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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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Reviewing Records for Unclaimed Property

Posted By Administration, Thursday, March 1, 2018

To help ensure that all potential property types and sources are being captured in the unclaimed property review process, holders should periodically review trial balances, general ledger and bank statements. 

 

The review should identify all open and closed bank accounts that are used to distribute checks and electronic payments. Review open accounts to verify that the outstanding checks associated with the accounts are being captured in the unclaimed property procedures. Review closed accounts to determine the resolution of outstanding items. Ensure voids are well-supported and not being issued to circumvent unclaimed property.    

 

Conduct an additional review on general ledger accounts to identify accounts that have been established to capture unknown, unreconciled, write-off or suspense balances. If accounts are noted in the system, conduct additional research to verify whether the balances represent unclaimed property.

 

Uncashed checks

Including uncashed checks is intrinsic to every unclaimed property review. Research checks outstanding more than 180 days to determine if the funds remain due and payable to the payee. If the distribution is still owed, confirm payee name and address and conduct outreach to contact the payee about the status of the outstanding check. If the payee lost or destroyed the original check, the original issuance should be voided and reissued. Make sure to maintain notes pertaining to the reissuance in the accounting records along with the date that the reissued check cleared.

 

To verify that the reasons for voids are documented and that they weren’t voided simply because they were outstanding and not cashed, review all voided transactions greater than 90 days. Third-party auditors may test outstanding checks aged greater than 90 days from issuance and voided aged greater than 30 days from issuance. As such, to be conservative, transactions voided more than 30 days from date of issue should be documented in the accounting records to cover all bases.

 

Checks issued by third parties on behalf of the holder can create unclaimed property exposure for a company if responsibilities are not well-defined. Ensure third-party contracts clearly outline the duties and that those responsibilities are executed based on the contract terms. 

 

If the third party is reporting on the company’s behalf, the company should request and maintain copies of the unclaimed property reports, detail of the property that was reported and all associated payments or remittances to the state. Ultimate responsibility for outstanding checks tends to fall back on the company unless adequate supporting documentation can be produced.

 

Credit balances

Accounts receivable credit balances tend to be one of the most complicated accounting types in unclaimed property because states take various positions regarding when or if property is deemed to be reportable. For example, some states hold the position that accounts receivable credit balances are not reportable while there is an active relationship with the customer, but the state may not provide a thorough explanation of what constitutes an active relationship. Other states consider all credits as potential unclaimed property, no matter the account relationship, and want holders to confirm that their customers are aware of credits and have the opportunity to use them.   

 

Most states also allow credits owed to a customer to be offset by balances owed to the company by the same customer. Debits due from the customer that were written-off to bad debt during the same time period can be used to offset the credit balance write-offs. 

 

When conducting an analysis of the accounts receivable transactions that are potentially escheatable, holders need to look at transactions that may no longer be included in the receivables account – for example, credits that were moved out of accounts receivable and into accounts payable because they were refunded to the payee.

 

The process should include reviewing reports that contain any unresolved credits that were reclassified out of the receivables account. Review the general ledger detail to identify any credit balances that were reclassified, because these transactions may represent unclaimed property. The states do not accept write-offs to income as sufficient to remove the credit balance and therefore prevent the credit balance from being escheated to the state as unclaimed property.

 

Holders should review the unapplied cash detail, also commonly referenced as an unidentified remittance, to identify any receipts that are stale-dated and have not yet been applied to a customer’s invoice to offset the credit. 

 

Determining when the transaction is stale-dated may vary by state. Companies should routinely review unapplied cash detail quarterly, bi-annually or annually. 

 

For holders that maintain unapplied cash on the accounts receivable aging reports, the unapplied cash detail analysis may not be applicable. In such cases, holders should review aging reports on a regular basis.

 

Gift cards

Sales of gift cards and certificates may result in escheatable property too. Holders need to review the gift card/certificate reports that identify unredeemed gift card balances. Obtain these reports either internally from the appropriate department or from the third-party administrator if one is used to run the gift card/certificate program.

