Successful unclaimed property compliance programs undertake multi-faceted approaches to find owners of unclaimed funds that may include proactive searches of life status along with other outreach programs. Insurance companies, financial institutions and other holders must follow not only industry specific laws and regulations (such as SEC Rule 17-Ad-17), but they must also actively monitor and comply with the ever-changing unclaimed property laws. A proactive search and review of the life status of owners and beneficiaries will preserve accounts from the escheatment process, thereby decreasing the reputational risk to the holder and the cost of escheatment, while increasing customer goodwill and potentially driving new business.
While there are no statutory requirements that force holders of banking or securities property to determine whether an owner is deceased, death can be a factor in triggering escheatment for some property types. For example, death is a trigger for ROTH IRAs in most states, and in some states, such as Illinois and Vermont, dormancy periods are accelerated for deceased owners of certain property types. In the states that have adopted a version of the 2016 Uniform Unclaimed Property Act (RUUPA), holders of IRAs, custodial accounts and securities must confirm death within 90 days from the receipt of notice or indication of death.Many states have also adopted a version of the Unclaimed Life Insurance Benefits Act, a model act proposed by the National Conference of Insurance Legislators (NCOIL), which requires life insurance companies to perform periodic searches of in-force life insurance policies, annuity contracts and retained asset accounts against the Death Master File (DMF), a national database of death records maintained by the Social Security Administration. If the insurance company finds a match, the insurance company has a period of time (usually 90 days) to document a good faith effort to verify death using a secondary source, determine if benefits are due, and if so, document a good faith effort to locate the owner or beneficiary and provide them with instructions on how to submit a claim.
While the DMF search requirements are not required of all holders, auditors have taken the approach that under audit, holders should bump their records against the DMF. If an account owner is found to be deceased, and there has been no contact with a beneficiary, the account is considered “lost,” which triggers escheatment.
Holders of property types including life insurance, pensions, annuities, disability payments and banking obligations, can therefore benefit from performing mortality searches.
The DMF is only one source of determining life status and it is important to note that the DMF that is put out by the National Technical Information Services (NTIS) is missing roughly half of actual deaths since 2013. Therefore, to help bridge that gap, holders may use additional methods to ascertain life status, including searches of obituaries, cemetery records, genealogy sites, and county probate records.
Mortality searches can help companies with both holder compliance and owner reunification efforts, not only as a fraud prevention measure, but as a tool to enhance search and outreach campaigns. As more states enact laws related to unclaimed life benefits, insurance carriers as well as other holders can benefit from a process that proactively and continuously performs mortality searches. Otherwise, the first that a company may learn of a customer’s death may be through an unclaimed property audit.
Contact MarketSphere to speak with our experts about the benefits of early owner outreach and the custom solutions that are available to assist your organization with meeting owner reunification goals.
*Content contained in this article is considered accurate as of the publish date.