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Unclaimed Property Focus
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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 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.

 

Christa 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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UPPO Advocacy Update: June 2019

Posted By Administration, Thursday, June 6, 2019
Updated: Thursday, June 6, 2019

To help members remain aware of UPPO’s advocacy activities, the Unclaimed Property Focus blog presents the recurring Advocacy Update when legislatures are active or significant advocacy activity has occurred. Following are recent activities and trends from UPPO’s Government Relations and Advocacy Committee (GRAC).

 

Most state legislatures have recessed or adjourned for the year, so the number of active unclaimed property bills has decreased. States are likely to continue introducing new RUUPA-inspired bills when legislatures reconvene next year. 

 

As mentioned in recent advocacy updates, many such bills include provisions related to contingency auditors, earlier liquidation of securities and subpoena rights. 

 

The expansion of state subpoena power is especially concerning. Providing appropriate data to states as part of the unclaimed property reporting process is essential. However, some data requests and subpoenas are overly broad, presenting privacy concerns for consumers and the holders with which they do business. In some cases, data turned over to states that should be protected may be made public if the state doesn’t exclude private information from Freedom of Information Act (FOIA) responses. UPPO will continue to oppose such legislation and encourages holders to challenge overly broad information requests and subpoenas.

 

During the legislative recess, GRAC and the Holders Coalition will continue to work on federal issues, including the Internal Revenue Service’s position on individual retirement account escheatment, the tax treatment of unclaimed 401(k) accounts highlighted by the recent GAO report, and the SECURE Act. GRAC also continues its work promoting introduction of a voluntary disclosure program in California

 

As more and more legislatures and regulatory agencies take on issues affecting unclaimed property compliance, advocacy has become an increasingly important role for UPPO.

Please take a few minutes to complete our 
Government Relations and Advocacy Survey to help us build our grassroots network. Responses will give us the ability to mobilize UPPO members when we are faced with legislative and regulatory challenges and opportunities.

 

 

Tags:  California  GAO  IRS  retirement accounts  SECURE Act  subpoena 

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