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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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Insights from the NAST Symposium, Part 2

Posted By Contribution by Christa DeOliveira and Michael Unger, Thursday, July 11, 2019
Updated: Thursday, July 11, 2019

The National Association of State Treasurers’ (NAST) Annual Treasury Management Training Symposium held during May 2019 in Providence, Rhode Island, was engaging and enlightening. The National Association of Unclaimed Property Administrators (NAUPA) is affiliated with NAST and led the well-attended unclaimed property track of educational workshops and sessions. This blog post is part two in a series about the topics discussed in the symposium sessions. Read part one here.

 

Legislation 

Discussion about RUUPA-inspired legislation characterized it as not following a one-size-fits-all approach. Some jurisdictions, including Colorado, the District of Columbia and Vermont, have repealed their unclaimed property statutes and enacted new versions of RUUPA that have been largely modeled after the Uniform Law Commission’s version. Others, including Maine, South Carolina and Washington, introduced amended versions of RUUPA.

 

Still other states, including Minnesota, maintained their existing statute with expansive modifications incorporating RUUPA-like designs. These bills keep significant portions of current law, including examination of records, release and holder indemnifications, associated periods of limitation, and owner claims. They also add many amended RUUPA provisions. 

 

Another approach is to limited the scope of changes by keeping existing law and incorporating RUUPA-inspired provisions. Nevada took this approach, as most of the current law remains intact, but it proposes several dormancy periods like RUUPA, allows for electronic owner outreach under specified conditions, and makes some adjustments to included property types.

 

Direct payments to owners were dubbed as the ultimate outreach. This is where the state issues a payment to the owner in the absence of a claim. Naturally, states conducting this type of direct payment have certain criteria, such as comparing the address on reported property to the address on tax records (or other state/government databases), and the dollar value of the payment. Colorado enacted this option as part of its RUUPA bill and Florida has pending legislation related to state and local governments on specified small-value claims. California, District of Columbia, Maine and Vermont were also cited for considering similar pending bills.

 

South Dakota enacted a reduction in aggregate reporting from $50 down to $10. There was pending legislation to eliminate aggregate reporting altogether in Connecticut, Nebraska and Nevada.

 

Time limits on claims was a hot topic again at this year’s symposium. Georgia has enacted narrow “pure” escheat legislation to terminate an owner’s right to claim property for unclaimed excess proceeds from the sale of abandoned vehicles. Hawaii had two such bills that failed. S.B. 978 would have property with a value of less than $250 escheat to the state, if not claimed within five years. H.B. 1130 would have had property less than $100 automatically escheat to the state upon being reported and remitted. In both Hawaii bills, the owners’ property rights would be fully terminated.

 

Notably, participants expressed concern about enacting time limits on claims. It was described as bad policy and in contrast to the purpose of unclaimed property laws existing to protect the property rights of owners. The shift from the state assuming title, rather than a custodial role, may cause due process violations and be constitutionally problematic, according to the discussion. It was also noted GASB accounting rules already have provisions for setting up reserves for the amount expected to be claimed and taking the rest into income. Again this year, NAUPA discussed drafting a resolution about preserving owner rights to claim unclaimed property from states in perpetuity.

 

It was reported that, at the time of the symposium, DMF matching requirements exist in 33 states, in some form. Colorado, Kansas and Wyoming added this requirement since last year’s symposium, and there was pending legislation in California, D.C. and Massachusetts.

 

Litigation

Litigation was also discussed. Several cases related to disputes in holders producing records were noted: Texas v. ClubCorp Holdings Inc.Commonwealth, Treasury Department. v. PPL Corporation.Delaware, Department of Finance v. Univar Inc., and Univar Inc. v. Geisenberger. Current active cases discussed were: Faasse v. Coinbase Inc. as a cryptocurrency case; Weinbach v. Boeing Company as a case asserting wrongful escheat; and United Insurance Company of America v. Patronis, appealing a prior insurance ruling in Florida. 

 

Cases related to the treatment of class action proceeds were cited: McLeod v. Bank of America, N.A. and Rodriguez v. Danell Custom Harvesting, LLC, and Tennille et al. v. The Western Union Co. et al. Two qui tam (whistleblower) cases were touched on: Total Asset Recovery Services, LLC v. MetLife Inc. and Delaware ex rel. French v. Overstock.com Inc.         

