by a fine of not less than $300 nor more than $3,000.

At the time the report is filed. 5 years If Holder files a late report, it may be fined $1 a day up to $100. If Holder fails to perform its due diligence obligations, it may be fined $5 per account if 35% or more of its accounts are claimed from the state within 24 months after a report is filed. If Holder fails to deliver property, it may be charged interest at the greater of 1% per month or 3% above prime per year.


If Holder fails to report, it shall pay a penal sum of $300, and an additional penal sum of $10 for each day of the period of default. A knowing failure to deliver property is a Class B misdemeanor.

At the time the report is filed. 10 years If Holder willfully fails to deliver property, it will pay interest of 25% of value of the property. If Holder willfully fails to report, it will be fined $100 per day, up to $5,000. If Holder fails to perform its due diligence obligations, it will pay a $5 fine for each such failure. Willful refusal to deliver property after receiving a written demand is a Class B misdemeanor.

By the January 1 after the report is filed.

If Holder fails to file a report, it will be fined between $50 and $200, or be imprisoned for 30 days to six months, or both. If a civil action is brought against Holder to force production of a report or surrender of property, it will be fined the lesser of 10% of the amount due or $500.






LA Louisiana Unclaimed Property Section P.O. Box 91010 Baton Rouge, LA 70821-9010 (504) 925-7425



MA Abandoned Property Division 1 Ashburton Place, 12th Floor Boston, MA 02108 (617) 367-3900

3 years At least 60 days before filing its report, Holder must send notice to the owner at the last known address, and take steps to prevent abandonment.


MD Unclaimed Property Section 301 W. Preston Street Baltimore, MD 21201-2385 (410) 225-1700

5 years

Before April 30 for the year ending the preceding December 31.*

ME Treasury Department Abandonment Property Division State House Station Suite 39 Augusta, ME 04333 (207) 287-6668



MI Department of Treasury Unclaimed Property Division Lansing, MI 48922 (517) 335-4327

5 years

Before June 30 for the year ending the preceding Jan. 1.*

MN Minnesota Commerce Dep’t Unclaimed Property Section 133 E. 7th Street St. Paul, MN 55101 (612) 296-2568

3 years Holder shall, before filing its re-port, take steps to prevent abandonment.








At final due date for filing the report. 10 years If Holder fails to deliver property, it may be assessed interest on the value of the property. In addition, it may be charged a penalty of 25% of the value of the property. If Holder fails to report, it may pay a civil penalty of $100 per day, not to exceed $5,000.

By May 1 after the report is filed. 5 years If Holder fails to report or deliver property, it can be fined up to $500, plus up to $150 per day for the cost of an investigation of Holder’s records. Holder will have to pay 12% interest on any property it fails to deliver to the state.


7 years (No Statute) If Holder fails to deliver property, it shall pay a penalty equal to 25% of the value of the property. If Holder willfully fails to report, it is subject to a fine of $100 per day, but not more than $5,000. If Holder willfully refuses to deliver property, it is subject to a fine of not less than $500 nor more than $5,000, or imprisonment for not more than six months, or both.

Within 85 days of publication of notice by the state, which is within 120 days after Holder files its report.

10 years If Holder fails to report, it shall pay civil penalties of $100 per day, not to exceed $5,000. If Holder fails to deliver property, it shall pay interest on the value of the property. If Holder willfully refuses to deliver property, it will pay a penalty of 25% of the value of the property. If Holder willfully refuses to deliver property after written demand, it commits a Class E crime.


If Holder fails to deliver the abandoned property, it will pay a penalty of 1% per month to a maximum of 25% of the value of the property. Holder will also be liable for interest. If Holder fails to file a report, it will be fined $300 plus $10 per day until the report is filed.


Failure to render report is a misdemeanor. Willful refusal to deliver property is a gross misdemeanor. If Holder refuses to deliver property after written demand, it shall pay interest of 12% on the value of the property.






MO Unclaimed Property Division P.O. Box 1272 Jefferson City, MO 65102-1272 (314) 751-0840

7 years If Holder knows the whereabouts of the owner, it shall (before filing its report) communicate with the owner and take necessary steps to prevent abandonment. For property worth $50 or more, Holder shall exercise reasonable diligence to ascertain the where-abouts of the owner.


MS State Treasurer’s Office Unclaimed Property Division P.O. Box 138 Jackson, MS 39201 (601) 359-3600

5 years Holder shall (before filing its report) communicate with the owner and take reasonable steps to prevent abandonment. Holder shall mail notice to the owner at the last known address.

Before No. 1 for the 3 years ending the preceding June 30. *3

MT State of Montana Department of Revenue Abandoned Property Section P.O. Box 5805 Helena, MT 59620 (406) 444-2425

5 years Holder shall (before filing its report), communicate with the owner and take necessary steps to prevent abandonment. For property worth $50 or more, Holder shall exercise due diligence to ascertain the whereabouts of the owner.


