Background of the Regulation:
Escheatment is a US regulation requiring financial institutions to send abandoned property to the state after a certain period.
The regulation varies by financial instrument & state but is typically between 3 & 5 years after the account’s last activity.
Typically the regulation requires financial institutions to document all attempts to reach the client with a final 30 day notice required before the mandated escheatment to the state.
Challenges of Complying with the Regulation:
Financial institutions are facing increasing pressure to promptly transfer unclaimed assets to the states.
Failure to do so can result in the institution paying substantial interest charges & penalties.
Accurate abandoned property data collection, documentation and client notification are the primary challenges confronting large institutions in the escheatment process.
Additionally, effective Jan. 1, 2020, institutions are required to withhold the 10% tax on non-periodic designated distributions that have become unclaimed and subject to escheatment using IRS Form 1099-R prior to remittance to the state, if the owner of the IRA account did not make a withholding election.
The Meritsoft Escheatment module is specifically designed to:
- provide firms with a robust audit trail of all historical data collection and client contact
- Provide a Rules-based and flexible solution
- comply with various state regulations
- client notification and communication