Escheatment Essentials for Accounts Payable Managers:

Transcription

1 Escheatment Essentials for Accounts Payable Managers: By: Karen L. Anderson and Marcella Easly Sr. Compliance Advisors Abandoned Property Services, LLC 1

2 OBJECTIVES Provide fundamental, working knowledge of: State unclaimed property obligations State due diligence requirements State reporting requirements Present practical tools for effecting unclaimed li property compliance and minimizing liability Relay information about important changes in state unclaimed property laws and procedures 2

3 Basic Unclaimed Property Terminology 3

4 Basic Terminology Holder The business or any other entity which holds inactive property that belongs to another and is deemed to be presumptively abandoned under state law. (In some case law, the debtor.) In A/P, this is the entity that is the payer of the check. Owner The person or entity to whom the property belongs. (Sometimes this is the creditor.) In the A/P realm, this is the check payee. Escheat In the UP industry, this means delivering or remitting property to the applicable state. Last Activity Date The date of last owner-generated activity. In A/P, the last activity date is the check date. This date is used to determine dormancy and correspondingly, when property is due for reporting and remitting to states. Dormancy Period The period of time property remains inactive before it is presumed abandoned by state law. Dormancy periods differ by property type and state. In A/P, most uncashed checks have a 3 or 5 year dormancy period. 4

5 What is Unclaimed Property? 5

6 Unclaimed Property Basics: What is Unclaimed Property? Definition: Any intangible personal property that is held, issued or owing in the ordinary course of business and has remained unclaimed by the apparent owner for a specified period of time after it became py payable or distributable is presumed abandoned. Accounting errors are NOT unclaimed property. The most common unclaimed property: 1. A/P uncashed vendor checks 2. Payroll uncashed wage and expense checks 3. A/R unused customer/client credits, refunds 4. Equity uncashed dividend checks and underlying shares, certificates returned from the post office 5. Insurance claims payments, refunds 6. Mineral Interests uncashed checks 7. Bonds uncashed interest checks and bond equity 8. Bank Accounts and CDs idle account proceeds (savings and checking accounts, official checks, timed deposits, etc.) 9. Third Party Administrator records 10. Suspense Accounts 6

7 Do unclaimed property laws apply to my business? 1. Does every business have to comply with state unclaimed property laws? 2. Does it matter if our company doesn t td do business or isn t registered in the state? 7

8 Business Nexus Not Required! Answers: Yes, most businesses have to comply with state unclaimed property laws. No, it doesn t matter for unclaimed property purposes whether or not your company is registered to do business in a state. Business Nexus is NOT a consideration in determining whether property is due or the state to which it is to be reported. Texas v. New Jersey (USSC 1965): 3 rules 1. Last known address of the payee/creditor controls 2. When no address, the state of incorporation of the holder controls 3. When the state does not have a law pertaining to the property, the state of incorporation of the holder controls 8

9 When Does a Business Comply? py What is a dormancy period? What is an as of or end date? When are the reporting deadlines? 9

10 Examples of Dormancy Periods and End Dates for non-financial corporations State Credit Balances (MS09)/A-R Vendor Checks (CK 13) Payroll Checks (MS 01) Annual Reporting Deadline As of / End Date California 3 years 3 years 1 year 11/01 06/30 Connecticut cu 3yeas years 3yeas years 1 year 03/31 12/31 Delaware 5 years 5 years 5 years 03/01 12/31 Florida 5 years 5 years 1 year 04/30 12/31 Mass. & Oregon New York 3 years 3 years 3 years 11/1 6/30 3 years (1H*) 3 years (2G) 3 years 02/15 (1H) 5 years (1G) (8A) 03/10 (2G, 8A) 12/31 Ohio 3 years 3 years** 1 year 11/01 6/30 Pennsylvania 5 years 5 years 2 years 4/15 12/31 1H is the NY Code for Consumer Credit Balance **May be exempt under certain circumstances. 10

11 Example - Facts Yurco Industries (a business that is not a life insurance company) issued a check for $100 in payment to Yursupplier on Feb. 15, It appears from Yurco s records that Yursupplier has not cashed the check issued on Feb. 15, Yurcustomer s address in Yurco s records is in California (where CK13 vendor checks have a 3- year dormancy period). 11