 

More expansively, Kolton v. Frerichs and Goldberg v. Frerichs deal with not paying interest on claims. In Goldberg v. Frerichs, loss of the time value of money on property can be compensated for by giving owners the benefit of interim earnings. In Goldberg, the court cited an example of a rare coin being reported and remitted as unclaimed property. If the coin is sold, the owner loses out on the opportunity of appreciation. As such, it is insufficient to compensate the owner simply with the sale proceeds when the owner claims his property. Instead, upon claiming, the owner would be entitled to the earnings on the invested proceeds as the best substitute for the loss of appreciation. In the Goldberg case, the court made the caveat that low value properties may be treated differently and are most unlikely to be entitled to earn interest where the administrative cost exceeds the interest. In April 2019, the plaintiffs’ in Goldbergsought to renew a class certification; therefore, this litigation is ongoing.

 

Based on this case the following questions were raised in the session: Will this lead to other litigation? Will this ruling be constrained to the 7th Circuit? Will states change their unclaimed property statutes to proactively address questions about interest? If states do decide to determine what will qualify as the threshold for accounts where the interest exceeds the administrative costs to preserve the account? If new statutes on interest are enacted what proxy will be used to determine the time value of money?

 

Time Bars

Currently there is not uniformity amongst state laws regarding the period of time after which a state cannot enforce its unclaimed property law. Such time bars can encompass periods of limitation, statutes of limitation, periods of repose or lapsed periods of enforcement. 

 

The different approaches include a set number of years; the number of years contingent on filing or notice; a hybrid of both; a limitation based on years to be examined under audit; some other form of limitation; or no time bar limitation at all. Also, states enacting RUUPA have followed different approaches, including following RUUPA language, maintaining provisions in current law or following other approaches.

 

The various versions of the Uniform Law Commission’s Uniform Unclaimed Property Acts contain different time bars, with the 2016 version listing five years from the date of a report and 10 years if no report was filed. In the presentation, it was noted this approach was not required and, instead, this was promulgated as an accommodation to holders.

 

The session equated time bars to an all-encompassing reporting exemption. It was noted that time bars regularly do not receive the deliberation they merit when drafting or considering new unclaimed property legislation. Further, the importance of weighing public and private interests when setting a time bar was raised.

 

While NAUPA succeeded on many controversial issues, it did not prevail on the matter of time bars, according to the discussion. NAUPA recommendations to the Uniform Law Commission were discussed as being 10 years, generally, but 15 years for either nonreporting or underreporting. The caveat to this was that if the holder’s books and records showed acknowledged liabilities that are presumed unclaimed, even if they were reportable prior to the time bar, it would not qualify. NAUPA communicated to the ULC it strongly opposed the ULC time bar provision.

 

Panelists discussed with certainty that shorter and more absolute time bars will result in less property being collected. The following recommendations were made related to enacting or revising legislation: do not include a time bar, but rather address look backs administratively; if a time bar is included, follow the 1995 Act provisions or what NAUPA proposed to the ULC; at minimum, follow the 1981 Act of 10 years plus the corresponding dormancy period; and consider the lessons of matured, unpaid life insurance.

 

The NAST Symposium unclaimed property track included important insights on legislation, suggestions on drafting legislation, court cases and time bars. While the topics covered may not directly or indirectly impact all property type holders, it is worthwhile to remain aware of NAUPA developments. It is also important to be informed of opportunities to work together with states, where our expertise and needs are aligned, and we can share our respective unique expertise and insights, and related unclaimed property challenges or issues.  

 

More information on this symposium will be available in future blog posts.

 

Christina DeOliveira is chief compliance officer with Linking Assets Inc. Michael Unger is a senior manager with Crowe LLP’s unclaimed property practice. 

 

Tags:  legislation  litigation  NAST  NAUPA  time bars  unclaimed property 

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Insights from the NAST Symposium, Part 1

Posted By Contribution by Christa DeOliveira and Michael Unger, Wednesday, July 3, 2019
Updated: Tuesday, June 25, 2019

The National Association of State Treasurers’ (NAST) Annual Treasury Management Training Symposium held during May 2019 in Providence, Rhode Island, was engaging and enlightening. The National Association of Unclaimed Property Administrators (NAUPA) is affiliated with NAST and led the well-attended unclaimed property track of educational workshops and sessions. This blog post is part one in a series about the topics discussed in the symposium sessions.

