The National Association of Unclaimed Property Administrators (NAUPA) held its annual conference May 21-24 in Providence, Rhode Island as part of the National Association of State Treasurers (NAST) Conference. In addition to state unclaimed property administrators and employees, law firms, third party auditors, and holder advocates were also in attendance. I attended the meeting as a representative of Georgeson. This article will outline highlights and what I view as key takeaways from the conference. Please note that the views of the presenters may not necessarily represent the views of all states or NAUPA and in many cases, sessions were led by third party audit firms.
Reuniting owners with unclaimed property takes a village
MissingMoney.com, the national database of unclaimed properties that simplifies rightful owner searches and enhances state reunification efforts is getting a new look and will be managed by David Milby, the previous NAUPA Executive Director. The website offers free public searches and free state participation but not all states participate in the program. There are currently 43 jurisdictions that participate on the database. Current results for MissingMoney.com include:
- 875 Million searches performed
- 150 Thousand searches per day
- 22.5 Million claims
- 11 Million claims by state residents
- 11.5 Million claims by non-state residents
- 130 Million searchable property records
What are states doing to reunite money with owners?
Several states shared some of their marketing and media efforts used to help spread the word that citizens might have money sitting with the state unclaimed property offices. Below is a list of what some states have done that has brought them success in reuniting assets with the rightful owner:
- Purple heart return day
- Compare unclaimed files against tax records for better address
- Telethons
- Live auctions
- Facebook focus – videos and photos of safe deposit property
- Press coverage
- State fairs
- Social media presence
- Print ads in newspapers
- Promotional videos
Time Bars: Limiting how long states can compel compliance
Time bars, also known as a period of limitation, statute of limitation, period of repose, or lapsed period of enforcement, is the period of time after which the state's ability to enforce its unclaimed property law is barred. Property subject to a time bar remains unclaimed property; however, the state's ability to enforce compliance is impaired or eliminated.
The states view time bars as a form of reporting exemption, eliminating the filing requirement for property that has passed the statute of limitations. Therefore, time bars ultimately result in excluding material amounts of unclaimed property from reporting and preventing the return of assets to rightful owners.
Each of the four Uniform Property Acts contained a different time bar so it isn't surprising that there is an extreme lack of uniformity in state laws with respect to time bars. Some variations include:
- Definitive set number of years
- Contingent depending on filing or notice
- Hybrid of both contingent and definitive
- Audit related with a limitation on years to be examined
- No time bar at all
The RUUPA includes a statute of limitations of 5 years from the date the holder filed a non-fraudulent report and a statute of repose of 10 years after the duty arose if no report was filed.
The states are certain that the shorter and more absolute the time bar, the less property that will be collected. In the opinion of the presenter the states would prefer not to have a time bar.
Mind the gap: Focusing on a state's compliance regime on gaps in reporting
States believe that the annual compliance rates are very low and a large number of holders (big and small) are still not regular and/or complete annual filers. Even holders that file regularly are not always filing all of their reportable unclaimed property. As a result, the state's core objective is to increase annual compliance. In the view of the states, increasing annual compliance means:
- More unclaimed property to be returned to the rightful owners
- Less regulatory enforcement actions
- More predictability for states, holders, and owners
The states were focused on ensuring annual compliance is timely, complete and accurate. The two primary solutions they discussed on were:
- Offer meaningful and diverse voluntary compliance options for holders to "catch-up" on past due unclaimed property liabilities; and
- Maintain a robust audit program.
Traditional Voluntary Disclosure Agreement (VDA) programs generally involve a high-level review with very little follow-up and the waiver of interest and penalties, and retention of the state's right to audit the holder.
The Delaware VDA program has been a useful tool to drive increased compliance. Over the past 6 years, the state has settled over 580 VDAs and collected roughly $800 Million in unclaimed property. Representatives of the state of Delaware believe that by communicating expectations up-front, and making the program voluntary, the state was able to overcome certain conflicts that were otherwise delaying resolution of audits.
The other option the states are looking to for bridging the compliance gap is to maintain a robust audit program. According to one speaker, the threat of audit drives compliance. The overall principle is to create a diverse suite of compliance options (voluntary and mandatory) and with varying degrees of rigor.
Clearly, the states have a very distinct perception that may or may not take into account the holder's point of view. Perhaps the real gap that needs to be bridged is between the states and holders, to find a better middle ground such as drafting legislation that is more uniform, and easier for holders to understand in order to increase compliance, offering more holder education, and consistent audit guidelines.
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