Most investors are aware that to balance the books most states need new sources of income. Now PENNSYLVANIA is using enhanced Escheatment laws to go after its resident’s savings and IRA accounts.
During a budget meeting in July, Pennsylvania legislators moved swiftly to amend a law about unclaimed assets in the state. This law officially aims to simplify the reclamation of lost or unclaimed assets, but critics suggest it is simply an attempt to rob people of various retirement savings accounts, including 401(K) accounts and IRAs.
This new amendment relies on the state government’s power of escheatment, or asset reclamation, to collect revenue on the behalf of individuals. In theory, the Pennsylvanian government has greater information and resources to collect unclaimed assets than financial firms. While this is true, recent statistics do not suggest that escheatment laws are reuniting individuals with their unclaimed assets. According to the National Association of Unclaimed Property Administrators, only one-third of $40 million collected by the Pennsylvania government since 2011 was returned to citizens. Before the amendment was passed in July, retirement accounts were exempt from escheatment laws.
The state government can legally seize any retirement savings accounts from people who have not contributed to retirement funds in three years or more, so a large portion of Pennsylvanians can suffer financial losses from this amendment. To make matters worse for savers, the interest rates and dividends on seized savings accounts are frozen until the owner reclaims their assets.