We are a nation of the lost, hiding in plain sight.
There are tens of billions of dollars sitting in the unclaimed property funds that states run, just waiting to be taken back by rightful owners who have lost track of various stock dividends, tax refunds, bank accounts and the like.
Orphaned 401(k) balances are a big enough problem that the Labor Department commissioned a report from experts in the retirement industry. They had trouble agreeing on who should even be classified as missing or lost in the first place. Employers are increasingly writing rules for their workplace retirement accounts that make it easier to push former employees’ accounts out of the plans altogether. That way, they can wipe their hands of the responsibility for finding them.
On one hand, it sure doesn’t seem that hard to track many of these individuals down. The Internal Revenue Service and the Social Security Administration used to help with the hunt, but both have bowed out in recent years, citing ever easier ways to locate the missing. But the unmistakable impression I got after several days wallowing in the rules and infrastructure around lost payments is that many entities are not even bothering with a mere Google search for owners of the lost accounts. So why don’t they look harder? And what are we all supposed to do to avoid getting lost in the first place?
Each state has laws around unclaimed property, and many of them base their legislation around something called the Uniform Unclaimed Property Act. It was last revised in 1995, and one of the lawyers leading the next rewrite is an unclaimed property expert named Michael Houghton.
The laws generally have a due diligence requirement for entities that can’t find the rightful holders of money or other property. In practice, this means they have to send a letter to their last known postal address warning that the money may be headed to the state’s unclaimed property fund. There may be a requirement to publish the person’s name in a local newspaper, too.
It’s all rather quaint, though at least companies or states generally can’t keep the money as they used to decades ago. Now, any unclaimed money with an individual’s name attached to it ends up in a state fund and sits there until someone comes looking for it.
Still, the not-so-due diligence often leads to odd outcomes. For years, I’ve been urging everyone I know to check their state’s unclaimed property database. My most recent prompt resulted in my colleague Mary Pilon finding $3,318.46 in New York. Her alma mater, New York University, had left it there. She had recently spoken to NYU classes and received fundraising calls from NYU solicitors. Still, the university could not track her down.
MetLife, which had nearly a half-million unclaimed accounts in New York as of this summer, is using online locator services to track people down. It notes that many of the unclaimed accounts are from small-dollar policies from decades ago, but it encourages anyone hunting for their own policy information or that of someone who is dead to look the name up at www.metlife.com/policyfinder.
Employers and the companies that administer 401(k) and other workplace retirement accounts tend to rely on guidance from the Labor Department. It urges them to call beneficiaries for information, do Internet searches and spend money to get access to commercial databases. The big three credit bureaus tend to know where lots of people are at any given moment and can sometimes help employers. But privacy and other laws may limit what they can disclose.
Then there’s the sheer magnitude of the task for companies that automatically enroll workers in 401(k) plans and have a lot of turnover.
“If you’re McDonald’s and you have 300,000 people, you can say that it takes just two seconds to Google, but that’s a lot of Googling,” said Ian S. Kopelman, who heads the employee benefits and executive compensation practice group at the law firm DLA Piper in Chicago.
And let’s say they do find people. How can they reverify that person’s identity? A Twitter handle proves nothing, after all. Or will that person even respond? Imagine getting a Facebook message from a stranger who claims to have some lost money of yours. Would you believe it? Or would you worry that hackers were on to you?
The model unclaimed property law compounds the problem when it comes to retirement accounts. In 1995, a revision allowed employers to turn accounts of former employees over to their state’s unclaimed property fund after just three years of no contact from the account holder.
Nowadays, however, the employers themselves put people’s money into a target-date mutual fund that requires no rebalancing. Plus, it’s unwise to check the balance too often lest you persuade yourself to make a trade rather than leaving things alone. State laws shouldn’t punish people for that.