12 Example - Question Is this check reportable to California on the Fall 2008 reporting deadline? d dli? 12

13 Answer to Example Question Calculation: CA Fall 08 End Date=6/30/2008 LAD or Issue Date = 2/14/2005 Dormancy Time = 3 yrs, 4 mos, 14 days CA Dormancy (CK13) = 3 yrs Answer: This check would be eligible for reporting to CA on the Fall 2008 deadline for businesses that t are not life insurance companies. 13

14 Compliance and Best Practices 14

15 The Basic Compliance Obligations* i 1. Records Review 2. Due Diligence/Owner Contact 3. Reporting and Remitting 4. Record drt Retentionti *All of the above must be done within ihi the time frames and/or in the formats/modes required by the various applicable state laws. 15

16 RECORDS REVIEW (aka Procedural Due Diligence ) e ) As a part of a businesses unclaimed property procedures, the appropriate accounts and ledgers must be reviewed and data collected. ITEMS TO REVIEW: Vendor Items uncashed hdvendor checks Payroll Items Credit Memos / Balances 3 rd Party Benefit Checks 16

17 RECORDS REVIEW/PROCEDURAL DUE DILIGENCE: VENDOR CHECKS Three Questions: 1. Is the owner really lost? owner generated activity ongoing client or vendor relationship pertinent owner/payee address Indication of bad address? 2. Is the property really unclaimed? Procedural ldue Diligence Offsetting Entries? 3. Is the property exempt from reporting? 17

18 RECORDS REVIEW/PROCEDURAL DUE DILIGENCE: VENDOR CHECKS Question 1: Is the owner/payee really lost? Other addresses in vendor file Finding a new address: Forwarding Address: Payroll Checks Internet Sources Switchboard.com PeopleFind.com People.yahoo.com Anywho.com Outsource Services Credit Bureaus (TransUnion, Equifax, etc.) Heir Finders 18

19 RECORDS REVIEW/PROCEDURAL DUE DILIGENCE: VENDOR CHECKS Question 2: Is the property p really unclaimed? Re-issues without voiding original. Duplicate items on Vendor Master Duplicate payments. Wrong payee. Inter-company payments (payments between related party companies). Periodic/recurring vendor payments (utilities, landlords, etc.). Reconciliation error (i.e., Bank rec has checks with sequential numbers outstanding/bad check run). Large dollar checks with familiar payee names. Check represents payment for an invoice for which a credit was issued. 19

20 RECORDS REVIEW/PROCEDURAL DUE DILIGENCE: VENDOR CHECKS Question 3: Is the property exempt from reporting? No automatic ti de minimus i property exemption Business to Business Exemption (tricky- generally, for MS09-Credit Memos, ) AZ, IL, IN, IA, KS, MD, MA, NC, OH, TN, VA, WI (WY-only for merchandise credits from gift certificates) Florida s under $10 exemption for credit balances Gift Certificate / Card Exemption (tricky) 20

21 RECORDS REVIEW/PROCEDURAL DUE DILIGENCE: PAYROLL ITEMS Payroll - Follow-up on items outstanding once per year (internally) Review Listing of Eligible Escheatment Are Employees active or retired? Are Employees on overseas assignment? Are Employees retired and receiving a pension? Direct Deposit (monthly review / clear) Third Party Checks (Benefits, etc.) Follow-up on items outstanding periodically (for items over 90 days old) 21

22 Procedural Due Diligence Best Practices 1. Review / research outstanding checks/payments on a regular basis (60 90 days) for accounting errors, familiar payee names, or offsets. a. Set a materiality limit b. Reverse e identified ed accounting errors, make appropriate offsets 2. Review supplemental information that may lead to the address of an employee or former employee. 3. Establish contact with the payee through correspondence and telephone calls and resolve outstanding checks. a. If appropriate, do electronic database searches for better addresses for items over the materiality limit and for those items with familiar payee names 4. Retain documentation of reversals resulting from research or contact. 5. Maintain written procedures for record review and make them a part of your company s policy or manual. 22

