Senate Bill S3512

                                 BILL NUMBER:  S3512

 TITLE OF BILL :
An act to amend the education law, in relation to the mandated payment
of unclaimed funds in the amount of one thousand dollars or less

 PURPOSE :
This bill would authorize the Retirement Board of the New York State
Teachers' Retirement System to promulgate rules and regulations
allowing for the mandated distribution of unclaimed funds in the
amount of $1000 or less.

 SUMMARY OF PROVISIONS :
Internal Revenue Code §401(a)(31) which governs roll-over
distributions from qualified retirement plans, such as the System,
allows for mandated distributions to participants or beneficiaries of
amounts not exceeding $1000. Unfortunately, no current provision of
law allows the System to implement the mandated distributions of such
unclaimed amounts. This bill would give the System authority to
mandate distributions of amounts not exceeding $1000.

 JUSTIFICATION :
Under current law, if an amount due a former member is not claimed
after 7 years of non-service or 7 years following withdrawal from
service, or if an amount due a beneficiary is not claimed after 7
years from when the beneficiary became entitled to the benefit, the
              

System may only send a notice to the former member or beneficiary
advising that the unclaimed amount will be deemed abandoned if not
claimed within one year after the date of the notice. Even after the
funds have been deemed abandoned and transferred to the System's
pension accumulation fund, the former member or beneficiary still has
the right to claim the funds.  The difficulty with current law is that
the System must wait until a former member or beneficiary takes
affirmative steps to claim the funds in question, even in cases where
the System knows where the former member or beneficiary resides or can
be found. This statutorily mandated passive role forces the System to
incur costs and administrative time in keeping track of the unclaimed
funds and satisfying the provisions of law relating to the abandoned
funds, long after the persons entitled to the funds should properly
have claimed them. The claimants gain no advantage by not claiming the
funds due them and, in effect, forcing the System to retain them,
inasmuch as no interest is paid on the unclaimed funds.  The System,
as well as participating employers and members and retirees generally,
would benefit if the System was able to mandate the distribution of
amounts of $1000 or less as permitted by IRC §401(a)(31). Allowing for
mandated distributions would relieve the System of the administrative
burdens of keeping track of small amounts in cases where the System
has a way of finding the claimants.  Such a procedure would, in the
end, very likely also benefit the claimants themselves who currently
fail for whatever reason to ask for funds due them.

 PRIOR LEGISLATIVE HISTORY :
None.

 FISCAL IMPLICATIONS :
This bill would amend Section 531 of the Education Law to authorize
the Retirement Board of the New York State Teachers' Retirement System
to promulgate rules and regulations allowing for the mandated
distribution of unclaimed funds in the amount of $1,000 or less.  The
annual cost to the employers of members of the New York State
Teachers' Retirement System is estimated to be negligible if this bill
is enacted.  The source of this estimate is Fiscal Note 2009-6 dated
October 15, 2008 prepared by the Actuary of the New York State
Teachers' Retirement System and is intended for use only during the
2009 Legislative Session

 EFFECTIVE DATE :
The act would take effect immediately.