NC Escheats & Unclaimed Property 325 N. Salisbury Street Raleigh, NC 27603-1385 (919) 733-6876

5 years Before March 1 for the year ending the preceding December 31, Holder must mail notice to the owner at the last known address. Holder must certify that it has performed such due diligence obligations.

Before Nov. 1 for the year ending the preceding December 31.*

ND State Land Department Unclaimed Property Division P.O. Box 5523 Bismarck, ND 58506-5523 (701) 328-2805

2 years For property worth $50 or more, not more than 120 days before filing its report, Holder shall send written notice to owner at the last known address.









If Holder intentionally fails to report, it shall be fined $10 per day, but not more than $1,000. If Holder intentionally refuses to deliver property, or makes a false statement in any report, it may be fined not less than $100 nor more than $1,000.


If Holder willfully fails to report, it shall pay a fine of $5 per day, but not more than $100. If Holder will-fully refuses to deliver property, it shall pay a fine of not less than $5 nor more than $100, or be imprisoned for not more than six months, or both. In addition to such penalties, if Holder fails to report or deliver property, it shall pay interest of 1% per month on the value of the property.

At the time the report is filed. 10 years If Holder willfully fails to report, it will be fined $50 per day, up to $100. If Holder willfully refuses to deliver property, it will be fined $100 to $1,000, imprisoned for up to 6 months, or both. Holder will pay interest of 1% per month on the value of the property.


If Holder fails to certify that it has performed its due diligence obligations, or submits a false certification, it will be fined $500 to $5,000. If Holder willfully fails to file a report or to deliver property, it will be fined the greater of $300 plus $10 per day or 50% of the amount unpaid. Holder will pay 12% interest on all unpaid amounts.

No sooner than March 1 and no later than May 1.

10 years If Holder willfully fails to report, it shall pay penalties of $100 per day, but not more than the value of the property. If Holder willfully fails to deliver property, it shall pay a penalty equal to 25% of the value of property. If Holder willfully refuses to deliver property after written demand, it is guilty of a Class B misdemeanor.






NB State Treasurer’s Office Unclaimed Property Division P.O. Box 94788 Lincoln, NE 68509 (402) 471-2455

7 years If Holder knows the whereabouts of the owner, and if the owner’s claim has not been barred by the statue of limitations, Holder shall (before filing its report) communicate with the owner and take steps to prevent abandonment. Holder shall exercise due diligence to ascertain the whereabouts of the owner.


NH Treasury Department Abandoned Property Division 25 Capitol Street Room 121, State House Annex Concord, NH 03301 (603) 271-2649

7 years4 For property worth $25 or more, not more than 120 days before filing its report, Holder shall send written notice to owner at the last known address.


NJ New Jersey Department of Treasury Unclaimed Property Section CN 214 Trenton, NJ 08646 (609) 984-8234



NM Taxation and Revenue Office Unclaimed Property Unit P.O. Box 25123 Santa Fe, NM 87504-5123 (505) 827-0767



NV Unclaimed Property Division 2601 E. Sahara, Room 270 Las Vegas, NV 89158 (702) 486-4140

5 years Holder shall (before filing its report) communicate with the owner and take steps to prevent abandonment. Holder shall exercise due diligence to ascertain the whereabouts of the owner.









If Holder willfully refuses to report, it shall be guilty of a Class IV misdemeanor. If Holder willfully refuses to deliver property, it shall be guilty of a Class II misdemeanor.

At the time the report is filed. 10 years If Holder fails to deliver property, it shall pay interest of 10% on the value of the property. If it willfully refuses to deliver property, it shall pay a penalty of 25% of the value of the property. If Holder willfully refuses to deliver property after written demand, it is guilty of a misdemeanor. If Holder willfully refuses to report, it shall pay a penalty of $100 per day up to $5,000.

At the time the report is filed. 10 years If Holder fails to deliver property it shall pay interest on the value of the property. If Holder willfully fails to deliver property, it shall pay a civil penalty equal to 25% of value of property. If Holder willfully fails to report, it shall pay a civil penalty of $100 for each day report is withheld.

Within 6 months after the final due date for filing the report.

10 years If Holder fails to deliver property, it shall pay interest on the value of the property. If Holder willfully fails to deliver property, it shall pay a penalty equal to 25% of value of property. If Holder willfully refuses to deliver property after written demand, it is guilty of a petty misdemeanor. If Holder willfully fails to report, it shall pay a penalty of $100 per day, but not more than $5,000.


If Holder willfully fails to report, it is guilty of a misdemeanor. If Holder willfully refuses to deliver property, it is guilty of a gross misdemeanor. Holder must pay 18% interest on the value of undelivered property.