23 Statutory Due Diligence: Attempt t to Contact tth the Payee/Owner 23

24 Statutory Due Diligence (the 2 nd Obligation) The Due Diligence Requirement: A last attempt to contact the owner/payee prior to reporting and remitting unclaimed property Important t Elements: Method Letter Content Timing Form or Mode of Delivery Limitations/Exceptions Allowable Deductions 24

25 1. Methods: Statutory Diligence (the 2 nd Obligation) a. Generally A letter to the owner at the last known address in the records of the holder b. Banks/Insurance su a Companies Delaware ea a e( (Life Insurance) and New York (utilities, too) require publication in newspapers 2. Letter Content: a. Generally 1995 Uniform Act (Section 7e): i. Must state that the holder is in possession of the property subject to the unclaimed property law ii. b. Must state that the claim of the owner is not barred by the statute of limitations iii. That the value of the property is greater than $50. 25

26 Statutory Due Diligence (the 2 nd Obligation) 2. Letter Content (continued): b. California - For accounts valued at over $50, notice must be sent not more than 6 to 12 months prior to reporting deadline and the following information must be included in the notice and must be in bold type or type 2 points larger than the rest of the notice: 1. the time when the property will escheat to state and effect of a escheat; and 2. statement that since the date of last activity there has been no customer, client, payee activity; and 3. identification of the deposit, account, shares, etc. by number or identifier; and 4. statement that the item in in danger of escheatment to the state. Also, a form for confirming the owner s current address must be included for response. 26

27 Statutory Due Diligence (the 2 nd Obligation) 2. Letter Content t (continued): c. Important inclusions 1. A statement that the property will be delivered to the state if no action is taken 2. A statement that the state is the custodian and the owner does not lose his/her rights to the property 3. A date by which the owner must respond and/or a direct request for the owner to respond 4. Instructions for responding (i.e., how to contact the holder, the methods for responding and/or receiving the property, how to effect an address update, etc.) 27

28 Sample Due Diligence Letter Name, AP or AR Manager Company Street Address City, State Zip Date Dear AP or AR Manager: Our records indicate that your company may be the owner of funds or have an interest in funds represented by the items listed below. No transaction or other activity has occurred for a significant period of time. If you have an interest in the funds and wish to prevent the funds from being reported and remitted as unclaimed property to the State of, please indicate the disposition of the items listed below. After you complete the form, please fax it to us immediately at XXX-XXX-XXXX or mail it to us in the enclosed stamped, self-addressed envelope. Please reply by. Nature of Funds Date Issued Amont Description/Reference Check #XXXX widgets XX/XX/XX $XXXX Invoice No. XXX-4 gross Credit memo #XXX XX/XX/XX $XXXX Disposition of Items (Check the blank next to one of the following.) The above (s) / credit memo was cashed/or applied on. Check (s) / credit memo was received but not cashed/applied. (If you still possess the check (s) / credit memo please return it/them along with this letter indicating if you are still entitled to these funds. Check (s) / credit memo is no longer required. There are no outstanding invoices for this amount and the obligation has been satisfied. This check (s) / credit memo was not received and our records indicate the amount is still due. Please issue another check. Other: Name: Signature: Address (if different from above) SSN/Federal ID No. Date: Sincerely, 28

29 Statutory Due Diligence (the 2 nd Obligation) 3. Timing: a. Generally Not more than 120 days nor less than 60 days prior to the reporting deadline. (1995 Uniform Act, Section 7(e)): AL, AR, DC, FL, GA, IL, IN, KS, KY, LA, ME, MT, NE, NV, NH, NJ, NM, NC, TN, UT, VT, WV, WI b. Within 120 days prior to filing report: AK, CO, ID, MN, ND, OK, RI, SC, VI, WY c. At least 30 days prior to filing report: OH d. At least 60 days prior to filing report: MA, VA e. At least 90 days prior to filing report: OR f. At least 120 days prior to filing report: AZ g. Within 30 to 120 days prior to filing the report: MD h. Within 60 to 365 days prior to filing the report: MI i. Within 90 days for the first attempt and 2 nd attempt within 60 days if over $1000: NY* j. Within 180 days prior to filing report: HI, CT* k. Within 30 to 365 days prior to filing report: MO l. Within 180 to 365 days prior to filing report: CA m. Not required but recommended: DE*, TX, PA n. Required but no timing specified: IA*, MS, SD, WA *Please see state statute for more details. Time frames for due diligence may change as new legislation is adopted. 29

