Authorizes the retirement board of the NYS teachers' retirement system to promulgate rules and regulations allowing for mandated distribution of unclaimed funds

6 Co-sponsors

• Ruben Diaz
• Martin Malavé Dilan
• Shirley L. Huntley
• George Onorato
• Toby Ann Stavisky
• Antoine M. Thompson

Title of bill

An act to amend the education law, in relation to the mandated payment of unclaimed funds in the amount of one thousand dollars or less

Purpose

This bill would authorize the Retirement Board of the New York State Teachers' Retirement System to promulgate rules and regulations allowing for the mandated distribution of unclaimed funds in the amount of $1000 or less.

Summary of provisions

Internal Revenue Code §401(a)(31) which governs roll-over distributions from qualified retirement plans, such as the System, allows for mandated distributions to participants or beneficiaries of amounts not exceeding $1000. Unfortunately, no current provision of law allows the System to implement the mandated distributions of such unclaimed amounts. This bill would give the System authority to mandate distributions of amounts not exceeding $1000.

Justification

Under current law, if an amount due a former member is not claimed after 7 years of non-service or 7 years following withdrawal from service, or if an amount due a beneficiary is not claimed after 7 years from when the beneficiary became entitled to the benefit, the System may only send a notice to the former member or beneficiary advising that the unclaimed amount will be deemed abandoned if not claimed within one year after the date of the notice. Even after the funds have been deemed abandoned and transferred to the System's pension accumulation fund, the former member or beneficiary still has the right to claim the funds. The difficulty with current law is that the System must wait until a former member or beneficiary takes affirmative steps to claim the funds in question, even in cases where the System knows where the former member or beneficiary resides or can be found. This statutorily mandated passive role forces the System to incur costs and administrative time in keeping track of the unclaimed funds and satisfying the provisions of law relating to the abandoned funds, long after the persons entitled to the funds should properly have claimed them. The claimants gain no advantage by not claiming the funds due them and, in effect, forcing the System to retain them, inasmuch as no interest is paid on the unclaimed funds. The System, as well as participating employers and members and retirees generally, would benefit if the System was able to mandate the distribution of amounts of $1000 or less as permitted by IRC §401(a)(31). Allowing for mandated distributions would relieve the System of the administrative burdens of keeping track of small amounts in cases where the System has a way of finding the claimants. Such a procedure would, in the end, very likely also benefit the claimants themselves who currently fail for whatever reason to ask for funds due them.

Prior legislative history

None.

Fiscal implications

This bill would amend Section 531 of the Education Law to authorize the Retirement Board of the New York State Teachers' Retirement System to promulgate rules and regulations allowing for the mandated distribution of unclaimed funds in the amount of $1,000 or less. The annual cost to the employers of members of the New York State Teachers' Retirement System is estimated to be negligible if this bill is enacted. The source of this estimate is Fiscal Note 2009-6 dated October 15, 2008 prepared by the Actuary of the New York State Teachers' Retirement System and is intended for use only during the 2009 Legislative Session

Effective date

The act would take effect immediately.