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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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Advocacy Update

Posted By Administration, Thursday, July 2, 2020

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).

 

Retirement Account Dormancy

With the COVID-19 pandemic disrupting so many areas of our lives in the past few months, it’s little surprise that it has led to complications related to unclaimed property. Passed last year, the SECURE Act changed the required minimum distribution date for individual retirement accounts from 70.5 to 72. The CARES Act, designed to ease the economic impact of the pandemic, waives the required minimum distribution for 2020. Because the required minimum distribution date may begin the unclaimed property dormancy period, holders are affected. GRAC is currently developing questions for holders to use when working with states to respond appropriately to this issue.

 

Certified Mail

Because some states have included language in their RUUPA bills requiring certified mail to be used for due diligence letters, GRAC is developing a position paper for UPPO expressing its objection to a certified mail requirement. However, should language be included in a RUUPA bill, UPPO’s position is to specify certified mail receipt cards be accepted as a form of contact, regardless of who signed the cards.

 

Savings Account Language

GRAC is also drafting recommended language to provide states that introduce RUUPA bills using incorrect language to address the treatment of Demand Deposit accounts versus standard savings accounts, which has become a trend.

 

Unclaimed Savings Bonds

Over the past several years, states have battled with the U.S. Treasury over unredeemed U.S. savings bonds. Kansas State Treasurer Jake LaTurner led the state charge in the courts, arguing that proceeds from matured, unredeemed bonds should be turned over to the states. Last year, a federal appeals court ruled the Treasury is not required to do so. The plaintiffs are asking the U.S. Supreme Court to review the case. GRAC is reviewing the case to evaluate whether it is appropriate for UPPO to draft an amicus brief, taking a position on this issue.

 

Positive Legislation

Ohio HB 270, the Unclaimed Funds Reform Act, is moving quickly, having passed the House and under consideration in the Senate. Among other things, the bill would clarify the treatment of auto-renewing certificates of deposit.

 

Tennessee SB 1634 was signed into law by the governor on June 22, 2020. The bill increases the time before the state treasurer liquidates securities from “eight months to a year” to “32 to 36 months.” 

 

Reporting in California

California normally required unclaimed property reports to be filed via CD and paperwork. The state is now allowing holders to send reports via FTP. However, to take advantage of this process, holders first need to request permission. Contact the California State Controller’s Office for details.

Tags:  Advocacy  dormancy  due diligence  IRAs  unclaimed property 

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Court Rules California Unclaimed Property Guidance Are Invalid Regulations

Posted By Administration, Thursday, September 6, 2018

Judge Harold Kahn with the California Superior Court in San Francisco ruled two California unclaimed property regulations invalid on July 18, 2018, saying the state controller had improperly adopted them. 

 

According to the court order granting summary judgment in the case of Thrivent Financial for Lutherans v. Betty T. Yee, et al., Case No. CGC-15-548384, the California controller imposed two pieces of “guidance” as regulations without following state requirements for adopting regulations.

  • The state’s “External Database Regulation” required life insurers to compare its insureds’ life insurance policies or other records against the Social Security Administration’s Death Master File or similar database to determine whether any insureds were deceased in order to comply with California Unclaimed Property Law obligations.
  • The “Dormancy Trigger Regulation” required that a life insurance policy is reportable as unclaimed property under the California Unclaimed Property Law no later than three years after the insured had died, even if less than three years had elapsed since the insurer’s records disclosed that the insured had died. 

The regulations appeared in the September 2013 Holder Handbook, issued by the controller’s office. Insurer Thrivent Financial filed suit in 2015, arguing that they were improperly adopted. Defendant Betty Yee, in her role as California controller, responded that the Holder Handbook was intended to provide best practices and was not intended as regulations.

 

The court disagreed with the defendant and ordered the controller’s office to remove reference to the regulations from any materials it disseminates to life insurance companies “unless accompanied by a conspicuous disclaimer that the purported requirements of the two regulations are merely defendants’ views and do not have any legal effect.”

 

The ruling also allows the defendant to take steps to comply with the state’s Administrative Procedure Act in order to properly enact the regulations. 

 

In addition to the immediate effect on life insurers complying with California laws, the ruling raises issues about guidance published by other state and federal agencies. Treatment of such guidance as requirements rather than informal opinions could be problematic, and could be subject to scrutiny as a result of the Thrivent decision. 

