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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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Practical Insights and Deeper Dives Highlight Annual Conference Sessions

Posted By Administration, Wednesday, January 9, 2019

 

 

Unclaimed property continues to provide a maze of compliance challenges for the professionals charged with managing their companies’ escheatment responsibilities. This year’s UPPO Annual Conference agenda offers a wide variety of sessions designed to help navigate that maze and keep up with the latest trends.

 

Managing Relationships

If your company is using third-party agents for employee benefits, payroll, equity or other services, understanding the roles of each party and ensuring everyone is properly fulfilling their responsibilities is essential to the unclaimed property reporting process. The Managing Your Third-Party Administrator session will offer tips for managing this important relationship.

 

The Bridging the Gap session looks at another key relationship – the one between holders and the states. This session will help attendees gain insight into building positive relationships with state administrators and maintaining a compliance program that is mutually beneficial to the holder, the state and property owners.

 

Emerging Property and Account Types

Unclaimed property compliance involves much more than uncashed payroll checks and customer credits. Dive into the specific requirements and considerations for unique account types in the unclaimed property process during the Unique Accounts with Unique Requirements session. Attendees with explore developments related to traditional and nontraditional retirement/IRA accounts, beneficiary accounts, HSAs and FSAs, and the effects of linking activity between customer accounts. 

 

Another rapidly evolving area of unclaimed property compliance is the world of virtual currencies. The Virtual Reality, Real Unclaimed Property session will look at issues arising from virtual currencies, blockchain technologies and modern incentive programs. Attendees will get insight into regulatory changes and practical considerations related to cryptocurrencies, virtual wallets and customer loyalty programs. 

 

Audits and VDAs

Always hot topics, unclaimed property audits and voluntary disclosure agreements will take center stage in several sessions. 

 

Unclaimed property professionals who haven’t yet been fully exposed to the audit process can gain an understanding of the concepts, timelines and expectations at the Audit 101 session. This introduction to audits will explore the scope and methodologies used by states and their third-party auditors. 

 

Holders under examination or participating in a VDA may be subject to estimated liability. The Estimation Under Audits and VDAs session will explore estimation methodologies and considerations and examine how states differ in their estimation practices. 

 

With so many companies incorporated in Delaware, that state spends a lot of time in the unclaimed property spotlight, but other states can’t be neglected. The Non-Delaware Voluntary Compliance session will look at VDAs in other states and when an informal approach may be more beneficial than a formal VDA. 

 

Not all third-party auditors were created alike. In fact, their processes and procedures vary greatly. The Third-Party Auditor Differences session will walk through the many different document requests that holders can expect throughout the audit process and will examine conflicting auditor requests when under audit by multiple states using different firms. 

 

View complete details about educational sessions and other 2019 UPPO Annual Conference events. The early-bird registration deadline is Jan. 28, so register today for the best rate.

 

 

 

 

 

Tags:  audits  cryptocurrency  IRAs  state administrators  TPAs  UPPO Annual Conference  VDAs  virtual currency 

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UPPO seeks clarification about Pennsylvania’s due diligence and IRA provisions

Posted By Administration, Thursday, October 6, 2016

On July 13, 2016, Pennsylvania Gov. Tom Wolf signed H.B. 1605 into law. The massive bill revises the commonwealth’s Fiscal Code, including its unclaimed property program. Among H.B. 1605’s unclaimed property provisions are requirements for conducting due diligence and escheating Individual Retirement Accounts (IRAs). Unfortunately, the law’s language is causing confusion for unclaimed property holders. In an effort to gain clarity, UPPO submitted a letter to Treasurer Timothy Reese and legislative leaders on Sept. 22, 2016.

 

Due Diligence

One of the new statutory provisions imposed by H.B. 1605, Section 1301.10A, requires holders to perform due diligence for property valued at $50 or more when the holder’s records do not disclose the owner’s address to be inaccurate. The statute specifies that holders must send written notice by first class mail, “unless the owner has previously agreed to a method of electronic notice that remains valid to contact the owner.”

 

The statute’s wording opens the door to multiple interpretations. It is unclear whether an owner’s agreement to receive electronic notices triggers a requirement for the holder to use electronic communication or merely gives the holder the option to choose either first class mail or electronic communication.

 

The due diligence provision also fails to specify what constitutes owner agreement to receive electronic communication. It fails to define whether the owner’s request to receive any type of communication from the holder is sufficient or if the agreement must specifically include due diligence notices. Similarly, it causes confusion for holders who have received consent to send specific types of communication via one method (tax forms by mail, for example) and other types of communication via another (i.e., general account information by email). 

 

IRA Distributions

Under federal law, IRA owners are allowed to take account distributions beginning at age 59 ½ without penalties and are required to take account distributions beginning at age 70 ½. If they choose to take distributions before 59 ½, they are subject to an additional 10 percent “early distribution” tax (with some well-defined exceptions).

 

Section 1301.8(2) of H.B. 1605 suggests that IRAs could be reportable to Pennsylvania regardless of the owner’s age. This could trigger the 10 percent early distribution penalty for owners under the age of 59 ½. Because the Internal Revenue Service has not addressed whether unclaimed property reporting of an IRA owned by someone younger than 59 ½ triggers the early distribution tax, the change to Pennsylvania’s law could lead to several unintended risks for IRA owners and custodians, including:

  • The incorrect application of taxable income reporting.
  • Tax withholding and overall tax liability computation.
  • Long-term loss of compounded interest earned on account balances.
  • Long-term loss of the accrued value of reinvested dividends no longer accruing on accounts.
  • General interference with the long-term retirement investing goals of individuals who often use IRAs as passive, long-term investments with no expectation of the need to access the funds prior to retirement.

In its comments, UPPO encouraged Pennsylvania officials to consider the potential negative tax consequences of the unclaimed property provisions on the commonwealth’s residents and questioned whether the state has the authority to subject residents to such consequences.

 

Federal Preemption

The new IRA dormancy standard in H.B. 1605 also may conflict with federal law governing the creation, control and tax treatment of such accounts. UPPO points out that the tax implications from IRA distributions required by the new law contradict Congress’ intent to provide a clearly defined and heavily regulated tax benefit to retirees. Thus, the state’s unclaimed property law would violate the Constitution’s Supremacy Clause, which establishes that federal law takes precedent.

 

Pennsylvania Law Inconsistency

In addition to the apparent conflict with federal law, H.B. 1605’s IRA provisions seems to conflict with Pennsylvania’s own unclaimed property principles. UPPO writes, “The Pennsylvania Disposition of Abandoned and Unclaimed Property is founded on the premise that the Commonwealth may take custody of property that is ‘payable or distributable’ to an owner, but which the owner has abandoned or neglected to claim. The change implemented by H.B. 1605 permits the Commonwealth to take custody of assets that are not ‘payable or distributable,’ and ignores whether the owner has truly abandoned the property or not. Thus, the legislation crosses over the threshold of taking custody, and acts instead to confiscate the assets of Pennsylvania residents.”

 

A spokesperson for Pennsylvania’s Treasury Department told The Wall Street Journal that the dormancy standard was aimed at protecting retirement account beneficiaries, allowing them to access IRA accounts when the owner died before the mandatory IRA distribution age. The wording of the new IRA dormancy provision, however, is overly broad for that intent.

 

UPPO hopes to receive clarity regarding these issues soon. We will update membership via the blog with news and developments related to the UPPO letter or these regulations. View UPPO’s letter.

 

 

Tags:  compliance  due diligence  IRAs  Pennsylvania  unclaimed property 

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