Now that Health Savings Accounts have been around a few years, do you treat a dormant H S A the same as a regular savings account? For instance the rules for our state is a savings account is considered dormant after 3 years of inactivity.

Dormancy is generally a matter of bank policy and abandonment is governed by state law.

Descriptions of property under state law generally focus on the type of investment, not the holder; e.g. the states I'm familiar with don't make distinctions based on the fact that a deposit is held in an IRA. I don't know why they would treat an HSA held time deposit or savings account differently.

This is a good question that I unfortunately do not know the answer to. I know that with regards to IRA accounts some states do not start the escheatment clock until the IRA owner attains the age to begin mandatory distributions. Unless your state has specifically stated that HSAs will fall under the same escheatement rules as retirement accounts I would assume they would be treated the same way as any other non-retirement account.

I would make sure that my policies and procedures clearly differentiate an "inactive" account from a "dormant" account subject to escheat. If I have no activity, but you haven't lost touch with me, my account should not be escheated to the State.

Regardless of the type of account, if you can't contact me, my account should be treated as dormant and fall under additional safeguards. Our prior auditors used a 90-day rule. Returned mail + no activity in 90 days meant the account had to be coded as dormant.

Brenda, is this your bank's definition of dormant? returned mail + no activity in 90 days? Or do other scenarios fall into the dormant bucket too?

In addition it was defined as no activity for 1 year on a transaction account and 2 years on a savings or MMDA. Our system didn't differentiate between "inactive" and "dormant", so we had to go straight to dormant. Once we confirmed we had lost contact with the customer, the account status was changed to "escheat" for tracking through the escheat date.