Slide 1 May 19-21, 2019 | Walt Disney World Resort®, FL From the Regulator’s Perspective: Recent Developments in Unclaimed Property Compliance for AP Professionals Brenda Mayrack State Escheator / Director Delaware Office of Unclaimed Property
Slide 1
May 19-21, 2019 | Walt Disney World Resort®, FL
From the Regulator’s Perspective: Recent Developments in Unclaimed Property
Compliance for AP Professionals
Brenda MayrackState Escheator / Director
Delaware Office of Unclaimed Property
Slide 2
Learning Objectives
May 19-21, 2019 | Walt Disney World® Resort, FL
• State unclaimed property requirements
• Steps companies should take to achieve
prospective and historical compliance
• Regulatory consequences for failure to
comply
Slide 3
What is Unclaimed Property?
, 2019 | Walt Disney World Resort®, FL May 19-21, 2019 | Walt Disney World® Resort, FL
➢ Legal Definition: Unclaimed property is … a fixed and certain
interest in tangible or intangible property held, issued or owed,
in the course of a company’s business that has been
abandoned or unclaimed for a specific period of time (dormancy
period) by the rightful owner.
➢ Indication of abandonment vs. owner interest
➢ Common Types of Unclaimed Property:
o Disbursements / Vendor Checks / Accounts Payable
o Mergers & Acquisition Activity
o Dividend Checks / Securities
o Accounts Receivable Credit Balances
o Payroll
o Commission / Bonuses
o Rebates
o Gift Cards / Stored Value Cards
Slide 4
What is Unclaimed Property?
May 19-21, 2019 | Walt Disney World® Resort, FL
➢Once property is deemed abandoned/unclaimed, it triggers the obligation to report and remit the value
of the UP to the appropriate jurisdiction.
➢The United States Supreme Court has established a two-pronged approach for determining priority
among states:
❑Texas v. New Jersey, 379 U.S. 674 (1965)
❑Pennsylvania v. New York, 407 U.S. 206 (1972)
❑Delaware v. New York, 507 U.S. 490 (1993)
➢ First Priority Rule: Report to State of the Owner’s last known address.
➢ Second Priority Rule: If no last known address for the Owner is indicated on the Holder’s books and
records, or if last known address is in a foreign country, then report and remit the UP to the
company’s state of incorporation.
➢ Public Policy: State governments are better situated to hold (in perpetuity) and return (one-stop
search for owners) property than private corporations, and if not returned, funds are used for public
benefit.
Slide 5
Unclaimed Property – The Story of a Check
May 19-21, 2019 | Walt Disney World® Resort, FL
➢Company A issues a paycheck to Employee B
➢Employee B never cashes the check and a replacement is never
issued, his wages remain unpaid
➢Company A is still holding the money to which Employee B is
entitled
Slide 6
Unclaimed Property – The Story of a Check
May 19-21, 2019 | Walt Disney World® Resort, FL
➢When the obligation to pay Employee B remains unsatisfied for a certain length
of time (typically 1 to 5 years), Company A may no longer hold onto this money
➢ Instead, Company A must report it as Unclaimed Property to the appropriate
state on the appropriate annual unclaimed property report
➢ If Employee B’s last know address is in Texas, then the amount of money for
this check is reported on Company A’s annual report to Texas
Slide 7
Unclaimed Property – The Story of a Check
May 19-21, 2019 | Walt Disney World® Resort, FL
➢Texas receives the money and publishes (in a newspaper,
on a website, etc.) that it has unclaimed property for
Employee B
➢In theory, Employee B can see his name and retrieve his
property from Texas by filing a claim.
Slide 8
Delaware Landscape
May 19-21, 2019 | Walt Disney World® Resort, FL
➢Delaware’s Corporate Franchise
-1.3 million legal entities
-66% of Fortune 500
-Built on a reputation for efficiency, predictability, and
fairness
➢Approximately 10,000 unique unclaimed property filers
annually
➢A Compliance Gap: Many Delaware legal entities with
unclaimed property liability likely are not reporting to
Delaware and other states.
• Parent
• Subsidiaries and affiliated entities
Slide 9
Vision Statement
May 19-21, 2019 | Walt Disney World® Resort, FL
Collecting and Returning
Unclaimed Property
for the Public Good and
Business Fairness
Slide 10
Mission Statement
May 19-21, 2019 | Walt Disney World® Resort, FL
To fairly, accurately, and
efficiently collect and maintain
the unclaimed property
reportable to the State of
Delaware and facilitate its
prompt reunification with the
rightful owners.
