While most employees are living paycheck to paycheck, there are reasons why funds will sometimes sit in your company’s bank account long after payday – and now, state laws about reporting unclaimed property are changing.
Let’s say someone misplaces a paper check, or a former employee closes a bank account you’ve been using for direct deposit. You may have unclaimed property on your hands.
Each state has its own laws about how long you can wait to report and turn over the money.
But here’s a new development: Several state legislatures are looking into updating their laws.
That’s because a new standardized law now exists. States can choose to adopt the Revised Uniform Unclaimed Property Act (RUUPA).
In fact, Delaware and Utah have already enacted the law. Get ready: Four states introduced the law this year. They are Illinois, Minnesota, Nebraska and Tennessee.
Even if your state doesn’t adopt the RUUPA, you still need to understand the law so you can figure out which state has the rights to the funds.
When the clock starts ticking
First, the law covers wages, commissions, bonuses and other compensation, giving you one year until the property is considered abandoned. Set the clock for longer – three years – for payroll cards.
Important: You shouldn’t consider property abandoned if an employee shows an interest in the property during the dormancy period.
The law relies on the holder’s records – for example, what’s in your payroll system – to determine someone’s last-known address and, therefore, the state of custody.
If the records are incomplete, or in other situations, you’ll need to consider where your business is incorporated – or additional factors.
The RUUPA spells out that you can use electronic communication when you notify the employee and send a report to the state.
Also, the notice must contain certain details, such as a deadline for the employee to respond before you’ll send the unclaimed wages to the state.