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Keane's Unclaimed Property Blog

Tennessee Unclaimed Property Law Significantly Revised

Tennessee unclaimed property law is significantly revised as House Bill 420 was signed into law on May 25, 2017.

Revisions to Tennessee escheatment law include the reduction of dormancy periods for many property types from five to three years, dormancy trigger changes, and the introduction of new provisions for specific property types – including health savings accounts, custodial accounts and stored value cards.

Changes to Tennessee Unclaimed Property Dormancy Periods

The biggest changes to Tennessee unclaimed property law includes the reduction from five to three years in the dormancy periods for many property types.

Below are the new dormancy periods for these property types:

One Year

  • Wages, commissions, bonuses or reimbursements

Three Years

  • State and municipal bonds
  • Bearer bonds
  • Original issue discount bonds
  • Payroll cards or demands
  • Savings deposits
  • Time deposits
  • Store credit as a result of a retail business transaction
  • Life insurance policy and annuity contracts
  • Tax deferred pension and retirement accounts
  • Health savings accounts
  • Securities
  • All other property not specifically set forth in the new law

Five Years

  • Stored value cards

Indication of Owner Interest

The new law includes a listing of what may constitute owner interest in the property, which would reset the dormancy period. Indications of owner interest include:

  • Record of communication from the owner to the holder (written or oral)
  • Presentment of a check or other instrument of payment of a dividend, interest payment or other distribution
  • Increase or decrease in the property amount by the owner
  • Making a deposit or withdrawal from an account, other than an automatic reinvestment of dividends or interest
  • Any action that reasonably demonstrates that the owner is aware that the property exists

Tennessee Due Diligence Requirements

Holders of unclaimed property are required by Tennessee escheatment law to perform due diligence on any property where the value of that property is $50 or more. The new law requires holders to send notice to an apparent owner via first-class mail no more than 180 days and no less than 60 days before filing an unclaimed property report with Tennessee. This is a change from the previous 120/60 day rule.

However, if an owner has consented to receive electronic communications from the holder, notice must be sent by both first-class mail and electronic mail, unless the holder has reason to believe that the electronic address is invalid.

Additional Revisions to Tennessee Unclaimed Property Law

Life Insurance Property

Insurers are now required to comply with provisions from the Unclaimed Life Insurance Benefits Act and perform death master file (DMF) searches. Additionally, the dormancy period is now set at three years after the obligation to pay arose or, if the policy has not yet matured by proof of death, three years after the earlier of the date that the insurer received proof of death or the date that the insured reached, or would have reached, the limiting age under the mortality table off of which the policy was based.

Retirement Accounts

Property held in a pension account or tax deferred retirement account now has a dormancy period of three years after the date that a second communication was sent via first-class mail by the holder to the owner and which is returned as undelivered, or

  1. If the second mailing is sent later than thirty days after the first communication was returned undeliverable; or
  2. The earlier of the date the apparent owner turns 70.5, or
  3. If the Internal Revenue Code requires mandatory distribution, two years after the date the holder receives confirmation of the owner’s death.

However, if the apparent owner does not receive communications from the holder via first class mail, the holder must attempt to confirm owner interest in the property by sending an electronic communication no later than two years after the last indication of interest. If this communication is not received, or if the apparent owner does not respond within 30 days, the holder must attempt to contact the apparent owner via first class mail. If this mail is returned undelivered, the property is presumed abandoned 3 years after the later of:

  1. The date the second communication sent via first class mail is returned undelivered, or
  2. If the second communication is sent later than 30 days after the first is returned undelivered, the date the first communication was returned undelivered; or
  3. The date established in the section above.

Health Savings Accounts

Health savings accounts  are considered abandoned three years after the earlier of the date specified in income tax laws by which distribution must begin to avoid tax penalties, with no previous distributions having being made, or  30 years after the date the account was originally opened.

Custodial Accounts

Tennessee unclaimed property law now states that property held on behalf of a minor will be presumed abandoned if unclaimed  three years after the later of:

  1. The date a second communication sent by the holder via first class mail to the custodian is returned undelivered, or, if the second communication is sent later than 30 days after the first communication is returned undelivered, the date the first communication was returned undelivered; or
  2. The date on which the minor reaches the statutory age of majority. If the custodian does not receive communications from the holder via first class mail, the holder must attempt to confirm the custodian’s interest by sending an electronic mail communication not later than two years after the custodian’s last indication of interest.

If this communication is not received, or if the custodian does not respond within 30 days, the holder shall promptly attempt to contact the custodian via first class mail. If this mail is returned undelivered, the property is presumed abandoned 3 years after the later of:

  1. The date the second consecutive communication via first class mail is returned undelivered; or
  2. The date established above.

Stored Value Cards

Stored value cards now have a dormancy period of five years after the later of

  1. December 31st of the year that the card was issued,
  2. The date of the most recent indication of owner interest, or
  3. The date of the last balance verification made by an apparent owner.

Liquidation of Securities

The treasurer is now authorized under the new Tennessee escheatment law to sell or liquidate securities between 8 months and 1 year after receipt of the property and after notice has been sent to the property owner.

Estimation

The treasurer is directed to prescribe rules, procedures, and standards for an unclaimed property audit – including the requirements for use of estimation, extrapolation and statistical sampling during the examination period.

Record Retention

Holders of unclaimed property are required to retain their records for 10 years after an unclaimed report was filed or due to be filed.

Keane will be sure to provide the latest updates on our Unclaimed Property Blog for additional information regarding these changes to Tennessee Unclaimed Property Law as well as other industry news. We encourage you to subscribe to Keane’s Unclaimed Property Compliance Portal to stay informed on all legislation, along with access to various escheat compliance resources.

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