What is Escheatment?

01/20/26

Escheatment is the legal process by which unclaimed or abandoned property is transferred to the state. Each state has its own escheatment procedures for unclaimed property, such as dormant bank and insurance accounts, unclaimed stock certificates, contents of safety deposit boxes and other tangible and intangible items. Property that is escheated to the states goes into their unclaimed property funds. States generally require a defined period of inactivity before benefits are considered abandoned, but escheatment processes and dormancy periods vary by state.

Escheatment and ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) pre-empts state escheatment laws to the extent such laws require ERISA-covered plans to transfer any plan assets to state unclaimed property funds. Thus, state escheatment laws requiring transfer of assets do not apply to the assets held in private-sector retirement plans [1]. Generally, unclaimed retirement benefits remain in the retirement plan until claimed by the participant or beneficiary. However, under Department of Labor (DOL) guidance there are two specific circumstances where a fiduciary of a plan may voluntarily transfer unclaimed retirement benefits to a state unclaimed property fund without violating ERISA’s standards of fiduciary conduct [2]. These situations occur when the plan fiduciary cannot locate the participant to make a distribution when terminating the plan or when a former employee with an accrued benefit of $1000 or less cannot be located and is cashed out of the plan [3].

Terminating a defined contribution plan:

When a defined contribution plan, such as a 401(k) plan, is terminated fiduciaries must pay out all the participant benefits. When a participant cannot be found after a reasonable and diligent search, the plan is generally required to consider a rollover of the participant’s benefits to an Individual Retirement Account (IRA) opened in the name of the participant. If the plan fiduciary cannot locate an IRA provider willing to accept a rollover distribution for the account or there is a compelling reason not to make a rollover to an IRA, the fiduciary may transfer the participant’s account to an appropriate state unclaimed property fund, or in some cases, to an interest-bearing bank account. (Field Assistance Bulletin 2014-01). There may be other options for fiduciaries in this situation, including transferring the money in the account to the Missing Participant Program of the Pension Benefit Guaranty Corporation.

Mandatory transfer of small accounts of $1000 or less:

A fiduciary of an ongoing plan may transfer a missing participant’s account with an accrued benefit of $1000 or less to a state property fund under circumstances described in a temporary DOL enforcement policy announced in Field Assistance Bulletin (FAB) 2025 – 01. The FAB states that DOL will not pursue enforcement action against a plan fiduciary making a forced transfer of a participant’s small account (i.e., $1,000 or less) to a state unclaimed property fund if the plan cannot locate the participant following a reasonable and diligent search. The FAB also requires that a plan fiduciary determines that a transfer to the state fund is prudent, and that the plan’s summary plan description indicates that benefit payments may be transferred to an eligible state fund. If a plan does transfer a retirement account to an unclaimed property fund, it must do so to the state of the participant’s last known address.

What happens to escheated accounts?

Once benefits are escheated, they are held by the state government in an unclaimed property fund. The owner of the retirement account will have the right to reclaim the escheated property from the state. Depending on state law and practices, the state may attempt to contact the owner or beneficiaries of the account. Generally, states holding unclaimed retirement accounts do not charge fees. Most states do not pay interest on money held in their unclaimed property funds, although a few, such as New Jersey do.

ERISA retirement accounts transferred to state unclaimed property funds are no longer in the ERISA retirement system and may be subject to federal taxes.

How can I find potentially escheated property?

If your former employer is still in business, contact the plan administrator to see if there is a record of transferring your account or if the plan has a practice of transferring accounts to state unclaimed property funds. The summary plan description for your retirement plan also may have information on plan practices for unclaimed benefits.

If you’ve lost track of your former employer or plan, you may be able to contact the plan’s service provider. You may also use the DOL’s Form 5500 database to locate contact information for your former employer or try an internet search for the employer using FreeErisa.com. The Department of Labor has a Lost and Found database that you can use to find a former employer [4]. The Pension Benefit Guaranty Corporation maintains a searchable list of employers with defined benefit plans.

If your benefits have already been escheated to a state, you can use the state’s unclaimed funds database to find your money. Check the property fund of the state where you currently live and any other states where you lived previously. If that fails, you should also check the state in which you worked or your employer was located.

How can I prevent escheatment of my retirement benefits?

ERISA retirement plans are required to try to contact you before escheating your benefits. Even a terminating plan must try to contact you. Problems occur when an employer does not have your current contact information.

Maintain up-to-date contact information on record with your plan administrator
Create and maintain your beneficiary designations
Regularly check your account statements
Contact the plan administrator at least once a year to be sure the plan has your current contact information.

Resources:

DOL Form 5500 Search

FreeErisa.com

Pension Rights Center

Pension Counseling and Information Program

National Registry of Unclaimed Retirement Benefits

DOL Lost and Found Database

EBSA Abandoned Plan Program

PBGC Missing Participant Program

[1] Church and government plans are generally exempt from ERISA and therefore could be subject to state laws on escheatment. Individual Retirement Accounts (IRAs) are also exempt from ERISA.

[2] A fiduciary is the person who is legally responsible for managing and safeguarding the pension plan and the retirement accounts of its participants.

[3] ERISA permits, but does not require, retirement plans to pay out the accrued benefit of participants who have separated from employment when the participant’s accrued benefit is small ($7000 or less). Special rules apply when a participant cannot be found to accept the money and the accrued benefit is $1000 or less.

[4] The DOL Lost and Found database may not have the most current contact information for your employer. DOL is working to improve the information in the database.

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