Unclaimed Property Overview

By Zachary Porter December 19, 2019

(The rules and your responsibilities)

According to the National Association of Unclaimed Property Administrators (NAUPA), every U.S. state, District of Columbia, Puerto Rico, and the U.S. Virgin Islands have unclaimed property programs that actively and continuously find owners of lost and forgotten assets. Now you may be asking yourself: What is unclaimed property? The NAUPA defines unclaimed property, which is also sometimes referred to as abandoned property, as accounts in financial institutions and companies that have had no activity generated or contact with the owner for a specified period of time. Common types of unclaimed property are savings or checking accounts, payroll checks, gift cards and customer overpayments.

Each state has enacted an unclaimed property law under which companies must remit unclaimed property to the state, which in turn works to reunite the property with its rightful owner. If you are reading this and think your company may be subject to unclaimed property law, review the list of below steps you can take to identify your exposure and what you can do to achieve compliance with the applicable laws.

• Determine what types of property you may have that are subject to unclaimed property requirements. Here are a few examples:
• • Savings or checking accounts
  • Payroll checks
  • Insurance payments or refunds
  • Customer overpayments or deposits
  • Stocks
  • Gift cards

• Determine in which states the property owners reside

Each state has its own Unclaimed Property Law – it is important to ensure you are following the law and applicable requirements in the correct state(s); the property owner’s state presides. A number of states have what is referred to as “reciprocity” in which all unclaimed property can be remitted to one state. That state will work with the other states to ensure that the property is remitted to the appropriate places. Reciprocity is dependent on state and property type.

• Determine the dormancy period for your state(s) and property type(s)

The dormancy period is the amount of time that the property has to be outstanding to be considered “abandoned” and subject to unclaimed property requirements. This could be time elapsed from original issue date of the check, date of the last account statement, date of last contact, or other. There are different dormancy periods dependent on the state and type of property. For example, in Vermont, an uncashed check is considered unclaimed after three years of dormancy; in Maine, five years.

• Identify the reporting requirements for the state of unclaimed property filing

As an example, the state of Vermont requires that property holders file annual holder reports by May 1 each year; in Maine, by November 1.

• Review the due diligence requirements for the state of unclaimed property filing

Most, if not all, states require property holders to complete due diligence prior to filing and remitting the property to the state. An example of due diligence would be sending letters to property owners letting them know what unclaimed property they may be able to claim, and how to do so.

Due diligence must be completed in a specified timeframe prior to the annual filing based on the state’s Unclaimed Property Law.

• Complete the unclaimed property filing and remit the applicable property to the state(s)

Review each state’s filing requirements (i.e. format of report, method of payment). File the report and remit the property by the annual deadline.

• Develop a project plan and internal process to continuously evaluate your unclaimed property exposure, complete due diligence requirements, and file your unclaimed property reports per state requirements

This step is critical in ensuring you are in compliance with state laws and to avoid any civil penalties or interest that you could be subject to if you are not in compliance.

The above list is a great high-level approach you can take to achieving compliance. You may now be asking yourself, however: What can I do if I determine I have never filed an annual unclaimed property report, but should have, based on the state law?

Most, if not all, states have a form of Voluntary Compliance Program (VCP) in which holders that are unaware of their legal obligation to report may be allowed to report unclaimed property liabilities without being subject to the assessment of any civil penalties and interest, which, depending on the number of assets and age, can be substantial. This process generally starts with contacting the state (this can be done anonymously at the outset) and explaining the situation and determining the steps necessary to take  part in the VCP.

States have a “look-back” period for which you will need to evaluate your unclaimed property exposure and file and remit accordingly. All of the property identified in the “look-back” period must be subject to the same due diligence and reporting processes as described above for annual compliance.

Once you have filed your report under the VCP, develop a project plan and internal process to continuously evaluate your unclaimed property exposure, complete due diligence requirements, and file your unclaimed property reports per state requirements. This step applies to all situations and is critical to ensuring you remain in compliance.

As of November 7, 2019 the Office of the state Treasurer for the state of Maine was holding approximately $256 million of Mainers’ unclaimed property. If you manage a financial institution or company, chances are you are subject to unclaimed property laws in one way or another. The above steps are a great way to begin understanding your unclaimed property exposure, and working toward compliance. It could go a long way in helping you avoid costly penalties and interest.

BNN works with several clients to address their unclaimed property compliance needs.  If you have questions regarding your unclaimed property exposure and are interested in learning more about how we may be able to assist you, please contact Zach Porter.