NY Office of Unclaimed Funds Alfred E. Smith Building 9th Floor Albany, NY 12236 (518) 474-4038

3 years Within 30 days of filing its report, Holder must publish at least one notice in a newspaper published in the county in which the last known address of the owner is located.

On or before April 1 for the year ending the preceding December 31.*

OH Division of Unclaimed Funds 77 South High Street 20th Floor Columbus, OH 43266-0545 (614) 466-4433

5 years Holder shall send notice to the owner at the last known address before filing its report. A self-addressed stamped envelope shall be included with the notice, with instructions that the owner may use such envelope to inform Holder of its continued interest in the funds.


OK Oklahoma Tax Commission Unclaimed Property Section 2501 N. Lincoln Boulevard Oklahoma City, OK 73152 (405) 521-4275


Before Nov. 1 for the year ending the preceding September 1.*

OR Division of State Lands Unclaimed Property Section 775 Summer Street, N.E. Salem, OR 97310-1337 (503) 378-3805


After Oct. 1 but no later than Nov. 1 for the year ending the preceding June 30.

PA State Treasury Office of Unclaimed Property P.O. Box 1837 Harrisburg, PA 17105-1837 (717) 772-2722

7 years

Before April 15 for the year ending the preceding December 31.







On or between September 1 and September 10.

5 years If Holder fails to report, it will be fined $100 per day until the report is filed. If Holder fails to deliver property, it will pay 10% interest on the amount unpaid.


If Holder knowingly fails to report it may be subject to a penalty of $100 per day. If Holder fails to report within 4 months of the date of a specific request, it shall be subject to a civil penalty of $100 per day. If Holder fails to deliver the property. In addition, it shall pay a penalty of 1% of the amount of the property. If Holder knowingly fails to report or to deliver property, it can be fined up to $500 per day.


10 years If Holder fails to deliver property, it shall pay interest of 10% on the value of the property. In addition, if Holder willfully fails to render a report or deliver property, it shall pay a civil penalty of $100 per day, but not more than $5,000. If Holder willfully fails to deliver property, it shall pay a penalty equal to 25% of the value of the property. If Holder willfully refuses to deliver property after written demand, it is guilty of a misdemeanor and may be punished by a fine of between $500 and $5,000, or imprisonment for not more than six months, or both.

At the time the report is filed (Implied)

5 years If Holder willfully refuses to report or deliver property, it is subject to a fine of $1,000 for individuals and $50,000 for corporations. This fine will not be imposed until after the first reporting cycle.

Within 60 days of receiving a written demand from the state.

If Holder fails to report, it will be fined $10 per day, up to $1,000. If Holder fails to deliver property, it can be fined $100 to $1,000, be imprisoned for up to 12 months, or both. If Holder fails to file a report or deliver property, it will have to pay 12% interest on the value of the property.






RI Unclaimed Property Division 40 Fountain Street Providence, RI 02903 (401) 277-2287



SC South Carolina Tax Commission P.O. Box 125 Columbia, SC 29214 (803) 737-4756



SD Unclaimed Property Division 500 E. Capitol Pierre, SD 57501 (605) 773-3379



TN Treasury Department Unclaimed Property Division 9th Floor Andrew Jackson Building Nashville, TN 37243-0242 (615) 741-6499

5 years For property worth $50 or more, not more than 120 days before filing its report, Holder must send written notice to the owner at the last known address.


TX Unclaimed Property Division State Treasury P.O. Box 12019 Austin, TX 78711-2019 (512) 463-6060

3 years








At the time the report is filed. 7 years If Holder fails to deliver property, it shall pay interest on the value of the property. If Holder willfully fails to report, it shall pay a penalty of between $100 and $500 per day, but not more than $10,000. If Holder willfully fails to deliver property, it shall pay a penalty equal to 25% of value of property. If Holder willfully refuses to deliver property after written demand, it is guilty of a misdemeanor, and may be fined between $100 and $500, or imprisoned for not more than 6 months, or both.


10 years If Holder fails to deliver property, it shall pay interest on the value of the property. In addition, it shall pay a civil penalty equal to 25% of the value of the property. If Holder willfully refuses to deliver property after written demand, it is guilty of a misdemeanor, and may be fined not more than $10,000, or imprisoned for not more than one year, or both. If Holder fails to render a report, it shall pay a penalty of $100 per day, but not more than $5,000.

At the time the report is filed. 10 years If Holder fails to pay or deliver property, it shall pay interest on the value of the property. The state may bring an action in a court to enforce the unclaimed property law.

At the time the report is filed. 5 years (No Statute)

If Holder fails to report, it shall pay a civil penalty of $25 per day, not to exceed $1,000. If Holder refuses to deliver property, it shall pay a civil penalty of 25% of the value of property.

