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T. Rowe Price Amends Its Policy Regarding Abandoned Property

edited November 26 in Off-Topic
Just received linked document from Price. At a glance it looks somewhat foreboding. However, suspect they are simply clarifying where they stand when it comes to existing state laws. Anybody have the legal training to decipher all this? Is there any uniformity in state laws per abandonment or are there markedly different laws by state?

While I deal with others, most of the “action” takes place at T. Rowe. The thought of accidental “abandonment” with them is pretty remote. On the other hand, have an account directly with PRPFX that I never touch. I inquired of them once about abandoned property concerns. They replied that simply logging-in once yearly to the account is adequate in that regard.

https://www.troweprice.com/content/dam/iinvestor/retirement/ira/update-to-disclosure-statement-and-custodial-agreement.pdf?cid=PI_IRA_Ascheatment_4th_waves_EM_201911 &bid=291293824&PlacementGUID=em_PI_PI_IRA_Ascheatment_Compliance_201911-PI_IRA_Ascheatment_4th_waves_EM_201911 _20191126

Comments

  • I have heard the same thing about logging into one's account. Matthews Asia has a requirement to log into more frequently (every 3 or 6 months) to keep your password active. Participating in proxy voting on issues will also suffice.
  • Just a guess, and definitely not legal advice ...

    I got the same notice, and have a few takeaways from it:

    1. As far as T. Rowe Price is concerned, an escheatment from an IRA constitutes a distribution. No surprise there: "When an IRA escheats to a state, the IRA administrator must report the escheatment as a taxable distribution to the IRA owner on Form 1099-R."
    http://news.cchgroup.com/2019/01/02/ira-escheat-reporting-withholding-form-1099-r/

    2. Since Price views the escheatment as a distribution, it will withhold 10% for federal taxes and whatever your state mandates.
    The IRS recently issued Revenue Ruling 2018-17, which provides that if the trustee or custodian of an IRA turns over the IRA to a state as unclaimed property, two things must occur:
    • Federal income taxes of 10 percent must be withheld from the amount paid to the state.
    • The trustee or custodian is required to report the escheated amount to the IRS, on a Form 1099-R, as a taxable distribution from the IRA to the owner of the IRA, even though the amount in the IRA was paid to the state and not to the IRA owner.
    The IRS ruling states that an IRA trustee or custodian must comply with the withholding and reporting obligations in the ruling by the earlier of Jan. 1, 2019, or “the date it becomes reasonably practicable . . . to comply with those requirements.”
    Law360 article at: https://www.blankrome.com/publications/irs-delivers-double-whammy-owners-escheated-iras

    3. Such withholding may require T. Rowe Price to liquidate securities. If it does so, it is not acting in a fiduciary capacity (just a ministerial one). Further, it may wind up liquidating more than necessary for withholding simply because of market fluctuations.

    With respect to staying in contact with your financial institution: I'm dubious about logging in being sufficient. That could be the result of an automated aggregator and not represent any actual contact you had with the institution. Still, each place sets its own requirements for what it considers sufficient contact. Just make sure that you do at least what your institution requires, whatever that is.
  • edited November 26
    Thanks @msf. Much clearer.

    (1) I guess if I were already dead I wouldn’t worry much about the 10% withholding tax.

    (2) If, on the other hand, I were only presumed dead (and having abandoned my TRP accounts), there’d be bigger issues to worry about than the tax hit.

    With respect to staying in contact with your financial institution: I'm dubious about logging in being sufficient. That could be the result of an automated aggregator and not represent any actual contact you had with the institution. Still, each place sets its own requirements for what it considers sufficient contact. Just make sure that you do at least what your institution requires, whatever that is.

    Yep - The only one I really worry about is PRPFX. Other than a convert to Roth 4 years ago there’s been no reason to do anything, although I log in twice a year. Probably a good idea to ring their phone every 3 years with the same question. (Reminiscent of “Groundhog Day.”)
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