Tags:  California  dormancy  life insurance  litigation  thrivent financial 

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State legislatures consider dormancy period changes

Posted By Administration, Tuesday, May 10, 2016

As many state legislative sessions continue, one of the continued trends affecting unclaimed property professionals is a movement to change dormancy periods. Bills in Connecticut, Pennsylvania and Illinois seek to either extend or decrease the dormancy period for specific property types.

 

“Bills that increase the dormancy periods on certain types of property held by financial institutions recognize that, with regard to certain types of accounts, owners need more time before their funds are remitted to states as unclaimed property,” says Karen Anderson, vice president, reporting compliance at Keane and co-chair of UPPO’s government relations and advocacy committee. “Many consumers ‘set and forget’ these accounts intentionally, and the intentions of consumers must be balanced against the state’s interests in trying to protect them.”

 

Connecticut

The Connecticut House of Representatives is considering H.B. 5533, which would extend the dormancy period for funds held by a bank or financial institution from three years to seven years. The bill was assigned to the Joint Committee on Finance, Revenue and Bonding on April 19 and awaits action.

 

Pennsylvania

In Pennsylvania, H.B. 2005 would amend the state’s Unclaimed Property Law, extending the dormancy period from three years to seven years for demand, savings or matured time deposits in a financial institution and funds paid toward the purchase of shares or other interests in savings associations. On April 19, this bill was referred to the House Finance Committee.

 

Illinois

In Illinois, H.B. 4601 would extend the dormancy period from five years to eight years for property held by a bank or other financial institution. The bill also specifies that property is not presumed abandoned when certain actions occur:

  • A federal taxable interest statement sent to the owner was not returned;
  • A dividend check was cashed; or
  • Any automatic transaction took place.

 

On April 22, H.B. 4601 was re-referred to the House Rules Committee, where bills often stall.

 

Two additional bills, H.B. 6074 and S.B. 2783 would decrease the dormancy period for property held by any federal, state or local government or governmental entity from seven years to five years. On April 12, the House passed H.B. 6074 and the Senate passed S.B. 2783. On April 18, H.B. 6074 had its first reading by the Senate and was referred to Assignments, while S.B. 2783 passed the House Judiciary — Civil Committee on May 4 and subsequently placed on the House calendar for a second reading.

 

H.B. 5607 seeks to establish a dormancy period for savings bonds issued by the U.S. Treasury. Under the bill, a savings bond would be presumed abandoned when it has remained “unclaimed and unredeemed for five years after its date of final extended maturity.” The House passed H.B. 5607 on April 19. It received its first reading in the Senate on April 27, passed the Senate Judiciary Committee on May 4 and was placed on the Senate’s calendar for a second reading.

 

H.B. 3830 establishes rules for forming, operating and regulating not-for-profit co-ops. The bill includes a provision specifying that any “unclaimed stock or other equity interests, dividends and patronage allocations” would be considered forfeited and become the co-op’s property if the owner cannot be found within three years. The bill currently awaits action by the House Rules Committee.

 

UPPO continues to monitor all of the pertinent bills affecting members. For the latest information about these and other noteworthy unclaimed property bills, visit UPPO’s govWATCH website.

 

Tags:  dormancy  legislation  unclaimed property 

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State Legislatures Consider Priority Issues

Posted By Administration, Tuesday, March 8, 2016

With most state legislatures currently in session, lawmakers across the country are considering a variety of unclaimed property bills. Several of these bills address UPPO’s priority issues, including dormancy periods, reporting requirements, and states’ use of auditors on a contingent fee basis.

 

Dormancy periods

In Illinois, H.B. 4601 would extend the dormancy period from five years to eight years for certain property types. The bill also specifies that property is not presumed abandoned when certain actions occur:

  • A federal taxable interest statement sent to the owner was not returned;
  • A dividend check was cashed; or
  • Any automatic transaction took place.

H.B. 4601 was referred to the Rules Committee on Jan. 28.

 

The Connecticut House of Representatives is considering a similar bill. H.B. 5533 would extend the dormancy period for certain types of property from three years to seven years. The bill is scheduled for public hearing on March 11.  

 

Contingency fee auditors

Arizona H.B. 2343 and Massachusetts S. 1710 would each prohibit their state revenue departments and other agencies from hiring auditors on a contingency fee basis. In Arizona, the change would apply to unclaimed property, while in Massachusetts, it would apply to any duties related to assessments or taxation.