At the time the report is filed. 10 years Holder will be liable for the state’s reasonable attorney fees incurred while enforcing the law. If Holder: (1) willfully fails to file a report; (2) refuses to permit an examination of its records; or (3) makes a deduction from or charge against the property, it will be subject to a criminal fine of $500 to $1,000, imprisonment for up to 6 months, or both, as well as a civil penalty of $100 per day. In addition, Holder will have to pay interest on the value of the property.






UT State Treasurer’s Office Unclaimed Property Division 341 S. Main, 5th Floor Salt Lake City, UT 84111 (801) 533-4101



VA Commonwealth of Virginia Department of Treasury Division of Unclaimed Property P.O. Box 2478 Richmond, VA 23207-2478 (804) 225-2393

5 years5 Holder shall, before filing its report, communicate with the owner and take necessary steps to prevent abandonment. For property worth $25 or more, Holder shall exercise due diligence at least 60 days, but no more than 120 days, prior to filling its report to ascertain the whereabouts of the owner.


VT State Treasurer’s Office Abandoned Property Division 133 State Street Montpelier, VT 05633-6200 (802) 828-2301


Before May 1 for the year ending the preceding December 31.

WA Unclaimed Property Section Department of Revenue P.O. Box 448 Olympia, WA 98507-0448 (360) 586-2736

5 years At least 120 days before filing its report, Holder must send written notice to the owner at the last known address.


WI State Treasurer’s Office Unclaimed Property Division P.O. Box 2114 Madison, WI 53701 (608) 266-1714


Before May 1 of even-numbered years.6








10 years If Holder fails to deliver property, it shall pay interest of 2% over prime. If Holder willfully fails to file a report or deliver property, it shall pay a penalty equal to 20% of value of the property. If Holder willfully refuses to deliver property after a written demand, it is guilty of a Class B misdemeanor, and may be punished by a fine of not more than $2,000.

At the time the report is filed. 10 years If Holder fails to deliver property, it shall pay interest on the value of the property. If Holder does not perform its due diligence obligations, it shall pay a penalty not to exceed $5 for each account. If Holder refuses to report or deliver property after written demand, it shall pay a penalty equal to lesser of $100 per day, or an amount equal to 25% of value of property.


If Holder willfully fails to report, it shall pay a penalty of not more than $10 per day. If Holder willfully refuses to deliver property, it shall pay a penalty of 25% of the value of the property or be imprisoned.

At the time the report is filed. 6 years If Holder fails to deliver property, it shall pay interest. If Holder willfully fails to report or deliver property, it shall pay a civil penalty of $100 per day (but not more than $5,000) plus 100% of the value of the property. If Holder willfully refuses after written demand to deliver property, it is guilty of a gross misdemeanor, and may be fined not more than $1,000 or imprisoned for not more than one year, or both.

By December 1 following the filing of the report (every 2 years.)

5 years If Holder fails to deliver property, it will pay interest of 18%. If it willfully fails to report, it will be fined $100 per day, but not more than $500. If Holder willfully fails to deliver property, it will be fined 25% of the value of the property. If Holder willfully refuses to deliver property after receiving written demand, it will be fined $100 to $5,000, imprisoned for up to 9 months, or both.






WV Unclaimed Property Division Office of the State Treasurer Building 1, Room E14 1900 Kanawha Blvd. East Charleston, WV 25305-0860 (304) 343-4000

5 years Holder shall, before filing its report, communicate with the owner and take necessary steps to prevent abandonment. For property worth $50 or more, at least 60 days but no more than 120 days prior to filing its report, Holder must exercise due diligence to ascertain the where-abouts of the owner.

Before March 31 for the year ending the preceding December 31.*

WY Unclaimed Property Division State Treasurer’s Office 1st Floor West Herschler Building 122 W. 25th Street Cheyenne, WY 82002 (307) 777-5590



† Shaded areas indicate a lack of statutory guidance. Contact the appropriate department for more information. * “Zero” or “negative” reports are required.

1 If the claims check is an employee benefit plan distribution, the amounts due under such check need not be reported or delivered to the state if, at the time the check was payable, the employee benefit plan contains a provision for forfeiture. 2 If the claims check is an employer benefits trust distribution, the amount due under such check need not be reported or delivered to the state if, at the time the check was payable, the employer benefit trust contains a provision for forfeiture.








If Holder willfully fails to report, it may be fined up to $500. If Holder willfully refuses to deliver property, it may be fined not less than $100 nor more than $1,000, or be imprisoned for not more than 30 days, or both.

At the time the report is filed. 5 years If Holder willfully fails to report, it shall pay a penalty of not more than $100 per day. If Holder willfully fails to deliver property, it shall pay a penalty equal to 25% of the value of the property. If Holder fails to deliver property, it shall pay interest on the value of the property.

3 Mississippi only requires a report to be filed every 3 years. 4 Amounts due under claims checks which require acceptance by the claimant, or which, by their terms, are void if not presented within a definite time, need not be reported or delivered to the state. 5 The dormancy period is 10 years if the claims check is an employee benefit trust distribution. The amounts under such claims checks need not be reported or delivered to the state if, at the time the check was payable, the employee benefit plan contains a provision for forfeiture. 6 Wisconsin only requires a report to be filed every 2 years.


(continued from p.1)

The penalties for failing to comply with state unclaimed property and escheat laws can be severe. In addition to specific dollar amounts for each day the report and property have not been properly filed and deposited with the state, some statutes also impose percentage penalties. For example, many statutes impose an “interest” charge or penalty of 25 percent of the value of the property.

Although states historically have not aggressively enforced such statutes against ERISA plans and the fiduciaries or custodians who have custody of plan assets, this situation may change in the future. States may become more aggressive in this regard, particularly in light of New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co. (Travelers), 115 S. Ct. 1671 (1995).

ERISA Preemption

ERISA’s broad preemption provision states that “[e]xcept as provided in subsection (b) ... any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” are superseded.2 Subsection (b) in turn exempts state laws which regulate insurance, banking, or securities (i.e., the “savings clause”).3 However, subsection (b) is restricted to its application in that it further provides that employee benefit plans (and their trusts) will not be deemed to be engaged in the business of insurance.4 As discussed below, the effect of ERISA’s preemption provisions with regard to state unclaimed property and escheat laws has been the subject of both court decisions and interpretations of the Department of Labor (DOL).

The Federal Courts’ Interpretation of ERISA Preemption

Historically, the United States Supreme Court has interpreted ERISA’s preemption provision broadly, holding that a state law “relates to” an employee benefit plan if it has “a connection with or reference to” an ERISA plan.5 State laws which affect ERISA plans only indirectly and which are not “specifically designed to affect ERISA plans” also have been considered preempted.6 As expressed in ERISA’s legislative history and confirmed by the Supreme Court, the desired effects of ERISA preemption include the promotion of a comprehensive federal system for regulating employee benefit plans and the promotion of uniformity with respect to interestate plans.7

Despite its repeated support of broad ERISA preemption, the Supreme Court has also recognized certain limits to preemption. For example, if a state law affects an ERISA employee benefit plan in a manner which is “too tenuous, remote or peripheral” the Court will not uphold preemption.8 The court has also held that ERISA does not preempt a generally applicable state statute that does not refer to an ERISA plan and that has an application state statute that does not refer to an ERISA plan and that has an application irrespective of ERISA.9 Therefore, for example, a generally applicable garnishment law was not preempted,10 nor was a state law requiring companies to make lump-sum severance payments upon a plant closing.11

Lower courts have also limited preemption in specific cases. For example, the Second Circuit held that ERISA did not preempt as state law prescribing what hospitals can charge for in-patient care which had the effect of precluding an employee benefit plan for negotiating plan-specific rates,12 nor did the Sixth Circuit impose preemption in a case involving a generally applicable city income tax affecting employee contributions to an employee benefit plan.13

To date, the only federal court to address the application of ERISA’s preemption provisions to a state’s unclaimed property law is the Second Circuit in Aetna Life Insurance v. Borges, 869 F.2d 142 (2d Cir. 1989), certiori denied 493 U.S. 811 (1989). As discussed in greater detail below, the court concluded that ERISA does not preempt a particular state unclaimed property law insofar as it affects uncashed checks and drafts issued from an insurance company to individuals under an ERISA employee welfare benefit plan.

Travelers

In Travelers, the Supreme Court decided, in a unanimous opinion, that ERISA does not preempt a New York state law which imposes hospital surcharges on purchasers of health care, including insured and self-


insured ERISA plans, which vary based on whether the care was financed by insurers, HMOs, or Blue Cross Blue Shield. This decision has been widely interpreted as signaling a new standard for testing preemption of a state statute.14 It is generally believed that under this new standard, state statutes which have a mere “indirect economic effect” on employee benefit plans, which do not have “too great” an impact on the plans, and which do not conflict with ERISA’s objectives (such as national uniformity of administration) would not be preempted.

Although it remains to be seen how the Supreme Court would apply such a standard to a state unclaimed property or escheat law, the resolution may very well be dictated by the context in which the dispute arises and the particular underlying facts. These are subjects which are further explored below.