 

NAUPA 3

Still under development, the NAUPA 3 format will use Extensible Markup Language (XML) to offer previously unavailable flexibility for the evolution of data fields/information reported and to accommodate state-specific requirements. NAUPA will create a standard suggested XML Schema Definition, with the understanding that states have different statutory, regulatory and administrative data reporting requirements. Therefore, states will modify the schema to fit specific reporting needs. While there will continue to be differences across states, having the state-specific schema will greatly assist transfer agents and other holders to appropriately program their systems and determine which data needs to incorporate into the report file. The schema will also provide a means for upfront data validation tools to be built. 

 

Although progress has slowed, the NAUPA 3 initiative has been both thoughtful and comprehensive. Originally anticipated for completion by the end of 2018, NAUPA 3’s introduction has been pushed back to the end of 2019. The format will likely be sent to NAUPA members for feedback on approximately August 1. Shortly thereafter, it will be shared with unclaimed property reporting software developers and the larger holder community. This will provide an opportunity for additional input and commentary. It remains to be seen how quickly state and holder systems can be programmed once the final format is determined.

 

After the new format is completed and presented to the holder community and software providers for feedback, there will be more necessary and time-consuming steps. Specific details on transitioning to NAUPA 3 on a state-by-state level, as well as the timeframe when old and new formats will be concurrently accepted, remain unknown. NAUPA anticipates encouraging states to accept both formats for about a year.

 

Strategic Plan

NAUPA’s 2018-22 strategic plan remains in effect. The association continues to make resolutions and policy position papers a goal. Previously, NAUPA determined a need for policy positions, and it plans to adopt official policy statements. On the short list is a paper backing the position that NAUPA does not support pure escheat where an owner’s rights are terminated. 

 

Combatting Fraud

States continue to share knowledge and best practices about processing claims and combatting fraud. Fraud detection and prevention methods include using identity verification and risk scoring tools to look for red flags. Such efforts may focus on specific email addresses, track IP addresses where claims originate and examine browser versions being used. 

 

Rapid completion of forms and use of all capital letters may raise red flags, as most claimants do not fill out forms quickly or use all caps. Analysis of online user habits continues to get smarter, but offenders are also getting more sophisticated. It is important that risk profiles and risk scoring continue to evolve.

 

What is an acceptable amount of fraud? Inserting enough friction in the unclaimed property claims process to stop all fraud could result in the costs outweighing the benefits. A tiered approach is advisable, such as under $50 and high dollar claims requiring different levels of scrutiny. With a layered approach, there is not a single solution. 

 

In practice, confirming the validity of uploaded documents is difficult. Sometimes employees lack sophistication on complex claims procedures, checklists and knowing when to ask for help. Claims processors can look for anything misplaced or unusual. Does the document exactly match itself? Are the fonts the same? Is it a copy of a website? Relying on more than one document provides more data points for substantiation and analysis. 

 

There can also be fraud in holder reporting. States rely on holders to report properly and to prevent fraud before property gets reported to states. For example, a holder paid with a fraudulent credit card and subsequently tried to file claims the next day. Such fraud can be prevented by waiting 10 days and ensuring full receipt of the payment remittance before making property available for claims via the state’s website.

 

To reduce the possibility of internal fraud, states can build processes, including segregation of duties, dual sign off, co-duties and steps to look for collusion. Rotating job functions, having clearly defined roles and verifying employees are performing only authorized duties also reduce risk.

 

Other Trends

Most states reported consistent year-over-year increase in property returned to claimants. 

 

More states are planning to transition to KAPS as their software system in part for online reporting features it offers for states and holders. Also, the KAPS system aids states in claims support, and some data validation tools assist streamlining.

 

Individual State Highlights

Highlights from the State of the States sessions included:

  • Wyoming raised awareness of its program to allow owners of property to donate property to charity instead of claiming property to have it returned.
  • Delaware reported that approximately 50% of holders invited to participate in the secretary of state’s VDA program have opted in.
  • The New Brunswick unclaimed property program establishment push is reportedly losing momentum. 
  • Kentucky announced it will be cleaning up RUUPA soon.
  • In addition to Washington assessing penalties, it will also be starting a self-audit program.
  • Illinois reports it is focusing on preneed funeral contracts.

 

The NAST Symposium unclaimed property track included important insights on priorities, trends and highlighted educational topics. While the topics covered may not directly or indirectly impact all property type holders, it is worthwhile to remain aware of NAUPA developments. It is also important to be informed of opportunities to work together with states, where our expertise and needs are aligned, and we can share our respective unique expertise and insights, and related unclaimed property challenges or issues. 