30 Statutory Due Diligence (the 2 nd Obligation) 4. Form of Delivery: a. Generally No specification in the1995 Uniform Act, Section 7(e), but most states require first class mail: AL, AK, AZ, AR, CA, CO, CT, DC, FL, GA, HI, IL, ID, IN, KS, KY, LA, ME, MD, MA, MI, MN, MO, MS, MT, NE, NV, NH, NM, NY, NC, ND, OH, OR, OK, RI, SC, SD, TN, UT, VT, VI, VA, WA, WV, WI, WY b. Notable exceptions: Iowa - Requires Banks and Financial Institutions only to send due diligence letters by certified mail. The costs of the certified mailing may be deducted from the account by the Bank or Financial Institution New Jersey For items that are greater than $50, the letter must be sent certified mail, return receipt requested. New York - First notice by first class mail within 90 days prior to reporting deadline; second notice by certified mail, return receipt for $1000+ (cost of certified mail deductible from property reported.) Ohio - Certified mail requirement for items $1000 & greater; costs deductible up to $20 maximum 30

31 Statutory Due Diligence (the 2 nd Obligation) 5. Limitations/Exceptions: a. DUE DILIGENCE MINIMUMS - By Item Amount/Value (ex. Securities): $10 IL $25 - NE $50 AR, AZ, CA, CO, DC, FL, GA, HI, ID, IN, LA, ME, MI, MO, MT, NC, ND, NH, NJ, NM, NV, OH, OK, RI, SC, SD, TN, UT, VI, VT, WI, WV, WY $75 WA $100 - AK, KS, KY, MA, MD, MN, OR, VA No minimum AL, CT, IA, MS, NE, NY, PR b. No Statutory Letter Due Diligence Requirement DE, PA & TX c. Self-Addressed Stamped Envelope Requirement-OH d. Publication requirement 1. Delaware - Banks, courts, and life insurance 2. New York - Banking organizations, insurance companies, and utilities must publish in newspaper in city of residence of owner. Due Diligence mailing still required! 3. Puerto Rico has an advertising requirement. 31

32 Statutory Due Diligence (the 2 nd Obligation) 6. Allowable Deductions: CA Banks and financial i organizations may impose a service charge for the notice in an amount not to exceed $2.00 on items over $50. DE Expense incurred for advertisement is deducted from remittance due IL May deduct first class mailing costs (postage, stationary, and envelopes IA May deduct cost of mailing from amount owed NV Charge of not more than $2.00 may be deducted from owners with over $50 and must be listed as line item on the report NY May deduct cost of certified mail and return receipt as a service charge. Also, may deduct costs of publication on a pro rata basis (using a specified formula.) OH Deductions are allowed up to $20.00 for certified mail OK May deduct only the cost of postage. PR May deduct expenses incurred in advertising 32

33 Reporting and Remitting 33

34 Reporting and Remitting (the 3rd Obligation) Important Considerations: i Type of Report Report Format Negative Reporting Report Aggregate Limits Form of Remittance Report & Remittance Delivery Filing Extensions 34

35 Reporting and Remitting (the 3rd Obligation) The Report 1.Type - Paper, Diskette, CD, Magnetic cartridge, tape or Internet a. Most states require electronic (diskette or CD) reporting if there are more than 25 items to report b. Note that some states that require electronic reporting also require that a hard copy of the report accompany the electronic report. c. MT accepts only paper reports. 35

36 Reporting and Remitting (the 3rd Obligation) Type Internet! Some states have on-line reporting: Kansas : com/prodweb/up3 new user php Idaho: Maine: ftp://ftp.state.me.us/incoming/treasury/up-reports (please call for username and password on FTP transfers) or at Maryland: (need to fill out form and send to MD for holder number) Massachusetts: b t t t / b /f First time call: x471 or x 471 New York: First time call: or NYSRPU@osc.state.ny.us to get username and password. Texas: Virginia: (need password, them at ucpupload@trs.virginia.gov) 36