Aetna Life Insurance Company v. Borges

In Borges, the Second Circuit held that ERISA does not preempt Connecticut’s escheat law because the law’s impact on ERISA plans is “too tenuous, remote, and peripheral.”15 The court found that, like other state laws which have not been preempted, unclaimed property laws are state laws of general application which present a traditional exercise of state power and which have only an incidental impact on ERISA plans. Citing its reasoning in Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), cert. denied, 472 U.S. 1008 (1985), the court explained further that the impact of the state’s unclaimed property law on ERISA plans is incidental because it has an indirect economic impact and an indirect impact on the structure, administration, and type of benefits.16 Despite the more than $2.5 million in uncashed checks and drafts issued, the court concluded that “[t]hese indirect economic and administrative effects are not substantial enough ... to persuade us that this is the type of law Congress intended to preempt.”17

At least one state court has also addressed this issue. In Attorney General v. Blue Cross & Blue Shield of Michigan, 424 N.W.2d 54 (Mich. App. 1988), a Michigan appellate court held that ERISA does not preempt the state’s unclaimed property law as applied to uncashed benefit checks issued by a health insurer. The court reasoned, as did the Second Circuit in Borges, that state unclaimed property laws are a traditional exercise of state authority, that the unclaimed property law in question affects the insurer as the holder of the property, not as an ERISA entity, and that it does not affect the “structure, administration or the type of benefits provided under the ERISA plan.”18

The Second Circuit’s decision in Borges should not be viewed as holding broadly that ERISA does not preempt state unclaimed property and escheat laws. Instead, Borges should be read narrowly as holding that such a state statute may withstand an ERISA preemption challenge when applied to property held by an insurance company (or other third party) rather than the ERISA plan itself, or where it has not been demonstrated that the abandoned property constitutes ERISA plan assets.

The DOL’s Interpretation of ERISA Preemption

According to the DOL, ERISA does not merely preempt state laws that conflict with ERISA, but broadly preempts all laws related to employee benefit plans. As demonstrated by a series of DOL Advisory Opinions and Information Letters, the DOL has consistently applied a broad view of ERISA preemption of state unclaimed property laws and, in all but one letter involving state unclaimed property laws, found in favor of preemption.

In 1978, the DOL issued an Information Letter with regard to the State of Illinois Uniform Disposition of Unclaimed Property Act.19 It was represented that the Illinois Act requires anyone doing business in the State of Illinois to remit to the Department of Financial Institutions the financial assets of any person whose property is in the possession of the business and is presumed abandoned. The DOL, after considering the Illinois Act, ERISA’s preemption provisions, and the legislative history to those preemption provisions, concluded that the Illinois Act is preempted by ERISA. It is the author’s understanding that the Illinois Department of Financial Institutions is aware of this Information Letter but is in disagreement with it and that the Department believes that the Illinois Act is not preempted. In March 1995, it requested an opinion from the Illinois Attorney General’s Office with regard to this question, but the opinion has not yet been issued.


On May 14, 1979, the DOL issued an Advisory Opinion to Fairchild Camera and Instrument Corporation

with regard to the State of California’s Unclaimed Property Law.20 The DOL stated that the California law (Section 1521(a)) provides that employee benefit trust distributions escheat to the state if the owner has not, within seven years after the distribution becomes payable, accepted the distribution, written regarding the distribution, or otherwise indicated an interest on file with the fiduciary or plan administrator. The state argued that there is no conflict between ERISA and the California law because the state merely “stands in the shoes” of the participants and there is neither a statutory limitation of time for the participant/beneficiary to claim the benefits from the state nor a charge or assessment of costs by the state. Nonetheless, the DOL concluded in Advisory Opinion 79-30A that “it is the position of the Department of Labor that, to the extent the State of California’s unclaimed property law relates to employee benefit plans covered by Title I of ERISA, it is preempted under Section 514(a). It is also noted that the method of notifying plan participants ... is not the method of notification used in the State of California’s Unclaimed Property Law.” The DOL’s position, as set forth in Advisory Opinion 79-30A, with regard to the California Unclaimed Property Law, was confirmed in Information Letters issued May 15, 1979, and September 2, 1994.21

The DOL also found preemption in the case of the Texas Unclaimed Property Statutes. In a 1994 Advisory Opinion, the DOL stated its view that if Section 72.101 of the Texas Unclaimed Property Statutes (entitled “Personal Property Subject to Escheat”) were applied to require the ERISA plan in question to pay the amounts held within the plan which had not been claimed by the plan participant, the Texas statute would be preempted. The DOL went on to state, “[s]uch an application of the State escheat law would directly affect the core functions of the Plan by reducing, through the escheat, the amount of plan assets held in trust for the benefit of all participants and beneficiaries of the Plan.”22

In the only Advisory Opinion in which the DOL did not find in favor of preemption, the DOL concluded that the provision of the New York Abandoned Property Law in question constituted a state law regulating insurance and, therefore, was exempt from preemption under the savings clause. The provision governed proceeds payable under an insurance policy which were held by an insurer and were unclaimed for three years and provided the state comptroller with the authority to take custodial possession of such proceeds, including proceeds of group accident and health insurance policies. On this basis, the DOL concluded, that the provision is not preempted.