 

Holders should review unredeemed gift card/certificate reports to identify cards and certificates that have been inactive and are soon to become dormant. The dormancy period for unredeemed gift cards/certificates varies by state.

 

Dormant unredeemed gift cards/certificates may be escheatable. If a holder retains the owner or gift recipient’s address information, then the unclaimed property laws for that address state will apply. If the holder does not retain address information, then the laws of the holder’s state of incorporation or domicile will apply. 

 

Some states do not require the escheatment of unredeemed gift cards/certificates. A vast majority of those states simultaneously require that the cards and certificates do not expire. This allows an owner to redeem the gift card/certificate into perpetuity. Holders should identify the applicable state law to determine if transactions are escheatable and what limitations may apply.

 

Equity

Equity is another type of property record that may result in an escheatable transaction. When evaluating equity for potentially escheatable property, holders need to review outstanding dividends and other payments that are owed and outstanding to the shareholder, as well as the underlying shares. Many states require that, if a dividend check is dormant and escheatable, holders also escheat the underlying share related to the dividend.

 

Most holders employ a transfer agent to oversee their equity. Escheat review and annual compliance filing is usually included in the duties of the transfer agent. Holders should request and maintain copies of all annual unclaimed property reports filed by the transfer agent on the holder’s behalf. 

 

Holder conducting their own analysis of potentially escheatable equity transactions should review the report of shareholder activity. This report should include the date of the shareholder’s last activity on their account, as well as list the outstanding dividend check payments.

 

States vary on what information is considered sufficient contact to identify the shareholder’s last activity date, so consult the applicable state provision.

 

Mineral rights

Some holders may hold potentially escheatable property in the form of mineral rights and royalties. A holder should review the list of suspended accounts that is due to the holder losing contact with the property owner.  The determination of lost contact may vary depending on the applicable state law, so the holder should always verify what is considered lost contact.

 

Similar to the analysis of equity transactions, if the royalty is determined to be dormant and escheatable, the holder should be aware that some states require holders to remit all owed royalties with the outstanding payment. Keep in mind, some states have more stringent guidelines for reporting mineral rights and royalties so be sure to research state statutes.

 

Insurance properties

Insurance companies have a number of unique transactions from other types of businesses that may become escheatable property. In addition to uncashed checks, insurance companies need to conduct analysis on agent commission liability accounts to identify any dormant unpaid commission balances.

 

These holders should also obtain and review records related to life insurance policies. Identify policies that have matured but were not paid to the policy holder due to losing contact with the policyholder, as these policies may be escheatable.

 

Holders should obtain a listing of life insurance policies for which the death notice was received but the claim not paid. This often occurs because the beneficiaries cannot be found. Many states have enacted the Life Insurance Benefit Act, which requires companies to check policy inventory against the Death Master File on a regular basis.

 

Further, holders should obtain and review a listing of unpaid annuities and inactive retained asset accounts to identify transactions that have become dormant and may be escheatable to the states.

 

As with all property types, dormancy and escheat requirements vary by state, so confirm applicable state laws.

Tags:  checks  credit balances  gift cards  gift certificates  insurance  mineral rights  records 

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State Legislatures Reconvene, Immediately Take up Unclaimed Property Issues

Posted By Administration, Monday, January 30, 2017

Reconvening earlier this month, state legislatures are wasting no time considering new unclaimed property legislation, including language from the Revised Uniform Unclaimed Property Act. Following are summaries of several of the most noteworthy bills UPPO is tracking.

 

Arkansas

H.B. 1142 extends the presumed date of abandonment for securities from five to seven years from any of the following:

  • The date of most the recent dividend, stock split or other distribution unclaimed by the apparent owner;
  • The date of second mailing of a statement of account or other notification or communication that was returned as undeliverable, or after the holder discontinued mailings, notifications or communications to the apparent owner;
  • The date that the security holder or payee is presumed lost or unresponsive as it existed on Jan. 23, 2013.