37 Reporting and Remitting (the 3dObli 3rd Obligation) 2. Format a. 44 states accept the NAUPA II Standard Electronic Reporting Format (AL, AK, AR, AZ, CA, CO, CT, DC, FL, GA, HI, KY, IA, ID, IL, IN, KS, KY, LA, MA, ME, MI, MN, MO, MS, NC, ND, NE, NH, NM, NV, OH, OK, OR, PA, PR, SC, TN, TX, UT, VT, WI, WV, WY) See: andard.pdf Standard relationship and property type codes listed as well. b. NY does not use the NAUPA II Standard Format and uses their own property type codes. Note that while CA now accepts the NAUPA II Standard Format, see: 37

38 Reporting and Remitting (the 3rd Obligation) 3. Negative Reporting - Required by 30 states: AL, AZ, CT, DC, FL, ID, IL, IN, KY, LA, MD, MA, MI, MN, MS, ND, NJ, NM, NY, NV, OH, PR, RI, SC, TN, VA, VI, WA, WV (ME only companies headquartered in ME). Some states permit negative reporting on-line: Indiana/Negative Reports Only: ero.html Ohio/Negative Reports Only: gov 4. Aggregate limits Most states have a limit under which the property does NOT have to be reported with name and address detail. These items are lumped together by property type and reported as an aggregate lump sum. $25, $50, & $100 are usual limits but this varies by state. Most states do not permit reporting of dividends or mineral interests in the aggregate. 38

39 Reporting and Remitting (the 3rd Obligation) 5. The Remittance - Form Cash (uncashed vendor, dividend and payroll checks, credits, refunds) are usually by check written to the appropriate state official or agency. Examples: CA-California State Controller IL - Treasurer State of Illinois, Unclaimed Property Division MA Commonwealth of Massachusetts NJ Treasurer, State of New Jersey TX-Texas Comptroller of Public Accounts -Unclaimed Property 39

40 Reporting and Remitting (the 3rd Obligation) Exception: Some states do not permit checks to be used for the remittance if the total amount is greater than a specified sum. Examples: 1.CA requires that if the sum (including interest penalty amounts) is greater than $20,000 it must be delivered by electronic funds transfer in the specific manner designated in CCP Section 1532 See or call for details. 2.MA requires the if the sum is $10,000 or greater it must be delivered by electronic funds transfer. To do so, the holder must complete and file (annually) with the MA Abandoned Property Division an Authorization to Agreement for EFT and it must be approved by the MA APD. Forms are located at: or call to have one mailed to you. 3.NJ requires Fed wire transfers for remittances of $50,000 or more. Call or see /wire.pdf for more information. 4.TX law requires holders who paid $100,000 or more during the previous state fiscal year to make subsequent payments by electronic fund transfer. The preferred method is through TEXNET for more information, see: 40

41 Reporting and Remitting (the 3rd Obligation) 5. The Remittance - b. Form Certificate or Confirmation (stock, mutual funds, book entry shares, etc.) While some states want shares to be liquidated prior to remittance, most want certificated or book entry confirmation shares registered in the name of the appropriate state official or agency or nominee and want them delivered to a specific address(es). 6. Report and Remittance Delivery - a. Timing on or before the deadline specified. (Fall By Nov. 1 st, Spring varies by state) b. Verifiable delivery is very important. 7. Filing Extensions - a. Notification of state administrator b. Reason c. Estimated, timely payment required? (i.e. NJ, TX) 41

42 Reporting Red Flags! Tips - Preventing Reporting Red Flags by: Making sure your reports/cover sheets are completed and signed (and notarized if required) Making sure the report reflects the same dollar amount that is reflected by your remittance Filing negative reports if required (one exception) Requesting filing extensions at least 2 weeks prior to the filing deadline Using the state prescribed cover sheets and/or holder numbers when filing reports Filing all property types: securities and general ledger-related and filing them accurately (not disproportionately) 42

