Regarding unclaimed property, what is the dormancy rule for automatically renewing certificates of deposit (CDs)? Are they considered dormant if there is no contact for three years after the initial renewal? If a customer receives interest checks that are being cashed, is that considered “contact”? Also, would individual retirement accounts (IRAs) be considered dormant three years after the first required minimum distribution if there has been no contact?

Unclaimed Certificates of Deposit

Absent any qualifying activity for the account, an automatically renewing time CD must be treated as unclaimed property once three years have passed from the first renewal date. The Illinois RUUPA does provide that automatically renewable accounts will not be considered unclaimed property if “3 years after its initial date of maturity.”

However, if the account owner deposits a check for a CD interest payment, the deposit of the check would be considered contact that would prevent the CD from being considered unclaimed property. This would be in addition to several alternative methods for an owner to indicate an interest in a deposit account, such as oral communications (provided that your bank “contemporaneously makes and preserves a record” of the oral communication) and logging in to an online banking portal to check the CD balance, among other methods covered in the resources listed below.

Unclaimed Individual Retirement Accounts

The Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA) requires tax-deferred retirement accounts, including IRAs, to be reported and remitted as unclaimed property on the later of:

Three years after the date that a communication is returned undelivered (RPO) or, if re-sent within thirty days, the second RPO, or

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, most IRAs will not become unclaimed property until three years after the owner’s first required minimum distribution.

Note that a recent federal law, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), moved the required minimum distribution age from 70½ to 72, and the Illinois RUUPA will need to be amended to reflect that change. The IBA plans to pursue a legislative fix to make this change in the upcoming session of the Illinois General Assembly.

For resources related to our guidance, please see:

Illinois RUUPA, 765 ILCS 1026/15-201(6) (“When property presumed abandoned. Subject to Section 15-210, the following property is presumed abandoned if it is unclaimed by the apparent owner during the period specified below: . . . (6) a demand, savings, or time deposit, 3 years after the later of maturity or the date of the last indication of interest in the property by the apparent owner, except for a deposit that is automatically renewable, 3 years after its initial date of maturity unless the apparent owner consented in a record on file with the holder to renewal at or about the time of the renewal; . . .”)

Illinois RUUPA, 765 ILCS 1026/15-210(b) (“Under this Act, an indication of an apparent owner’s interest in property includes: . . . (3) presentment of a check or other instrument of payment of a dividend, interest payment, or other distribution, or evidence of receipt of a distribution made by electronic or similar means, with respect to an account, underlying security, or interest in a business association; . . .”)

Illinois RUUPA, 765 ILCS 1026/15-210(b) (“Under this Act, an indication of an apparent owner’s interest in property includes: . . . (2) an oral communication by the apparent owner to the holder or agent of the holder concerning the property or the account in which the property is held, if the holder or its agent contemporaneously makes and preserves a record of the fact of the apparent owner’s communication; . . .”)

Illinois RUUPA, 765 ILCS 1026/15-210(b) (“Under this Act, an indication of an apparent owner’s interest in property includes: . . . (4) activity directed by an apparent owner in the account in which the property is held, including accessing the account or information concerning the account, or a direction by the apparent owner to increase, decrease, or otherwise change the amount or type of property held in the account; . . .”)

Illinois RUUPA, 765 ILCS 1026/15-210(f) (“If the apparent owner has another property with the holder to which Section 201(6) applies, then activity directed by an apparent owner in any other accounts, including loan accounts, at a financial organization holding an inactive account of the apparent owner shall be an indication of interest in all such accounts if: (A) the apparent owner engages in one or more of the following activities:

(i) the apparent owner undertakes one or more of the actions described in subsection (b) of this Section regarding any account that appears on a consolidated statement with the inactive account;

(ii) the apparent owner increases or decreases the amount of funds in any other account the apparent owner has with the financial organization; or

(iii) the apparent owner engages in any other relationship with the financial organization, including payment of any amounts due on a loan; and

(B) the foregoing apply so long as the mailing address for the apparent owner in the financial organization’s books and records is the same for both the inactive account and the active account.”)

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).”)

Illinois RUUPA Administrative Rules, 74 Ill. Adm. Code 760.200(c) (“Sections 15-202 and 15-203 of the Act indicate when ‘tax deferred’ accounts are presumptively abandoned. Section 15-202 prescribes the rules for tax deferred retirement accounts and Section 15-203 prescribes the rules for other tax deferred accounts. These rules for tax deferred accounts generally have longer periods of abandonment than accounts covered by Section 15-201 of the Act.”)

SECURE Act, Sec. 114, amending 26 USC 401(a)(9)(C)(i)(I) (“Section 401(a)(9)(C)(i)(I) of the Internal Revenue Code of 1986 is amended by striking ‘age 70½’ and inserting ‘age 72’.”)