Missing Assets: Unclaimed Pension and Retirement Account Search

► Traditional IRA  

A Traditional IRA is any IRA that is not a Roth, SEP, SIMPLE or Coverdell ESA. Any individual who has taxable compensation or self-employment income in a particular year, and will not reach age 70½ by the end of that year, may open and fund a Traditional IRA. It must be established at an institution that has received IRS approval to offer IRAs. These include banks and credit unions, brokerages, life insurance and trust companies.

Owners of Traditional IRAs must begin to take distributions not later than April 1 of the calendar year following the year in which they reach age 70½. Under Uniform Unclaimed Property guidelines, abandonment of a Traditional IRA may be presumed (a) after age 70½ if no distribution has been made; (b) if distributions have previously been made and then stopped, or (c) if a distribution check is not cashed.

► Roth IRA 

Roth IRA contributions are not deductible from taxable income at the time they are made. With Roth IRAs you don’t pay income tax on gains, interest or dividends when you withdraw the money if you are at least age 59½ and the account has been open for five years or longer. Tax-free withdrawals are also allowed for first-home purchase ($10,000 lifetime cap), and upon death or disability; but the five-year requirement still applies.

You can make contributions to a Roth at any age if you have taxable compensation, and the Traditional IRA requirement that you start making withdrawals at age 70½ does not apply. Roth IRAs may be reported and remitted as unclaimed property at some number of years determined by each individual state – 3 years is typical - after the election date (age 59½) or earlier, if there have been uncashed distribution checks and/or returned statements. 

► Lost or Unclaimed IRA Individual Retirement Accounts 

There is no limit to the number of Individual Retirement Accounts that an individual can have. IRAs may contain a variety of investments including bank accounts, certificates of deposit, stocks, bonds, precious metals, commodities, and even real estate; but half of all IRAs are administered by and invested in various mutual funds. About one-third are held in brokerage accounts, while bank deposits and life insurance annuities make up the remainder.

Earnings on Traditional IRAs grow on a tax-deferred basis until withdrawals begin. About 15% of IRAs - totaling some $450 million - are held by those aged 70 and above. The average account value is around $100,000.

Due to the long term nature of this type of investment, each year large numbers of owners and heirs - who may not be aware of a deceased family member's IRA or rollover 401(k) - fail to claim accounts to which they're entitled. While unclaimed 401(k) retirement plan assets are subject to federal guidelines mandated by ERISA, the Employee Retirement Income Security Act of 1974, most dormant and forgotten IRAs at banks, brokerages and insurance companies are not.

They come under the purview of state unclaimed property statutes, whereby a trustee takes custody of the funds based on a legal doctrine known as ‘escheat.’  It’s important to note, however, that in some cases 401(k) plan assets can lose their ERISA pre-emption and become subject to state escheat.

The rules for determining how a dormant and unclaimed IRA is treated depend on the type of account and the owner’s state of residence. Generally speaking, a Traditional IRA is considered unclaimed if a withdrawal is not made by age 70½; the age at which non-withdrawal triggers a 50% tax penalty under the IRS code. Both Traditional IRAs and Roth IRAs may be considered abandoned if one or more distribution checks remain uncashed, which can occur when the owner reaches age 59½ or before, if early withdrawal is taken.