The bill also includes new provisions requiring the security holder to liquidate the security before remitting it to the administrator. The bill was referred to a Senate Committee on Jan. 23.  

 

Delaware

Highly anticipated legislation since last summer’s Temple-Inland summary judgment and settlement, S.B. 13 adopts provisions from the 2016 Revised Uniform Unclaimed Property Act. It also adopts certain recommendations from the Delaware Unclaimed Property Task Force and makes significant changes to the state's unclaimed property reporting process and compliance initiatives.

 

These changes include reducing the look-back period for all voluntary disclosure agreements and audits to 10 report years, and creating a 10-year statute of limitations for the state to seek payment of unclaimed property due to the state. In addition, this legislation aligns the state’s record retention requirement for companies with the statute of limitations and look-back period, which mirrors laws in a majority of other states.

 

S.B. 13 also offers any company currently under audit the opportunity to convert their audit into a voluntary disclosure agreement. Since July 22, 2015, Delaware law has allowed companies to enter into a VDA before going through an audit. This change provides the VDA option for companies whose audits began before July 22, 2015, and are still in process. It also gives all companies that received a notice of examination who are currently under audit on the bill’s effective date the opportunity to engage in an expedited audit review process.

 

The bill addresses the state’s estimation practices for audits and VDAs, requiring the secretaries of finance and state to develop by July 1, 2017, regulations for estimation base periods, excluded items, aging criteria for outstanding and voided checks, and the definition of “complete and researchable records.”

 

Finally, the bill mandates that interest be assessed on any late-filed unclaimed property, as a means to incentivize voluntary compliance. The bill quickly made its way through the legislature, and was sent to the governor on Thursday, Jan. 26 for signing.

 

Nebraska

The unicameral legislature in Nebraska is considering a pair of unclaimed property bills. L.B. 137 adopts the Unclaimed Life Insurance Benefits Act. It requires an insurer to compare its policies and retained asset accounts against a death master file to identify possible matches of its insured at least a semi-annually. The bill outlines requirements in the case of a match or potential match, as well as procedures for group life insurance. A hearing is scheduled for Jan. 30.  

 

L.B. 141 adopts the Revised Uniform Unclaimed Property Act. Among relevant provisions, the bill establishes various dormancy periods and due diligence requirements. It exempts gift cards without expiration dates and fees and establishes a three-year dormancy period for returned merchandise credits and gift cards with fees. The bill also outlines the state treasurer’s responsibilities regarding unclaimed property and provides for holder reimbursement where appropriate. It provides in certain circumstances for the right of another state to take custody of unclaimed property. The bill is still awaiting to be scheduled for a committee hearing.

 

New York

S.B. 1689 prohibits gift card expiration dates and dormancy service fees unless it meets four conditions:

1.       The remaining value of the gift card is $5 or less each time the fee is assessed;

2.       The fee does not exceed $1 per month;

3.       There has been no activity on the gift card for 24 consecutive months; and

4.       The holder has the ability to reload or add value to the gift card.

 

The bill also requires retailers to redeem gift certificates of $10 or less for cash at the consumer's request. The bill was referred to the consumer protection committee.

 

Oregon

S.B. 113 requires the provider of goods and services identified on a gift card to transfer to the Department of State Lands the remaining balance of any gift card after five years of inactivity from the date of the last purchase using that gift card. The bill is currently in committee.

 

South Dakota

S.B. 34 revises provisions related to securities held as unclaimed property. The bill requires the state treasurer to sell all stocks, bonds and other negotiable instruments within 90 days of confirmed receipt, unless the property is on an open claim. The bill was referred to a House Committee on Jan. 20.

 

Utah

H.B. 42 makes comprehensive revisions to the state’s insurance law. Among other changes, the bill amends definitions under the Unclaimed Life Insurance and Annuity Benefits Act by removing the definition of “knowledge of death.” The bill saw its third hearing in the House on Jan. 25.