The DOL has also commented on the Second Circuit’s Borges decision. In a September 1994 Information Letter, the DOL reported that it “does not consider that ... the decision in Borges requires any revision in the opinions expressed in Advisory Opinion 79-30A which continues to state the Department’s views regarding preemption of the California law as applied to ERISA-covered plans.”24

In early 1995, in a letter to the chairperson of the Drafting Committee (of the National Conference of Commissioners on Uniform State Laws) to Revise the Uniform Unclaimed Property Act, the DOL stated its concerns with the Borges decision (and the Attorney General v. Blue Cross and Blue Shield of Michigan decision discussed above) as well as the proposed revisions to the Uniform Unclaimed Property Act.25

First, the DOL noted that the court in Borges arrived at its conclusion without making a determination as to whether the insurance company reserves used to fund the unclaimed benefit checks were plan assets. Next, it noted that while the Borges court involved a state escheat law which has only an indirect effect on ERISA plans, the revisions to the Uniform Unclaimed Property Act purport to apply directly to certain types of ERISA plans. The DOL noted that the Supreme Court’s 1990 decision in Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990), places Borges in “serious doubt.” In Ingersoll-Rand, the Court concluded that ERISA preemption extends to any state law that relates to ERISA plans “even if the law is not specifically designed to affect such plans, or the effect i[s] only indirect.” The DOL concluded that, as presently drafted, the model law would be preempted by ERISA as applied to employee benefit plans covered by ERISA.

Applying Travelers In The Context Of Unclaimed Property Statutes

How should the Supreme Court’s opinion in Travelers be applied in the context of a state unclaimed property statute? Although such state statutes do not refer to ERISA plans by name, there are several reasons


why they should be preempted when applied directly to ERISA plans. The distinction between applying the statute directly to an ERISA plan on one hand and applying the statute to an insurance company which may not be holding “plan assets” on the other hand is an important distinction and is the reason why Borges should not be of precedential value regarding plan assets.

First, applying such a state statute directly to a benefit plan would be “direct” regulation of the plan in contrast with the “indirect” impact of the type permitted by the Supreme Court in Travelers. In this context, the state would be directing the plan to cut a check from plan assets directly to the state, together with potential fines, penalties, and possible criminal sanctions. This economic impact is not “indirect.”

Second, the state regulation is likely to conflict with one of ERISA’s overriding goals: affording national uniformity of administration and avoiding conflicting or inconsistent state requirements. Without preemption, the plan administrator would be required to determine and reconcile the requirements of the statutes of various states which could impact plan assets which may be considered “abandoned.” While some states may protect residents of the state, others may protect individuals who were residents at the time they earned or otherwise became entitled to the property, and still other states may be more concerned with property and propertyholders currently located in the state. For example, should the “abandoned” property to be turned over to the state where: (1) the sponsoring employer is located, (2) the trustee is located, (3) the employment occurred, or (4) the last known residence of the participant is located? Further compounding the problem is the question of after how many years is the property to be considered abandoned? What if the state law conflicts with the plan’s own forfeiture provisions? Also, which state’s notification requirements are to be followed? And what if the notification requirements are different from those contained in the plan? It is just such administrative problems that Congress sought to avoid.

Planning Points

Consideration should be given to this matter before your state regulator comes knocking. At the very least, the subject should be addressed in the trust agreement or administration agreement with the plan’s trustee or administrator. Is the trustee or administrator obligated to comply with a demand letter from the state? Conversely, is the trustee or administrator directed to ignore any such demand, and will there be indemnification from the sponsor? The person with custody over the assets will likely be in a dilemma. While turning over funds to the state may at first appear to be the “safe” route to avoid state penalties, the potential liability could be greater if there is a violation, albeit unintentional, of ERISA. Paying plan assets to the state rather than retaining them within the plan to provide benefits under the plan may violate the exclusive benefit rule of ERISA set forth in Section 404(a)(1).

Consideration should be given to taking steps to help protect the plan against state statutes. For example, why not consider having a participant or beneficiary forfeit the benefit payment under certain circumstances? Currently, it is common for welfare plans to provide that a claim must be submitted within a specified number of days after the end of the plan year in order for the claim to be considered. There are also deadlines typically imposed upon participants who wish to appeal denial of a claim. Why not go one step further and require participants and beneficiaries to actually cash their claim checks within a certain period of time in order for them to be entitled to the payment? Exceptions could be provided if the person is later able to prove that it was impossible to do so or other extenuating circumstances prevailed. However, claimants who merely lose their checks or who allegedly never received their checks but wait several years to follow up would forfeit their benefits.

