Barganier and Associates was happy to sponsor the Unclaimed Property Professionals Organization (UPPO) Holder Seminar held in Atlanta, Georgia this week. The seminar was held over two days in downtown Atlanta, covering topics such as holders' rights and responsibilities, policies and procedures, due diligence requirements, audit defense, and federal law preemption of state unclaimed property laws.
There were two tracks available to attendees based on their experience in unclaimed property - a beginner's track and an intermediate track. Barganier had personnel attend each session. Here are the top five takeaways that we gathered from the Holders' Seminar.
- States of incorporation, particularly Delaware, have incentives during an audit to determine that a company does not have the required records available to perform an audit. When records are not available for certain periods, the liability is extrapolated using the records that are available from other periods. Without names and addresses, there is no chance that there will ever be a claim and that money can be used for other purposes. However, companies have begun challenging the extrapolation methods used by Delaware during administrative appeals and in litigation.
- Changes in state law and some of the proposed changes in the Model Act are leading to confusion on who is the holder. In Delaware v. New York, the U.S. Supreme Court used the debtor-creditor relationship to define the obligor to report unclaimed property. Recent statutory and administrative changes are adding not only the legal obligor but also the party in possession of the unclaimed property to the definition of a holder. This can create problems with multiple states claiming property from multiple holders.
- State administrators have effectively been changing the law by using administrative law regulations and using informal methods like holder handbooks. This has been highlighted by the recent life insurance audits and resulting litigation by Thrivent, ANICO and others. Companies should monitor not only legislative changes, but also administrative policy changes in order to stay in compliance. This is made difficult since often the changes are only communicated to limited groups, like UPPO, in letter agreements and are not made publicly available.
- Record retention remains a very important topic. One of the early document requests during an audit will be a request for all previously filed reports. Did you know that the states often cannot produce reports that companies have filed with them? Companies should not rely on any third party, including states or financial institutions, to retain records for use in an unclaimed property audit. Financial institutions have their own set of record retention rules that leave large gaps in unclaimed property audits. As a result, each company should save bank statements, outstanding checklists, and other pertinent records as part of their own record retention policies. Companies should also obtain records from any third-party administrator (TPA) that reports unclaimed property on your behalf (payroll, workers compensation, other employee benefits, rebates, and gift cards are common TPA related property types). It is also important to note that some states will audit years that exceed their statutory record retention policies.
- States are continuing to work towards updating their laws and programs to catch up with technological and business processes. Many states are implementing online reporting and removing options for paper reporting. Where its needed, state administrators are working with state legislatures to update laws to allow for electronic verification and removing notarization requirements for filing reports. They are also moving to allow for more electronic communication for due diligence (email, websites, call centers, etc) and to modernize the definition of contact (signing into secured websites, etc).
UPPO will hold its annual conference next March in Orlando, Florida.