 

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  death master file  insurance  RUUPA  securities  unclaimed property 

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Legislative & Regulatory UP-date - Second Quarter

Posted By Guest Author - Marcella Easly, GRAC member, Sunday, July 7, 2013
Updated: Sunday, July 7, 2013

UPPO’s Government Relations and Advocacy Committee (GRAC) provides a brief Regulatory UP-Date approximately once per quarter. The first post for calendar year 2013 was posted May, 2013 – Regulatory UP-Date, the Story So Far. The following a brief list of the legislative activity for April – June.

UPPO members receive the latest Unclaimed Property Legislative and Regulatory information on a weekly basis through their member benefit, govWATCH.  

DEVELOPMENTS FOR INSURERS

Alabama HB192 - Under existing law, certain insurers are required to search the death master file and notify the State Treasurer of any unclaimed life insurance benefits or unclaimed retained asset accounts, plus interest, to the State Treasurer. This bill requires certain insurers to search the death master file shall apply only to life insurance policies, annuity contracts, and retained asset accounts issued and delivered in this state and which are issued or entered into on or after January 1, 2016.

Montana SB34 - Creates unclaimed life insurance benefits act; requiring insurers to search the death master file. Effective January 1, 2014

Nevada AB226 - Enacts provisions governing certain policies of insurance, annuities, benefit contracts and retained asset accounts. Requires an insurer to notify the State Treasurer upon the reversion by escheat of a benefit under a policy of life insurance or an annuity and transfer to the State Treasurer the unclaimed benefit as soon as practicable after providing notice. Effective July 1, 2014

New Mexico SB312 - Requires insurers to make good faith efforts to locate beneficiaries and provide claim materials; provides that unclaimed benefits escheat to the state; clarifies that certificates of property or casualty insurance are not insurance policies; specifies terms for certificates of property or casualty insurance. Effective July 1, 2013

North Dakota HB1171 - Establishes Unclaimed Life Insurance Benefits Act, requiring insurers to search the death master file. Lowers dormancy period from three years to one year for unclaimed life insurance policies or annuity contracts. Effective August 1, 2012.

Vermont HB95 - Establishes payment and escheatment of life insurance benefits. Effective July 1, 2013

STORED VALUE AND GIFT CARDS

Connecticut SB912- Prohibits linked prepaid cards from expiring unless specific disclosures are clearly stated. Effective July 1, 2013

Indiana HB1081 - Exempts stored value cards, credit cards or debit cards issued by state or federally chartered financial institution from unclaimed property reporting requirements. Effective July 1, 2013

Texas HB3068 - Prohibits surcharges on debit or stored value cards. Effective September 1, 2013

BANKING AND FINANCIAL INSTITUTIONS

Indiana SB222 - As amended, provides that certain property left unclaimed in a safe deposit box for three years (down from five years) is presumed abandoned. Permits electronic submission of certain documents in connection with unclaimed property, and permits the attorney general to determine the manner in which payment or delivery of certain property is made. Authorizes the attorney general to deduct certain expenses from proceeds of property paid to the owner. Effective July 1, 2013

Louisiana HB348 - Limits time to bring an action against an FDIC insured holder of unclaimed property; limits the time an FDIC insured holder is required to maintain unclaimed property reports. Effective June 12, 2013

MINERAL RIGHTS

South Dakota HB1002 and HB1006 - Creates trust account for lost mineral interest owners. Effective July 1, 2013

Texas HB724 - Creates commission to study unclaimed land grant minerals proceeds. Requires escheatment to the state. Effective September 1, 2013

PROCESS AND PROCEDURE

Florida SB492 - Requires property held by fiduciaries under trust agreements to be reported as unclaimed after 2 years dormancy. Effective October 1, 2013

Hawaii SB1265 - Limits unclaimed property finder fees to 25% of the total property value. Effective October 1, 2013

