On live, when a (SteamVR/Index) controller loses tracking, it is meant to freeze in place, however this has been broken since the IK beta and the controllers' position changes to the center of the playspace (this also happens to trackers that disconnect/reconnect after being frozen, canny https://feedback.vrchat.com/bug-reports/p/devices-that-lose-tracking-may-teleport-to-the-center-of-the-playspace).
On the beta, controllers that lose tracking behave as if they disconnected, the arm moves to your side (or is animated), previously this behavior was primarily observed on Quest controllers but now it affects all controllers.
Beta: https://youtu.be/SxX3xe1Suyg (unfortunately I didn't have a mirror up to show the arm to my side, but you can just barely see skin indicating my hand is posed to my side).