43 Record Retention 43

44 Record Retention (the 4th Obligation) 1. Retention Time Period 1995 Uniform Act (Section 21) a holder required to file a report must maintain the records containing the information required to be included in the report for 10 years after the report is filed. (Drafter s notes to the Act state that records are to be kept for 10 year from the date the property was first reportable. ) CA Admin Code Title 2, Subchapter 8, Article Ati 1, Section 1175 Holders must maintain records pertaining to property reported for 7 years from the date it is or should have been reported. TX Statutes Title 6, Section Holders must maintain records for 10 years after the property was reportable. 44

45 Record Retention (the 4th Obligation) 2. Which Records? 1995 Uniform Act (Section 21) Silent on this issue. CA - Holders must maintain records pertaining to property p reported or that should have been reported TX Statute is specific that records maintained must include: (1) the name, the social security number, if known, and the last known address of each person who, from the records of the holder of the property, appears to be the owner of the property; (2) a brief description of the property, including the identification number, if any; and (3) the balance of each account, if appropriate 45

46 Record Retention (the 4th Obligation) Practical Considerations: Audit Protection 1.Verification of reversals accounting and data errors 2. Evidence of reporting and timely reporting 3. Evidence of due diligence including certified mailing if it was required. (Note: OH law specifically requires retention of proof of certified mailing, or proof of valid exemption of certified mailing, for at least 5 years from the report filing date or completion of a State compliance audit, whichever is earlier. ) 46

47 AUDITS Preparing for An Audit Working with the State Tips Penalty Review 47

48 Preparing for An Audit Preliminary Questions Who is performing the audit? State or contract/third party auditors Which states are involved? What is the scope of the audit? (Number of years covered in the audit.) What audit procedures will be used? (What procedures will be used when records are incomplete or nonexistent?) What are the auditors schedules and site requirements Will the state(s) or their agent sign a confidentiality agreement? 48

49 Preparing for An Audit Internal Review Prior to Audit Document internal controls Understand transaction flow Review chart of accounts Review previously filed unclaimed property reports Compile supporting documentation, including due diligence records Review voided and outstanding check lists 49

50 Preparing for An Audit Data to Provide to Auditors Organization Chart Chart of Accounts Merger and Acquisition history Unclaimed Property Reports in previous years Evidence of Due Diligence 50

51 Working with the State: Audit Demeanor. Be Cooperative. Ifyou have a history of reporting: Audit Tips Show your compliance commitment via your written procedures and report files Ifchecksre reversed ersed arequestioned, provide ideupofficials with ithstatistics regarding the checks that have been reversed due to your research and procedures Show compliance first if applicable If you have no history of reporting: Is name & address info available for all potential liabilities? Consider all of your compliance alternatives; mitigation/recovery, voluntary compliance or disclosure agreements, etc. Consider the value aueof using outside experts epets 51

52 Working with the State: Penalty Assessments Is the penalty accurate? Consider time frame/scope of the penalty (CA corporate fiscal year controls) Does state law permit compounding? Recalculate penalty to determine accuracy Was the penalty assessed in error or is it unenforceable? Is there a statute of limitations i i on penalty assessment? Was the property that is the subject of the penalty filed during an amnesty period? Are there circumstances that may permit the state to set aside the penalty? Can the state waive penalties and interest? (If so, what are the parameters for waiver?) 52

53 Latest tdevelopments 53

54 Latest Developments: Dormancy Period Changes Delaware SB 334 Effective Date: 7/1/ Reduced the securities-related dormancy periods from 5 years to 3 years (except SC20 Credit Balances which remain at 5 years). Hawaii - HB 2559 Effective date: 7/1/ the HI legislature adopted the 1995 Uniform Unclaimed Property Act to replace the current Hawaii unclaimed property law. This legislation impacts reporting for the October 31 st, 2009 deadline. As of or cut-off date for that year will be June 30 th for all entities except life insurance which will have a December 31 st cut-off date AND an October 31 st reporting deadline. The report aggregate limit will be $50. New Hampshire HB 1533 Effective date: Approx. 8/3/2008 / - Various changes to the NH Abandoned Property law. Significant provisions in the bill include: 1) All reports with 20 or more items must be reported in an electronic format prescribed by the administrator; 2) Securities dormancy periods (including underlying shares) were reduced to 3 years from 5 years; and 3) Requires the unclaimed property administrator i to precede a sale of securities ii with ih a mailing to the owner. Oregon HB 2104 Effective Date: 1/1/ Reduces the dormancy periods from 5 to 3 years for property held by banks, financial institutions, and life insurance companies and for securities including dividends. Banks and financial institutions no longer must use certified mail to notify owners they are going to impose a fee or service charge. Changes are retroactive to property held prior to the effective date of the bill. The bill was signed by the Oregon Governor on 6/22/07. 54

