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Four Tips for Preventing Uncashed Retirement Checks

Four Tips for Preventing Uncashed Retirement Checks

No plan sponsor or TPA likes dealing with uncashed retirement checks. However, when a former employee fails to cash their distribution, the employer still has fiduciary responsibility for the funds. Conducting search efforts to locate the “missing plan participant” takes time and money, and often fails to locate the participant. Likewise, going through the process of turning dormant accounts over to the state can also consume your staff’s time and resources.

Fortunately, there are ways to decrease the burdens involving ex-employees and uncashed checks. These include:

  1. Employees often forget they have a company-sponsored retirement plan, or the account balance is so small they can’t be bothered with it. Before an employee leaves, have your HR person remind them of their retirement plan and explain why it’s important they take it with them.
  2. Encourage departing employees to roll over their retirement plan to their new employer. That way, your company won’t get stuck paying administrative fees on an ex-employee’s account. The plan administrator at the new job can answer any questions the former employee may have about the rollover process.
  3. If the employee’s account balance is $1,000 or less and you intend to send a check to their last known address per your plan’s cash-out provisions, let the employee know they should expect to receive a check in the mail for the account balance after a certain amount of time.
  4. Have the employee verify their current address. If they don’t have a definite address, as in the case of a move, have them provide the address of a family member where the check can be sent. Losing track of a former employee is a leading cause of uncashed checks, so strive to maintain a current address until the account is off your books.

Preventing Other Loose Ends
Handling the retirement account isn’t the only issue at departure time. Taking a few moments to address final paycheck and health benefits issues can also help prevent administrative problems down the road.

  • Make sure the employee knows how the final paycheck will be paid and when. Are they supposed to pick it up or will it be mailed? How many checks will there be? (If the employee’s last day was the first day of a new pay period, they should expect two checks.) When will the final commission check come? Some employers pay out vacation time in a separate check, so let the employee know exactly what to look for so you can get their account off your books.
  • Make sure the employee has contact information for enrolled benefits such as health insurance, dental, FSA, HSA, life, etc., so questions can be directed to those companies for any outstanding claims at the time of departure. This can prevent phone calls to your HR department.

To save time and effort, your IT department may be able to automate some or all of these steps. However, whether performed manually or automatically, proactively implementing these steps can reduce the headaches that occur down the road when a former employee calls about unresolved health benefit claims or that last retirement plan check they never received.

Now that you’ve helped clear your books of stragglers, here’s a little something for you. Go to www.unclaimed.org and look up your company name. From mom-and-pop stores to major corporations, chances are your company has unclaimed property.

Also, if you have been unable to locate and pay out a former employee, visit the National Registry of Unclaimed Retirement Benefits. The site allows employers to list and employees to search for unclaimed retirement accounts at no cost.

Speaker, author and consumer advocate Mary Pitman believes that everyone has the right to claim money that belongs to them without having to pay for it. She has appeared on Good Morning America and America’s Money Class with Suze Orman, and has been featured in AARP Magazine, CNNMoney and more.

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