by Michael B. Weinstein (Fall 2019)
A new state law, effective for the most part on January 1, 2020, should finally resolve the question of what a police or fire pension fund must do when a pension benefit is unclaimed or abandoned. Public Act 101-0546 (Senate Bill 1246) amends the “Revised Uniform Unclaimed Property Act” (765 ILCS 1026/15-1 et seq.) by adding two new sections (Sections 15-1505 and 15-1506) that specifically address pension fund benefits.
Section 15-1505 mandates that a retirement system, pension fund, or investment board reports the name of the owner, the names of any beneficiaries, the last known address (if known), the Social Security number or taxpayer identification number (if known or readily ascertainable), and the unclaimed or abandoned dollar amount to the Administrator of the Unclaimed Property Act (i.e., the Illinois State Treasurer) prior to November 1 of each year.
Each report would cover the 12 months preceding July 1 of each year. Thus, beginning no later than November 1, 2020, and each November 1 thereafter, an Article 3 or Article 4 pension fund that is holding an unclaimed or abandoned benefit because the recipient is nowhere to be found must report the above-noted information to the state treasurer.
Additionally, Section 15-1506, which specifically applies to Article 3 and Article 4 funds, mandates minimum due diligence standards for searching for the apparent owner of unclaimed or abandoned benefits. For example, not less than 90 days before filing the annual report to the state treasurer, a fund must attempt to contact the apparent owner of the benefit using, in any order, first class mail, telephone, or electronic mail.
Although somewhat unclear, it appears that all three methods should be used, to the extent that they are available to a fund. In any event, the fund should use the most current contact information available for the apparent owner. If the apparent owner does not respond or otherwise indicate interest in the property in response to these “routine” methods then the fund shall send a notice, by certified mail, to the apparent owner not less than 60 days prior to filing the annual treasurer’s report.
Additionally, each fund is required to ask any employer or former employer to search its records for more current contact information for an apparent owner, as well as more current contact information for any beneficiaries. In turn, the employer or former employer is required, unless prohibited by other state law, to make available to the fund any information that would allow the fund to determine the current address of an apparent owner.
Similarly, when an apparent owner has designated beneficiaries, the fund must attempt to contact such beneficiaries using the same “routine” methods noted above, if the fund has contact information for those beneficiaries. Additionally, the law allows a fund to make reasonable use of Internet search tools that do not charge a fee to search for an apparent owner.
Finally, if the benefit(s) is in excess of $1,000, the fund must undertake additional due diligence, including the use of Internet search tools, commercial locator services, credit reporting agencies, information brokers, investigation databases, and analogous services that may charge a fee. Since monthly pension benefits can quickly exceed $1,000, the use of such search tools will often be required. On the other hand, if the benefit is less than $50, the fund does not need to engage in due diligence, nor does a fund need to send mail or electronic mail to an address that it knows to be invalid.
Furthermore, a pension fund must enter into an interagency agreement with the State Treasurer concerning the implementation of the due diligence requirements. The agreement shall specify that the fund must annually certify that it meets or exceeds the due diligence requirements set forth in Section 15-1506. This requirement appears to apply to all Article 3 and Article 4 funds whether they currently have unclaimed or abandoned benefits.
Finally, recognizing a fund’s fiduciary obligations under federal law, Section 15-1506(f) recognizes that if the United States Department of Labor issues guidance or regulations that conflict with the state’s due diligence requirements, the fund shall comply with the federal guidance or regulations.
However, most importantly, and notwithstanding all of the foregoing due diligence and reporting requirements, Section 15-1505(d) provides that an unclaimed or abandoned annuity, pension, or benefit fund held in a fiduciary capacity should not be turned over to the State Treasurer, thus acknowledging a fund’s fiduciary obligations to its members.
What does all this mean? It appears that the State has finally provided guidance to Article 3 and Article 4 funds with respect to unclaimed or abandoned benefits. While the new law specifies minimum due diligence and reporting standards, it does not require that unclaimed benefits be turned over to the State of Illinois as abandoned property, thus recognizing a fund’s fiduciary obligations to its members.
Presumably, the State Treasurer will list the unclaimed or abandoned benefits on the Treasurer’s unclaimed property website (https://icash.illinoistreasurer.gov/); however, the property will, at all times, remain with the fund, which will engage in the required due diligence to also attempt to locate the apparent owner or beneficiary of the unclaimed benefits.