On December 7, Georgeson’s Unclaimed Property Services group led an informative unclaimed property forum in Manhattan, followed by a holiday social at The Bennett.
The forum kicked off with a panel discussion featuring speakers from two of the largest reporting states - Delaware and New York. Delaware was represented by Jeffrey Bullock, Secretary of State, and Geoffrey (Geoff) Sawyer, partner at Drinker Biddle & Reath LLP. New York was represented by Kelly Kuracina, Assistant Bureau Director of Unclaimed Property, and Robert Tambini, Director of Audits. During the state panel led by Georgeson Unclaimed Property Services President, Cindy Nisley, the states were asked four primary questions and took questions from audience members. Special guest, Valerie Jundt, Unclaimed Property Specialist, co-facilitated the state panel. Below is a brief recap of the questions and the states’ responses.
1. Describe your state enforcement audits.
As of February 2, 2017 there were over 400 active audits being conducted on behalf of the state. It is now expected that most, if not all, will either be:
- settled and resolved;
- converted into a Voluntary Disclosure Agreement (VDA); or
- converted into a fast-track audit with 2-years to complete.
The state representatives reminded attendees that since February 22, 2015, all companies must receive an invitation to join the VDA Program before receiving an audit notice. There are two exceptions to the rule. First, securities are an exception because there are no estimations associated with securities audits. The state also made an exception for the ability to sign on to multistate audits initiated by other states; however it was noted that the Secretary of State must be consulted prior to Delaware joining the audit.
New York’s Kelly Kuracina shared that New York views auditing as an “educational process.” The state currently employs 45 full time auditors in New York City and Albany, with over 200 years of collective audit experience. While the state employs internal auditors, they are not restricted from contracting with third party audit firms to assist with out-of-state audits. Currently, the state holds contracts with Audit Services, Kelmar Associates, and Verus Financial.
2. Describe your state’s process for voluntary disclosure agreements (VDA).
The Secretary of State (SOS) VDA program was created in 2012 to “divorce compliance initiatives from state audit programs.” The goal was to create a separation from the state’s Department of Finance (DOF) where audit responsibilities currently live. The SOS VDA program was created to be more corporate friendly with a new face and brand. Geoff Sawyer explained the overall goal of the SOS program is to make the process “cheaper, faster and easier” for holders. He noted several times that the program offered by the SOS is “not intended to be a game of gotcha.”
New York’s Voluntary Compliance Program was designed to create opportunity and awareness for holders. The benefits of participation in a New York program include:
- Reduced reach back periods (10 years plus dormancy on general ledger items);
- 6 months to file your report without interest or penalty assessment; and
- Increased potential for customers to be reunited with their lost funds.
Holders that have not been contacted about an audit and are reporting for the first time are eligible to participate although acceptance into the Voluntary Compliance Program is subject to approval.
3. What are some recent or anticipated changes to your state law or administrative policies?
Delaware law was overhauled by the passage of Senate Bill 13 earlier this year. The law included record retention requirements and changes to the statute of limitation and look back periods. Holders are required to retain records for 10 years after the date a report was filed. Unless the holder is already under audit or filed a fraudulent report, the state is prohibited from initiating an audit more than 10 years after the duty to report arose. The look-back period for both audits and VDAs has also been reduced to 10 report years. Previously, it was not uncommon for Delaware auditors to look back as far as 1981. These changes represent significant reform to Delaware’s unclaimed property program.
New York’s legislative session begins January 3, 2018. Recent proposals include:
- defining electronic contact to bring the state into the 21st century;
- increasing the minimum dollar amount for certified mail of due diligence letters (from $1000 to $3000);
- changing rules for publication and advertisement; and
- paying interest for insurance related properties.
Kelly encourages stakeholders to submit comments to the state legislators.
4. What would you like to make sure that every company knows?
Geoff Sawyer would like holders to be aware of the benefits of the VDA program:
- Ensure compliance
Kelly would like holders to know that the state will provide training for holders and they are available to speak at seminars, webinars, meetings and conferences. New York is recognized as having the most successful abandoned property program in the country and they are very good at what they do.
Georgeson also had several unclaimed property experts on hand to facilitate a general session on unclaimed property legislative and industry updates. Dana Terry, Georgeson’s newest team member, provided several legislative updates from 2017. Those updates included:
- Texas H.B 1454 and H.B 2964 were both effective September 1, 2017.
- Several states have passed legislation modeled after the Revised Uniform Unclaimed Property Act of 2016 (RUUPA). Those states are:
- Delaware (S.B. 13)
- Tennessee (H.B. 420)
- Utah (S.B. 175)
- Illinois (S.B. 9)
- While none of these states followed RUUPA exactly, the Illinois law has deviated the most.
- North Carolina (H.B. 294) now requires very specific language to be included in due diligence letters and reduces the due diligence threshold for securities to $25.
- Arkansas (H. 1752) amends the timing to not more than 180 days or less than 90 days for due diligence letters.
- Delaware (S.B. 13) requires a first class due diligence letter if the value of property is $50 or greater and for securities, regardless of value.
- South Dakota (S. 34) requires the state treasurer to sell all stocks, bonds, and other negotiable instruments within 90 days of receipt.
- Arkansas (H.B. 1142) increases the dormancy period from securities from 5 to 7 years.
Pam Wentz, the National Practice Leader of Georgeson’s unclaimed property consulting team, followed up with an overview of new regulations for Florida and Delaware. She also noted concerns with California’s automatic interest assessments on past due property and Nevada’s assessment of interest and penalties on past due property. She noted that Nevada may waive the penalty so be sure to submit an abatement request.
Pam also shared her thoughts on audit activity on the horizon. She noted that it is becoming more common for companies to be under audit by multiple audit firms representing different states. States are no longer focused on only the large companies and are auditing some smaller and mid-sized corporations as well. The definition of “activity or owner generated contact” continues to be an issue with states and audit firms. Lastly, states are taking a closer look at retirement assets when performing audits.
There were several significant court cases this year that have had an impact on the unclaimed property industry. Pam discussed these cases and why they are relevant. Over the past few years, litigation has become common as holders are taking a stand by challenging legal issues.
Mike Ryan, Senior Vice President at Georgeson, closed out the event by sharing several common reporting errors and best practices for reporting. Some of those best practices include:
- Having detailed written policies and procedures that are accurate and up to date.
- Establishing a committee approach to unclaimed property reporting in the organization.
- Getting legal and upper management involved; often and early.
- Making outreach efforts to customers before it is time for a state mandated due diligence letter.
Mike summed up the bottom line with “Nothing good ever comes from escheatment.”
Georgeson would like to thank all of the panel participants. Plans for additional regional events throughout the next year are underway.
Georgeson’s top goal is to locate, educate and assist owners in taking action prior to escheatment regardless of the account type, value and method of reunification. Georgeson has a proven track record providing deep research and active handholding for owners since 1990. The dedicated research team and phone unit provide unmatched outreach techniques using a proprietary database. Customer data and security are a top priority.
For more information regarding the services offered by Georgeson’s Unclaimed Property team, please contact us