State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.

Investment companies protest update to retirement accounts law

Written by Katie Meyer, Capitol Bureau Chief | Sep 14, 2016 1:53 AM

Now the state doesn't have to wait for people to be over 70 before assessing whether their retirement accounts are in use. (Photo by AP)

(Harrisburg) - A Pennsylvania law that took effect Saturday has investment companies calling foul.

The measure updates the state's unclaimed property law, allowing it to appropriate some dormant retirement accounts.

Previously, the state would only take control of dormant retirement accounts when the account holders reached age 70 ½. But now, the state can claim those accounts if they remain dormant for three years.

Scott Sloat, a spokesman for the state treasury, and said the change is aimed at making it easier for people to recover lost money.

For example: "Say, my wife would die, and she has retirement accounts that I'm not aware of," Sloat said. "Previous to this law change, the account holders would not have to make any effort to reach out to me and make me aware of the account. So what would happen is it would sit there for years and years and years."

Sloat said if the state wrongly declares an account dormant, its owner can always file a claim and recover the money.

But some financial institutions have a different take on the law's impact.

Tami Salmon is with the Investment Company Institute, a national investment trade organization. She said the three year dormancy rule makes it more likely accounts will be wrongly claimed by the state. And she says that sets people up to lose money.

"So if you realize you're the owner of the account, and you realize in five, ten, twenty years, the value of the account the state's going to give you is the value at the day they liquidate it," she said. "Your money gets locked at a point in time."

Salmon said the measure is just a way for the state to bulk its general fund.

Sloat called that claim "really outlandish," saying the funds generated wouldn't even make an impact.

Salmon said the Investment Company Institute and other groups plan to lobby against the law next session.

The law's language was written into and passed as part of the state's fiscal code, which passed in July.

Published in State House Sound Bites

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