55 Latest Developments: Dormancy Period Changes (2) South Carolina: SB 741 Effective Date: 4/15/ Reduced the securities dormancy periods to 3 years from 5 years. Made the penalties optional for failure to render a report, perform duties required in the Unclaimed Property Act or delivery property, etc., by using the language may be required to pay. Virgin Islands: Bill Effective Date: 7/12/08 Repeals the unclaimed property law and replaced it with a new one. Generally, the new law has 5, 3 and 1 year dormancy periods (i.e., gift certificates, customer credits in retail and insurance payments = 3 years; utility deposits and refunds, payroll and property held by a court or government = 1 year, securities, savings accounts and checking accounts = 5 years, travelers checks = 15 years, money orders = 7 years, etc.). The new law has a due diligence minimum and aggregate limit of $50. The reporting deadline is November 1 st for all entities except life insurance which has a May 1 st reporting deadline. 55

56 Latest Developments: Gift Certificates t and Cards Michigan HB 4050, HB 4317, HB 4680 and SB 388 Effective Dates: The 3 House Bills have an effective date of 11/1/2008 and the Senate Bill has a 9/30/2008 effective date. HB 4050 sets forth practices that t are prohibited with regard to gift cards issued by retailers (i.e., refusing to accept a gift certificate, restricting its use, altering the terms after issuance, failing to disclose the term, etc.). HB 4317 prohibits the issuance of retail gift cards/certificates that include inactivity or dormancy fees. HB 4680 prohibits the issuance by a retailer of a gift card / certificate that has an expiration period of less than 5 years. Senate Bill 388 sets a dormancy period of 5 years for gift cards / certificates, other than retail gift cards / certificates. Nebraska - Bill 668 Effective Date: 3/10/2008 The bill has various provisions relating to gift certificates and cards. Some of them are: A gift certificate / card which is not assessed any fees and does not have an expiration date shall not be presumed to be abandoned. A gift certificate / gift card which contains an expiration date or requires any type of post-sale finance charge or fee which is unredeemed for a period of three years from the date of issuance shall be presumed abandoned. A gift certificate / card issued prior to November 2, 2006, which contains an expiration date or requires any type of post-sale finance charge or fee and has not been redeemed shall not be presumed abandoned if the issuer's policy and practice as of July 1, 2006, is to waive all post-sale charges or fees and to honor such gift certificate or gift card, at no additional cost to the holder, whenever presented at full face value or the value remaining after any applicable purchases, expiration date notwithstanding. A written notice of such policy and practice shall be posted conspicuously by July 1, 2006, in not smaller than ten-point type, 56 at each site in all Nebraska locations at which the issuer distributes or redeems a gift certificate / card.

57 Latest Developments: Various Changes Tennessee - HB 3793 Effective Date: 5/16/ Safeguards the working papers and identity of holders involved in unclaimed property audits. Makes such paper confidential and not public records unless certain circumstances exist. Wisconsin: AB 617 Effective Date: 3/21/2008 The fiscal year is defined to be from July 1 st to June 30 th for the purposes of the report information cut-off and penalty assessment. 57

58 Resources 1. National Association of Unclaimed Property Administrators (NAUPA) 2. NAUPA II Standard Reporting Format: p p pdf Uniform Unclaimed Property Act Reporting Specifications: /lib / l /f /uupa95.txt 4. National Association of State Treasurers (NAST) t 5. Unclaimed Property Professionals Organization (UPPO) Annual Conference March 10 14, 2009 Hyatt Regency Jacksonville, FL 58

59 Your Presenters Today: Karen Anderson & Marcella Easly