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What is Escheatment Law?
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Workforce Management

What is Escheatment Law?

One Minute Takeaway

  • Escheatment is when an asset goes unclaimed and must be turned over to state government.
  • Each state has their own rules on how long it takes for unclaimed funds to become escheated.
  • If a 401(k) or other contribution plan is never cashed out, it could be escheated after a state audit.

Paying employees can be complicated. Payroll managers and HR teams know even small errors are costly, so every decimal point needs to be in the right place. For example, after running payroll and sending salaries to employees, you might think your work is done. But what happens if an employee doesn’t accept the money? It happens more often than you might expect.

What is Escheatment?

Escheatment is when an asset is unclaimed for a certain length of time, and must be turned over to state government. This doesn’t only happen to employee pay—dormant bank accounts, forgotten shares or uncashed dividend payments are all at risk. Escheatment also happens when someone dies with no identifiable heirs.

Once an asset has been escheated, the rightful owner or intended recipient must make a claim to the state to reclaim what is rightfully theirs. Each state has their own rules on how long it takes for unclaimed funds to become escheated, which vary depending on what sort of assets they are.

States are always looking for more revenue and may audit businesses to identify any unclaimed property. Beware: the state law that applies depends on an employee’s last known address, even if that’s not where your company is located.

What to Do If an Employee Doesn’t Cash Their Paycheck

There are plenty of reasons an employee’s pay might become escheated. Most commonly, they simply forget to cash their check. Or, the check never got to them in the first place. An employee might’ve changed address without letting their company know. An employee might even choose not to collect their paycheck, if they are departing on bad terms and want to avoid visiting the workplace one last time. 

This isn’t just unfortunate—your business must take action. Here’s what you can do:

  1. Contact employees to remind them to cash their checks. You may be required to send a certified written notice to the employee’s last known address
  2. If a paycheck isn’t successfully delivered, do your best to find the employee’s current address
  3. Report the unclaimed check to state officials
  4. File an annual report listing all unclaimed pay, the name and last known address of the payee, and the date of your last contact with them
  5. After a specified length of time, deliver the relevant sum to the state
  6. If the employee contacts you after their pay has become escheated, instruct them to contact the relevant state

These procedures only apply if a check is over a certain amount. Read up on relevant state rules. Businesses who don’t report unclaimed pay face financial penalties. NB: even if a paycheck goes unclaimed, you’re still required to withhold and report all relevant payroll taxes.

Watch out for unclaimed assets belonging to former employees. If a 401(k) or other contribution plan is never cashed out, it could be escheated after a state audit. To avoid this situation, when you do hold assets belonging to a former employee, keep track of their contact details and address.

Escheatment Laws by State

To help employers, Paycor has compiled a chart of state laws on escheatment.

The length of time listed is how long it takes before unclaimed funds count as escheat. In some states, the figure listed may differ in certain circumstances. Consult state law for specific regulations on the escheatment process and guidelines on what actions businesses are required to take.

State ChecksWages/SalariesBank Accounts
Alabama3 Years1 Year3 Years
Alaska 5 Years1 Year5 Years
Arizona 3 Years1 Year3 Years
Arkansas 3 Years1 Year3 Years
California  3 Years1 Year3 Years
Colorado5 Years1 Year5 Years
Connecticut3 Years1 Year3 Years
Delaware 5 Years5 Years5 Years
Washington D.C.3 Years1 Year3 Years
Florida 5 Years1 Year5 Years
Georgia 5 Years1 Year5 Years
Hawaii 5 Years1 Year5 Years
Idaho 5 Years1 Year5 Years
Illinois 3 Years1 Year3 Years
Indiana 3 Years1 Year3 Years
Iowa 3 Years1 Year3 Years
Kansas 5 Years1 Year5 Years
Kentucky 3 Years1 Year3 Years
Louisiana 5 Years1 Year5 Years
Maine 3 Years1 Year3 Years
Maryland 3 Years3 Years3 Years
Massachusetts 3 Years3 Years3 Years
Michigan 3 Years1 Year3 Years
Minnesota 3 Years1 Year3 Years
Mississippi 5 Years5 Years5 Years
Missouri 5 Years3 Years5 Years
Montana 5 Years1 Year5 Years
Nebraska 5 Years1 Year5 Years
Nevada 3 Years1 Year3 Years
New Hampshire 5 Years1 Year5 Years
New Jersey 3 Years1 Year3 Years
New Mexico 5 Years1 Year5 Years
New York 3 Years1 Year3 Years
North Carolina5 (or 7) Years1 Year5 Years
North Dakota 2 Years2 Years5 Years
Ohio 5 Years1 Year5 Years
Oklahoma 5 Years1 Year5 Years
Oregon 3 Years3 Years3 Years
Pennsylvania 3 Years2 Years3 Years
Rhode Island3 Years1 Year3 Years
South Carolina 5 Years1 Year5 Years
South Dakota 3 Years1 Year3 Years
Tennessee 3 Years1 Year3 Years
Texas 3 Years1 Year3 Years
Utah 3 Years1 Year3 Years
Vermont 3 Years1 Year3 Years
Virginia 5 years1 Year5 years
Washington 3 years1 Year3 Years
West Virginia 5 Years1 Year5 Years
Wisconsin 5 Years1 Year5 Years
Wyoming 5 Years1 Year5 Years

How Paycor Helps

Paycor builds HR solutions for leaders. With Paycor, you can modernize every aspect of people management, from the way you recruit, onboard and develop your team, to the way you pay and retain them.

Paycor is not a legal, tax, benefit, accounting or investment advisor. All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions.