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Showing posts from 2016

Pennsylvania Changes IRA Rules

According to the Investment Company Institute, Americans have $5.68 trillion in Individual Retirement Accounts (IRAs).  In a traditional IRA account, a person can make tax deductible contributions to an account that can grow over the years with no tax impact until distribution.  Importantly, individuals must wait until age 59.5 to make withdrawals without a tax penalty (and individuals generally must begin taking distributions at age 70.5).  In other words, an IRA is a prototypical long term investment.  Depending upon the individual's age when he or she opens the plan, decades can go by before the money is touched, in fact, to avoid tax penalties, it is likely. The unclaimed property laws account for the fact that long dormancy is expected.  Pursuant to the 1995 Uniform Unclaimed Property Act, the dormancy period for IRAs and similar accounts does not begin to run until (1) the attempted distribution of assets or (2) the date that distribution must begin under the tax laws. 

Delware and Temple Inland Settle - Questions to Remain Unanswered

In late June, 2016 a Delaware federal court issued a decision ruling that Delaware's unclaimed property audit and estimation practices "shock[ed] the conscience" of the court and likely violated the due process rights of Temple Inland (a Delaware company being subjected to an unclaimed property audit on Delaware's behalf by a private auditing firm).  While the court's holding was big news in the unclaimed property industry and signaled potentially seismic changes in the way unclaimed property audits are conducted, the real work was left to be done:  the Court expressly left open the issue of how Delaware's violations were to be remedied. Even with this important step left to be taken, the holder community was understandably excited that -- finally -- there would be some answers concerning (a) the interplay between estimation and availability of records; (b) the proper methods for calculating and sourcing historical unclaimed property liabilities; and (c) t

Charging Money For Free Informaton On Both Sides of the World

The Sydney Morning Herald (Australia) recently posted an article outlining how various companies in Australia seek to make money by repackaging otherwise public information at increased prices. According to the article, profit-minded Aussies are charging for public information relating to unclaimed property, ancestry records, government reports -- sometimes at a significant profit.  The experience here in the U.S. is no different, particularly with regard to unclaimed property.  Agreements with so-called "finder firms" are allowed in many states, pursuant to which the finder agrees to assist a claimant with obtaining his or her money from the state in exchange for a percentage fee. Of course, states generally charge no fees for searching, claiming and receiving unclaimed property that they hold for the benefit of the rightful owner.  Accordingly, finder firms (might) provide you with expertise or time (i.e., the they will deal with the the claim process so you do

Temple Inland Scores Win in Delaware Estimation Suit - Impact to be Determined

In 2014, Temple Inland filed a lawsuit against the State of Delaware, challenging the results and methodology of an unclaimed property audit performed by that state.  As part of a 2008 audit, the State of Delaware assessed Temple Inland unclaimed property liabilities for a 22 year time period, allegedly because of Temple Inland's failure to maintain records (notwithstanding the fact that no Delaware law requires a holder to keep such records).  After availing itself of the state's administrative appeal process, Temple Inland filed a lawsuit in federal  challenged the state's use of estimation in the audit context, arguing that the technique (1) was preempted by the Supreme Court's Texas v. New Jersey decision; (2) violated Temple Inland's rights under the Due Process Clause of the Constitution; (3) represented an unconstitutional "taking" of Temple Inland's property; and (4) violated the ex post facto clause of the Constitution. Initially, both part

Arizona to Take a Closer Look at Contingent Fee Audits

A few days ago, the Governor of Arizona signed House Bill 2343 into law .  The legislation makes some welcome and well-meaning changes to the way that unclaimed property audits (including, specifically, contingent fee audits) are conducted.  For example, the legislation provides that all holders will receive a "notice of rights" (1) making clear that the Department of Revenue makes all final decisions "that any unclaimed property is reportable;" (2) setting forth appeals procedures; (3) notifying holders where they can file complaints regarding auditor conduct; and (4) contact information for designated employees.  In addition to these changes, the new legislation also signals that Arizona is taking a fresh look at the use of contingent fee audits, and whether there are any practical alternatives.  The law requires the Department of Revenue to issue a Request for Information by the beginning of next year to "explore the feasibility of contracting for audits .

Friday Lost + Found: "Show Me State" Searches, "Sunshine State" Slowdown, Upcoming Compliance Webinar

Missouri Legislature Passes Life Insurance Bill . . . . -- The Missouri legislature recently passed House Bill 2150 , which would require insurance companies to compare policy information against the Social Security Administration's Death Master File on a semiannual basis. . . . .While Florida Insurers Seek to Block Bill -- In the same vein, WMFE is reporting that a group of insurers has filed suit in Florida state court seeking to prevent retroactive provision of a law that requires them to undertake DMF searches back to 1992. UPPO Audit Webinar -- The Unclaimed Property Professionals Organization (UPPO) is hosting a webinar on compliance efforts and avoiding audits.  Among the topics to be covered are state amnesty programs, completing state unclaimed property questionnaires, and fine-tuning compliance procedures.  Further information and sign-up details can be found at the UPPO website.

Friday Lost + Found: California's Audit Haul, Delaware Faces Threats, AARP Says "Open Your Mail"

California Unclaimed Property Audits Bring in Over $1B Per Year -- The Lake Arrowhead, California Mountain News has an article about a recent speech given by California State Treasurer John Chiang .  In addition to discussing the state budget, new technology initiatives, and " his perspective on the 'American Dream,'" Treasurer Chiang gave some information relating to his time as the State Controller.  As reported by Mountain News , Treasurer Chiang claimed that California's unclaimed property program was "broken" when he took over as Controller, and that his focus on "high profile audits brought in $9.3 billion" during his time in office (or about $1.2 billion per year).   To put that number into some perspective, $1.2 billion per year is more than the GDP of at at least 17 countries. Delaware Online Chronicles Threats to Delaware's Revenue -- In Delaware Online there is an editorial by Harry Themal which outlines some of the "

Oklahoma Supreme Court Affirms Dismissal of Suit Challenging Unclaimed Property Program as "Ponzi Scheme"

Recently, the Supreme Court of Oklahoma issued a decision in Dani v. Miller , an attempted class action suit challenging Oklahoma's Unclaimed Property Program as a "Ponzi Scheme."  In that case, an Oklahoma resident filed a number of constitutional and common-law challenges to the Oklahoma Unclaimed Property Act and its administration.  In particular, the plaintiff was challenging Oklahoma's practice (shared by nearly all the states) of only holding a portion of unclaimed property to pay out claims, while using the rest for state revenue.  As the Oklahoma Supreme Court explained: "[T]he UUPA contemplates and accounts for the fact that not all owners of abandoned property will seek to recover it.  The UUPA therefore creates a system where a reserve is maintained in the Unclaimed Property Fund to pay approved claims and the remainder is deposited to the General Revenue Fund for use by the state."  The plaintiffs contended that Oklahoma's unclaimed pro

Friday Lost + Found: Airport Accumulations, Bucks on the Bayou, Reporting Refresher

Loose Change Adds Up -- The UK's Daily Mail reports that the Transportation Security Administration collected over $750,000 last year at U.S. airports (and over $4.3 million over the last eight years) in loose change and the like left at security checkpoints.   States, They're Just Like Us -- WBRZ in Baton Rouge, Louisiana (home of Mike the Tiger ) has an article about the unclaimed property held by the State of Louisiana on behalf of various agencies of . . . the State of Louisiana.  According to the story, some of the $700 million held by the State is owed to various government agencies, many of which are operating under limited budgets. Upcoming UPPO Webinar on Reporting -- On May 18, the Unclaimed Property Professionals Organization is hosting a webinar on the details of unclaimed property reporting.  If you need a refresher in advance of the fall reporting season, signup information is available at the UPPO website.

Friday Lost + Found: More Fraud Warnings, Is DMF the Answer?

Massachusetts Warns of Fraudulent Letters -- Massachusetts Treasurer Deborah Goldberg issued a warning that her office has been receiving reports of fraudulent unclaimed property letters seeming to come from the Office of the Commonwealth Treasurer.  As a reminder, states do not charge owners of unclaimed property for searching for and obtaining property from the state. Life Insurance on Sixty Minutes -- CBS's news program 60 Minutes recently ran a story about life insurers payment practices that is based, in large part, on the mutli-state audits of insurers' unclaimed property practices.  As a result of those investigations, states have become increasingly more insistent that insurers consult the Social Security "Death Master File" in order to determine when life insurance benefits have become payable. But Is DMF The Answer? -- Though more and more states are requiring DMF searches as part of unclaimed property law or insurance regulatory compliance,

Further Update on West Virginia Life Insurance Legislation

We recently published a brief post concerning West Virginia legislation relating to the obligation (or not) of life insurers to review the Social Security Death Master File (DMF) to determine when a life insurance policy becomes payable.  After the West Virginia Supreme Court held that life insurers had a duty to periodically ascertain when life insurance policies become payable, a few West Virginia legislators introduced a bill that would largely undo that decision - by specifically providing that " the obligation to pay does not arise until after a claim is made." Instead of that legislation, however, the West Virginia legislature recently passed a  bill that would make DMF searches a statutory requirement for insurers.  The Governor signed that bill on April 1, effective June 30, 2016.

West Virginia Insurance Battle Moves From Courts to Legislature

Last summer, the West Virginia Supreme Court of Appeals issued an opinion in Purdue v. Nationwide Life Insurance Company , a case presenting the issue of whether a life insurer is required to undertake periodic investigations to determine whether any of its policyholders are deceased (and, thus, that a death benefit is payable).  While the Court did not rule that insurers had a specific obligation to review the Social Security Death Master File (DMF) or similar databases, it nonetheless held that the dormancy period for a life insurance policy begins at the date of death and placed the burden on insurers to figure out how to ascertain that information.  Of course, an insurer could search the DMF, the Court explained, but they could also "contact its insureds directly" (e.g., call them every year), farm the task out to agents, or do whatever else the found "the most economical" so long as they obtained the required information.  While the West Virginia Su

Delaware Proposes New VDA and Audit Guidelines - Comments Welcome

The Delaware Department of Finance has posted proposed regulations for public comment to govern the state's unclaimed property audits and VDA proposals.  The proposed regulations are intended to implement the Delaware legislature's direction "to complete the development of a detailed manual containing procedural guidelines for the conduct of Delaware unclaimed property examinations" as per January 2015's Senate Bill 11 . Among the highlights of the proposed regulations relating to VDAs administered by the Department of Finance* is the establishment of a "rolling look-back date of 19 report years" for all VDAs entered into on or after January 1, 2017. The proposed audit regulations include details regarding the appropriate sampling and estimation methodologies, rules for the auditor's conduct of the audit, procedural steps, as well as a sample (though very summary) non-disclosure agreement acceptable to the state. The proposed regulations also

Supreme Court Declines to Hear Unclaimed Property Case, But Fires a Shot Across the Bow of "Cash-strapped States"

Today, the Supreme Court of the United States issued an order declining to hear the case of Taylor v. Yee .  In Taylor , the United States Court of Appeals upheld a federal court's dismissal of a case challenging the methods used by California to notify owners that there property is about to be, or has been, escheated to the state. Specifically, the Taylor plaintiffs alleged that California violated the constitutional rights of unclaimed property owners by failing to, among other things, access databases of other California government agencies for information relating to the whereabouts of unclaimed property owners. The Supreme Court's review of lower court decisions is mostly discretionary, so the decision not to review a particular case is not an approval by the Supreme Court of the decision reached below.  In fact, that seems to be especially the case here, as Justices Alito and Thomas agreed with the decision to deny review the Ninth Circuit's decision in Taylor , b

Florida Senate Bill 970 -- Will Florida Expand the Use of Estimation?

One of the most controversial issues surrounding unclaimed property audits is estimation -- the use by auditors of statistical sampling and extrapolation to calculate a holder's historical unclaimed property liability in years that there are no researchable records available.  Holders and states dispute, among other things, when such estimation is appropriate, how it should be performed, and whether estimation can be used at all when not specifically authorized by statute.  Estimation has been a commonly contested issue arising in litigation between holders and states , and is one of the issues hotly contested in connection with the proposed revision of the Uniform Unclaimed Property Act. While states, auditors, holders, and holder advocates dispute a number of issues with regard to estimation, until now they all agreed on at least one thing:  that unclaimed property liabilities for "estimated" years (where actual records were not reviewed) were all payable to the holde

Friday Lost + Found: Just How Much Are States Holding in Unclaimed Property?

As the East Coast prepares for its first major snowstorm of 2016, we take a quick look at some recent stories concerning the dollar value of unclaimed property held by state governments.  California --  Over $8 billion Connecticut -- $710 million Illinois -- Over $2 billion Maryland  -- Over $1 billion New York --   Over $14 billion According to the National Association of Unclaimed Property Administrators, the states collectively are holding in excess of $40 Billion in unclaimed property for the rightful owners of those sums.  Like so many snowflakes, those misplaced pennies add up.

Happy New Year - A Look Ahead

Welcome to 2016.  What unclaimed property issues will come up over the next 365 (actually, 366 ) days?  While you can never be sure, here are some stories that we will be keeping an eye on. Lawsuits, Lawsuits, Everwhere -- More and more holders are challenging state audit procedures, practices, and results.  The Unclaimed Property Professionals Organization has a great roundup that we needn't repeat here, but cases are pending challenging Delaware's estimation techniques ( Temple Inland v. Cook ), the legality and use of gift card subsidiaries ( French v. Card Compliant ), federal preemption ( National Freight v. Sidamon-Eristoff ), and a variety of other issues.  A decision in any one of these cases could have a significant effect on unclaimed property practices. Revision to the Uniform Unclaimed Property Act -- The Uniform Law Commission of the National Conference of Commissioners on Uniform State Laws is continuing its efforts to  revise the Uniform Unclaimed Property