Discovering an uncashed rollover or distribution check from a 401(k) plan is not that uncommon an experience. If you relocated, for example, a check may simply have gotten lost in the confusion, only to be uncovered again months or years later. As long as it hasn’t already been replaced, the issuer must honor it, regardless of its age. Banking regulations in every state require banks to honor checks for six months past their date. Checks presented for payment more than six months past the date on the check are considered stale or stale-dated. The banks on which they are drawn may pay them, but are under no obligation to do so. However, a check’s expiration doesn't terminate the issuer’s obligation to pay you the money. If you come across an old check from a 401(k) or any other business, even if it’s very old, you can generally recover the funds.
If the check was written to transfer the funds in the 401(k) to another retirement account, bring the check to the plan administrator or bank and let them take care of it. Depositing the check into your personal account will likely trigger some substantial -- and avoidable -- tax consequences.
Depositing a Stale Check
If the check is not a rollover, but is a refund of an overpayment or a regular benefit payment, depositing it to your bank account to see what happens may turn out to be a costly exercise. If the bank returns it unpaid, it will probably charge a returned-item fee. In addition, your bank will reverse the amount credited to your account when you deposited the item. If your account falls into overdraft status as a result, you may incur an overdraft fee. In addition, there may be a ripple effect with other checks you have issued, resulting in additional fees and costs. If you have a stale check, it’s better to contact the issuer – the 401(k) – and ask for a replacement.
Recovering Your Funds
Just because you didn’t deposit a check while it was still fresh doesn’t mean you’ve forfeited your money. The check represents the 401(k)’s obligation to you, and that obligation isn’t erased by the passage of time. The business carries that obligation on its books until the check is presented for payment. Even if the check expires, the liability remains on the books. The 401(k) cannot, at some point, just write off the liability and re-assume ownership of the funds. If you discover an old check from a 401(k), contact the issuer, explain the situation, and request a replacement.
The 401(k) won’t hold on to your funds in perpetuity. After some period -- as little as one to three years in some states – unclaimed funds must be turned over to the state. Even if this has happened, you can still recover your money, although it’s going to take more time, effort and documentation to do so. There is no time limit on recovering funds turned over to a state’s unclaimed property office – even if a check’s payee has passed away, for example, the heirs can still recover the funds.
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