 

More information on this symposium will be available in future blog posts.

 

Christina DeOliveira is chief compliance officer with Linking Assets Inc. Michael Unger is a senior manager with Crowe LLP’s unclaimed property practice. 

Tags:  fraud  NAST  NAUPA  NAUPA 3  unclaimed property 

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Unclaimed Property News Roundup

Posted By Administration, Wednesday, June 26, 2019
Updated: Tuesday, June 25, 2019

Unclaimed property often makes news headlines beyond the frequent reports of states trying to return money to their citizens. Following is a recap of some recent stories getting news coverage from local and national media outlets. 

 

Boosting state budget with unclaimed funds generates controversy 

On June 10, 2019, the Colorado Sun published an article discussing the pros and cons of using the state’s Unclaimed Property Trust Fund to bolster the state’s budget. Advocates suggested that much of the property held in the trust will never be claimed, while opponents raised concerns about putting the state at risk later.  

 

Consumer learns about unclaimed property the hard way

Consumer advice columnists frequently advise readers to search state unclaimed property databases and claim their funds. However, a June 18, 2019, Cleveland Plains Dealer consumer article took a different approach to discussing unclaimed property. A reader sought help when she unsuccessfully tried to cash an $18,600 cashier’s check she had been holding for more 18 years only to find the funds were unavailable.

 

Scammers 

On May 14, 2019, WAFF 48 in Alabama warned viewers that scammers are using the promise of returning unclaimed property to extract cash from unwitting consumers. Although the story offered only a vague explanation of how the scheme works, it advised consumers to be suspicious of offers to return unclaimed funds after paying an upfront fee, which no state requires.

Tags:  budget  scam  uncashed checks  unclaimed property 

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Litigation Update: Delaware Supreme Court Rejects State’s Appeal

Posted By Administration, Thursday, June 20, 2019

On June 18, 2019, the state of Delaware took another hit in its battle with Univar. The latest rejection came from the Delaware Supreme Court, which denied acceptance of the state’s appeal of a May 2019 denial for interlocutory review by the state’s Chancery Court. 

 

In short, Delaware has been seeking enforcement of a subpoena for records requested by its unclaimed property auditor, Kelmar. The courts have consistently denied Delaware’s request, pending the outcome of litigation brought by Univar challenging the constitutionality of Delaware’s unclaimed property enforcement practices. 

 

“We agree that interlocutory review is not warranted in this case. The Court of Chancery exercised its discretion to stay litigation seeking enforcement of a subpoena issued under a statute that is the subject of federal constitutional challenges in federal court, and to avoid the potential for conflicting rulings and inefficiency,” the Delaware Supreme Court wrote in its decision to refuse Delaware’s appeal.

 

UPPO will continue to monitor and report on the Univar case as noteworthy developments occur.

Tags:  audits  Delaware  estimation  litigation  Univar 

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ERISA Advisory Council Plans Review of Unclaimed Property Practices

Posted By Administration, Thursday, June 13, 2019

The Advisory Council on Employee Welfare and Pension Benefit Plans recently announced it will study permissive transfers of uncashed checks from ERISA plans to state unclaimed property funds. Also known as the ERISA Advisory Council, the group’s purpose is to provide recommendations to the Department of Labor on matters related to Employee Retirement Income Security Act.

 

Many employee benefit plans have been established under ERISA. A common position for companies to take is that because federal law dictates how benefit plans should be administered under ERISA, states are preempted from claiming the money associated with those plans. 

 

Announcing its plans to study the issue, the advisory council wrote, “The department has consistently applied a broad view of ERISA preemption of state unclaimed property and escheat laws. However, that guidance does not limit the extent to which a plan representative may voluntarily transfer uncashed checks to a state unclaimed property fund. The 2019 Council’s objective is to review the treatment and procedures utilized by state unclaimed property funds, which may vary significantly between states.”

 

The council does not plan to address what steps are appropriate to locate missing plan participants. Rather, it intends to explore whether circumstances exist in which voluntary transfers of uncashed distribution checks to a state unclaimed property fund advances the Department of Labor’s goal of reuniting missing participants with their retirement savings. 

 

The ERISA Advisory Council is scheduled to take up this issue during its next meeting, scheduled for June 25-27, 2019. The council will accept public comments through June 18. 

 

 

 

 

Tags:  employee benefits  ERISA  retirement accounts 

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