It is reasonable for the plan fiduciaries to impose a deadline by which the claim checks must be cashed in order to know how much “abandoned” property the plan has for future needs. In the case of a large plan which produces many claim checks, there may be many stale outstanding checks at any point in time. This would be particularly true if the workforce is very volatile or transient and if the claim checks are for very small amounts. Is the plan willing to assume the risk that all claimants with uncashed claim checks may arrive at the administrator’s doorstep demanding satisfaction of their uncashed checks? How does the plan’s funding policy anticipate such potential? Therefore, consideration should be given to adding a provision to


the plan which terminates the participant’s or beneficiary’s rights to the property prior to the date the property would otherwise be considered abandoned under state statutes. As a result, when the waiting period expires under state law, the property would not be considered abandoned by the claimant because it no longer belongs to the claimant. Furthermore, unlike qualified retirement plans, which are required to reinstate benefits which are forfeited under the plan if a participant or beneficiary later claims the benefit (see Treasury Regulation Section 1.411(a)-4(b)(6)), there does not appear to be such a reinstatement requirement in the case of welfare benefit plans.

If the governing plan documents address the subject of disentitlement or forfeiture, and specifically contain a procedure for attempting to notify the participant or beneficiary, or which specifically address the question of when and under what conditions reinstatement is allowed, this would provide an alternative defense to the state statute in that the statute would likely be in conflict with the provisions of the plan and its administration.

Furthermore, if this subject is of enough importance to the plan’s sponsor and fiduciaries, additional steps should be considered to help assure that the assets in question constitute “plan assets.” This is in contrast with some funding policies in which the assets are held by an insurance company, administrator, or plan sponsor in a commingled fashion or in some other manner in which there would be difficulty arguing that they constitute plan assets. If the property in question does not constitute “plan assets,” the state statute is less likely to be preempted and more likely to be applied in the manner permitted in Borges.

While it is not entirely clear which state unclaimed property and escheat statutes will be preempted under which circumstances, careful planning could increase the likelihood of preemption. At the very least, ERISA plan sponsors, fiduciaries, and administrators should be aware of the existence of such statutes and should address, in advance, the question of what to do with uncashed benefit checks.


Notes

1. “Escheat” is defined as “a reversion of property to the state in consequence of a want of any individual competent to inherit.” Black’s Law Dictionary 545 (6th ed. 1990). At common law, the term applied only to real property subject to a reversionary interest or right of the feudal lord to take in the absence of a tenant. However, by modem statute, various kinds of unclaimed personal property have been expressly made subject to escheat. 27 AM JUR 2D, Escbeat §5 (1966).

2. ERISA §514(a).

3. ERISA §514(b).

4. ERISA §514(b)(2)(B).

5. Shaw v. Delta Airlines, Inc., 463 U.S. 85, 97 (1983). See also FMC Corp. v. Holliday, 498 U.S. 52 (1990); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987).

6. Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 525 (1981). See also Ingersoll Rand (cited on p. 77) (holding that a state law may be preempted by ERISA even if it is not specifically designed to affect such plans and even if its effect is indirect); Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985) (holding that ERISA preempts a state law even if the law is “consistent with ERISA’s substantive requirements”); Shaw (cited in note 5) at 97-98 (holding that preemption does not only apply in the case of state laws which deal with “subject matter covered by ERISA: reporting, disclosure, fiduciary responsibility and the like”). But see Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825 (1988).

7. See 120 Cong. Rec. 29942 (1974). See also Pilot Life (cited in note 5) at 46; FMC (cited in note 5) at 59.

8. Shaw (cited in note 5) at 100.

9. Mackey (cited in note 6). See also Borges (cited on p. 73).

10. Mackey (cited in note 6) at 825.

11. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987).

12. Rebaldo (cited on p. 74).

13. Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550 (6th Cir. 1987).

14. See William L. Sollee, Jr., “Blue Cross v. Travelers-Predicting the Impact of a New Preemption Standard,” Vol. 8 No. 3 Benefits Law Journal 79 (Autumn 1995).

15. Borges (cited on p. 73) at 147.

16. Id. at 146. The court noted that many state laws have “some minimal, indirect impact on the administration of benefit plans, including laws that have not been preempted” and therefore, that “any” impact does not trigger preemption.

17. Id. at 147.

18. Blue Cross and Blue Shield of Michigan (cited on p. 74) at 59.

19. Information Letter issued to Michael C. Greenfield (December 22, 1978).

20. Advisory Opinion 79-30A (May 14, 1979).

21. Information Letter issued to Emmeline S. Tatsuguchi of Wells Fargo Bank (May 15, 1979) and Information Letter issued to Robert N. Eccles (September 2, 1994).

22. Advisory Opinion 94-41A issued to Thomas R. Giltner with regard to the Luby’s Cafeterias, Inc. Employees Profit-Sharing and Retirement Trust (December 7, 1994).

23. Advisory Opinion 83-39A issued to the Director of Bureau of Abandoned Property of the New York Office of the State Comptroller (July 29, 1983).

24. Information Letter issued to Robert N. Eccles (September 2, 1994). See also Information Letter issued to Thomas R. Giltner (December 7, 1994).

25. Letter dated March 3, 1995, to Willis E. Sullivan, III, Chair, Drafting Committee to Revise Uniform Unclaimed Property Act, of the National Conference of Commissioners on Uniform State Laws.


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