Ask the Experts: Uncashed Claim Checks

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Question: Our company’s group medical plan is self-funded (uninsured). What is our responsibility when we pay a claim but the payee never cashes it? We cannot locate the payee. Do we have to escheat the money to the state?

Answer: Various states have “unclaimed property laws” which may lead to amounts from uncashed checks escheating to the state after a period of time. With respect to self-funded group health plans, however, such state laws generally are preempted by the Employee Retirement Income Security Act (ERISA). ERISA governs employee benefit plans sponsored by employers (other than governmental employers or certain church plans). In other words, if the self-funded plan is sponsored by a private-sector employer, ERISA preempts the state law.

In an ERISA plan, an uncashed check is a plan asset and must be handled in accordance with the plan document. Uncashed checks often are referred to as “unclaimed benefit payments.” The plan’s forfeiture provision should give the plan administrator (employer) discretion to use forfeited funds to defray plan administration expenses or for the benefit of current plan participants. For example, many plan documents include language similar to the following: “Benefit payments made by check must be cashed within one year of issue. If a benefit payment check is not presented for payment within one year of issue, the Plan will have no liability for the benefit payment and the amount of the check will be deemed a forfeiture.”

The one-year timeframe is not required by law, but it is the norm for self-funded health plans. Some plans include further language, such as “No funds will escheat to any state,” although the absence of that language would not cause escheatment.

In summary, provided the self-funded plan document gives the plan administrator discretion in using forfeited funds and the plan made reasonable attempts to locate the claimants when the claims were paid originally, there is no requirement to turn the funds over to the state nor to reissue the checks years later.

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About Kathleen A. Berger, CEBS

Kathy Berger is ThinkHR’s principal benefits consultant. She is a Certified Employee Benefits Specialist (CEBS) with over 25 years of experience working with brokers and employers. Kathy uses her extensive knowledge of ERISA, HIPAA, the ACA, and other benefits laws and regulations to assist our clients with practical information in clear language.

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