OTHER RESOURCES
UPPO govWATCH
2013 HOLDERS SEMINAR - CHICAGO, August 14-15


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Advocacy  Compliance  Gift Cards  Insurance  UP Laws 

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Regulatory UP-Date 2013: The Story So Far

Posted By GRAC Member, Michael Rato, Sunday, May 12, 2013
Updated: Wednesday, May 8, 2013

When UPPO issued its last Regulatory UP-Date in January, the headline item was about Delaware: specifically, the creation of a new (and temporary) Voluntary Disclosure Agreement program run by the Secretary of State’s office. While that program has received a significant amount of publicity from the state, service providers, and the unclaimed property media (to the extent that there is such a thing), the first third of the year has also seen a variety of other legislative developments that may be of interest to holders in particular industries or states. We encourage you to follow UPPO’s govWATCH for the most up to date information, but below is a sampling of some of legislative changes that have already been enacted in 2013.

Developments for Insurers

The past few years have seen substantial regulatory developments relating to life insurers, and this year seems to be continuing that trend. For example, on March 29, Montana enacted the "Unclaimed Life Insurance Benefits Act” (Montana Senate Bill 34), which will require insurers and related entities, starting next year, to compare their policies against the Social Security Administration’s death master file (or a similar database) on a semiannual basis. Similar searches will be required in New Mexico beginning July 1 of this year, and in North Dakota before next November, as a result of legislation that passed in those states (New Mexico Senate Bill 312, enacted April 1; North Dakota House Bill 1171, enacted April 30). Back on the East Coast, insurers in the Empire State will be required to make these searches on a quarterly basis as a result of NY Assembly Bill 1831, enacted March 15.

Gift Cards

There have also been a few developments relating to gift cards. In Colorado, new legislation (Colorado House Bill 1102, enacted March 15) created a reporting exemption for "small” issuers of gift cards, providing that holders selling less than $200,000 per year of gift cards are not required to report unclaimed cards to the state. Also of note, the newly created Bureau of Consumer Financial Protection (CFPB) published its long awaited determination concerning whether Maine and Tennessee unclaimed property laws relating to gift cards are preempted by federal law. UPPO’s earlier coverage of the decision can be found here, but in short, the CFPB ruled that all of the applicable laws were valid and enforceable with the exception of one provision of the Tennessee Act that would permit an issuer to refuse to honor a gift card as soon as two years from the date of issuance (which is inconsistent with provisions of federal law generally requiring most gift cards to remain valid for at least five years).

Process and Procedure

A number of bills signed into law thus far this year deal with the procedural nuts and bolts of reporting, remitting, and/or claiming abandoned property. In Florida, Senate Bill 464 (enacted April 30) allows the Department of Financial Services to accept owner claims electronically. Conversely, Indiana Senate Bill 222 (enacted April 12) will require holders to report property electronically. That law also purports to change the priority rules (and other requirements) for safe deposit box items, providing that Indiana may take custody of both (a) abandoned safe deposit boxes in Indiana and (b) abandoned safe deposit boxes outside of Indiana held for Indiana residents. In Alabama, House Bill 112 made a wide variety of changes – substantive and procedural – to Alabama’s Unclaimed Property Act. UPPO’s earlier overview of that legislation can be found here. Two unclaimed property bills have been passed in North Dakota, one adding a definition of "money orders” to the Unclaimed Property Act (North Dakota House Bill 1162, approved April 1), the other allowing the state to contract with private parties to perform audits where the state has "reason to believe” a holder has not complied with the Act (North Dakota Senate Bill 2058, approved March 14).

Although Delaware has grabbed most of the headlines in 2013 thus far, other state legislatures have also been busy in the unclaimed property area. We encourage you to consult govWATCH for the most up-to-date information.

OTHER RESOURCES
govWATCH
Michael Rato - LinkedIn


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Advocacy  Compliance  Due Diligence  Gift Cards  Insurance  Members  Policy  UP Laws 

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