No, we do not believe that you should report an IRA as unclaimed property before the owner has died or reached the age of 70½, and mail has been returned as undeliverable.

The Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA) requires tax-deferred retirement accounts to be reported and remitted to the Treasurer on the later of:

1. Three years after the date that a communication is returned undelivered (RPO) or, if re-sent within thirty days, the second RPO, or
2. Three years after the apparent owner reaches the age of 70½ years, or one year after the date of mandatory distribution following the apparent owner’s death, whichever is earlier.

Based on these rules, we believe that your bank should not report tax-deferred retirement accounts until the later of the two trigger dates in paragraphs (1) and (2). This would comport with the Uniform Law Commission’s (ULC) intent underlying its uniform law on which the Illinois RUUPA is based. In a comment on a related provision regarding tax-deferred accounts, the ULC concluded that because such accounts “may well be used by beneficiaries over a longer period of time . . . a policy allowing for up to thirty years before those accounts would be surrendered to the states was prudent and favored consumers.” We believe that the same reasoning would apply to IRAs, which are used for a longer period than ordinary deposit accounts and are subject to strict limitations on the beneficiary’s activities.

Here, neither of the conditions in paragraphs (1) or (2) have been met. Consequently, we do not recommend reporting this account as unclaimed property. Additionally, remitting a tax-deferred retirement account to the Treasurer before these triggers have been met could result in tax penalties and would require your bank to make an IRA distribution without the customer’s authorization.

For resources related to our guidance, please see:

• Illinois RUUPA, 765 ILCS 1026/15-202 (“When tax-deferred retirement account presumed abandoned. (a) Subject to Section 15-210, property held in a pension account or retirement account that qualifies for tax deferral under the income-tax laws of the United States is presumed abandoned if it is unclaimed by the apparent owner after the later of:
  • (1) 3 years after the following dates:
    • (A) except as in subparagraph (B), the date a communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; or
    • (B) if such communication is re-sent within 30 days after the date the first communication is returned undelivered, the date the second communication was returned undelivered by the United States Postal Service; or
  • (2) the earlier of the following dates:
    • (A) 3 years after the date the apparent owner becomes 70.5 years of age, if determinable by the holder; or
    • (B) one year after the date of mandatory distribution following death if the Internal Revenue Code requires distribution to avoid a tax penalty and the holder:
      • (i) receives confirmation of the death of the apparent owner in the ordinary course of its business; or
      • (ii) confirms the death of the apparent owner under subsection (b).”)

• Uniform Law Commission, Revised Uniform Unclaimed Property Act, Section 203, Official Comment (printed page 32) (“It was determined that tax deferred accounts, like health savings or college tuition savings, may well be used by beneficiaries over a longer period of time and that, as a consequence, a policy allowing for up to thirty years before those accounts would be surrendered to the states was prudent and favored consumers.”)