 

Arizona H.B. 2343 was engrossed in the House on Feb. 17, and Massachusetts S. 1710 is waiting a report out of the State Administration and Oversight Committee. UPPO submitted letters supporting both pieces of legislation.

 

Reporting requirements

The Hawaii Senate is considering S.B. 2619, which specifies that required notification from holders to owners of property valued at $50 or more could occur by mail, email or telephone. If the bill passes, holders would be required to include a statement confirming they have complied with this requirement when reporting unclaimed property to the state.

 

Hawaii S.B. 2619 was reported favorably from Ways and Means Committee on March 3.

 

UPPO continues to monitor all of the pertinent bills affecting members. For the latest information about these and other noteworthy unclaimed property bills, visit UPPO’s govWATCH website.

 

Tags:  audits  dormancy  reporting  unclaimed property 

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Understanding dormancy

Posted By Administration, Thursday, November 12, 2015

Essential to compliance with unclaimed property laws and regulations is an understanding of dormancy, the period of inactivity that triggers escheatment to the states. Complexities arise because dormancy periods and activities deemed as owner contact vary widely across property types and states.

 

To help cut through the confusion, Bob Peters, managing director of Duff & Phelps, Thomas Powers, regulatory review representative at U.S. Bank, and Mel Kurman, director of audits for the New York State Comptroller Office, addressed issues surrounding dormancy at UPPO’s Oct. 21 Understanding Dormancy webinar.

 

For some property types, activity on related accounts may be sufficient to prevent the dormancy period from beginning. Certificates of deposit, for example, rarely require customer contact until they have matured, which can be several years—sometimes exceeding a state’s dormancy period. Thus, owner activity on a checking account held by the same financial institution can help prevent the certificate of deposit from being considered dormant.

 

“Always pay attention to other relationships—especially with certificates of deposit,” says Powers. “Customers do not expect to be transacting on these, especially if they’re automatically renewing.”

 

Individual retirement accounts (IRAs) generally have a two- to seven-year dormancy period, which is triggered by one of three occurrences: distributions before the owner reaches age 70.5, mandatory distributions after the owner turns 70.5, or death. Most states begin the dormancy period for mandatory distributions on April 1 after the IRA owner turns 70.5. Nebraska, New York, Utah, Virginia and Wyoming, however, look at account inactivity before the owner turns 70.5 to determine when the dormancy clock begins, including returned mail or lack of owner activity on the IRA or related accounts held by the same financial institution before mandatory distributions begin.

 

“In New York, if all other criteria for abandonment have been met, the account would escheat at age 70.5 rather than three years later,” Kurman says.

 

Gift cards also present several unique dormancy-related considerations. Some states exempt gift cards from being treated as unclaimed property. Those without an exemption typically have a two- to five-year dormancy period. The federal Credit Card Accountability Responsibility and Disclosure Act of 2009 mandates several conditions for gift cards, including a five-year minimum expiration date. The five-year rule, however, doesn’t prevent states with shorter dormancy periods from requiring escheatment of gift cards before their expiration. Card activation or the last customer transaction date triggers dormancy.

 

Other property types, including checks, safe deposit boxes, merchandise credits, reloadable cards, insurance products and public utility accounts also have unique considerations. Holders managing such property should understand and monitor relevant state laws.

 

“It really pays to review the laws to understand what’s required,” Peters says.

 

Decreasing dormancy periods is a trend that we’ve been seeing in state legislatures. To make sure your processes are updated with the dormancy changes, review this list of changes made the 2015 legislative session. A notable and positive change came out of Louisiana this year. The state recently began recognizing recurring Automated Clearing House (ACH) transactions as customer activity, but most states don’t consider ACH transactions as customer activities affecting dormancy.

 

Dormancy periods and triggers vary significantly by property type and jurisdiction. Tracking relevant dormancy period details is essential for unclaimed property professionals. Two UPPO resources can help. The Jurisdiction Resource Guide includes dormancy period listings by property type for the United States and Canada, and govWATCH helps members monitor legislative activity, including potential dormancy period changes.

 

More resources
Want more information about dormancy? Consider attending the 2016 Annual Conference, March 20 – 23; Palm Springs, Calif.

 

 

 

 

Tags:  compliance  dormancy  unclaimed property 

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