Slide 11
Core Values
May 19-21, 2019 | Walt Disney World® Resort, FL
• Fair
• Accurate
• Innovative
• Responsive
Slide 12
Structure
May 19-21, 2019 | Walt Disney World® Resort, FL
Department of Finance
Compliance
Holder
Reporting
Enforcement
Exams
Annual
Compliance
Reviews
Legacy VDAs
Division of
Revenue
Division of
Lottery
Division of
Accounting
Department of State
Voluntary Disclosure
Agreement (VDA)
Program
Office of the Secretary
Office of Unclaimed Property
Securities
Claims
State Escheator
Slide 13
Overview
May 19-21, 2019 | Walt Disney World® Resort, FL
Claims
Paid
Slide 14
Priorities – for Companies (Holders)
May 19-21, 2019 | Walt Disney World® Resort, FL
• Annual Reporting
• If not reporting, begin reporting
• Voluntary Compliance (i.e., SOS VDA)
• If have historical exposure, sign up for the SOS VDA program
• Enforcement
• Last resort
• Only as needed to promote compliance
• Where holder have not voluntarily complied in annual reports or VDAs
• Likely involves:
• Examination of books & records to determine liability
• Interest & Penalties
Slide 15
Annual Reporting – State’s View
May 19-21, 2019 | Walt Disney World® Resort, FL
• Online reporting required
− Upload NAUPA File
− Manual Entry
• No paper/disk reports accepted after March 1, 2018
• Deadlines
− Banks: 11/10
− Insurance: 12/20
− All Other Holders & Businesses Associations: 3/1
• Owner outreach (“Due Diligence”) required
• OUP sends filing reminders to holders
Slide 16
Annual Reporting – Company Overview
May 19-21, 2019 | Walt Disney World® Resort, FL
• Identify outstanding obligations (uncashed checks,
A/R credits, unused gift cards, dormant accounts,
etc.)
• Determine reporting state based on priority rules
and owner address
• Apply state’s dormancy period by property type
• Before reporting, conduct owner outreach as
required by state law (“due diligence” letter)
• Report & remit property to each state
Slide 17
Annual Reporting – Company Overview
May 19-21, 2019 | Walt Disney World® Resort, FL
• Many companies outsource all or part of unclaimed property
reporting functions
• Companies may conduct additional outreach to contact owners
prior to dormancy
• Consolidated v. single-entity reporting
• Company structure: shared service environment?
• Property types
• Third-party administrators – allocation of UP responsibility?
• Payroll
• Transfer Agents
• Ultimately, the company is the “holder” or has oversight
responsibilities over TPAs
• Ensure that TPAs are meeting contractual responsibilities for UP.
Slide 18
Annual Reporting
May 19-21, 2019 | Walt Disney World® Resort, FL
• https://unclaimedproperty.delaware.gov/app/submit-a-report
Slide 19
Upload File (many properties)
May 19-21, 2019 | Walt Disney World® Resort, FL
Slide 20
Manual Reporting (few properties)
May 19-21, 2019 | Walt Disney World® Resort, FL
Slide 21
Voluntary Disclosure Agreements (VDAs)
May 19-21, 2019 | Walt Disney World® Resort, FL
• Administered by Secretary of State (“SOS”)
• If holder receives invite from SOS, and does
not opt in to VDA Program, holder will receive
exam notice after 60 days
• 2-year process
• Holder-directed review
• VDA will reflect scope of review (entities,
property types)
• Penalties & interest waived
Slide 22
Annual Compliance Reviews
May 19-21, 2019 | Walt Disney World® Resort, FL
• Established by SB 13 (12 Del. C. § 1170)
• Selecting holders based on certain criteria and at
random for review
• Opportunity for holder to remedy any errors in filing
without an exam
• Educational opportunities for holders without
regulatory consequence
• Policies & Procedures
• Respond promptly to requests
• Do not ignore, or will be escalated for enforcement
Slide 23
Annual Compliance Reviews
May 19-21, 2019 | Walt Disney World® Resort, FL
• Based on common holder reporting errors & filing
history
• Paper filing
• Late
• Incorrect Information
• Variance by year
• Variance by Property type
• Variance with comparable holders/industry
• Non-filers will be asked to file a Verified Report
• Targeted election of filers for additional review
• Completed within one year
• Not an exam
• Abbreviated review of filing
Slide 24
Enforcement
May 19-21, 2019 | Walt Disney World® Resort, FL
• All holders receive an invitation to the VDA Program before
receiving a Notice of Examination
- Delaware Registered Agents receive a copy
- Holder has 60 days to enter VDA program
- After 60+ days, Holder will receive Notice of Examination,
unless Holder has entered VDA program.
• Exam Process
- Interest & Penalties
- Expectation is that all exams are completed within 2-3 years
- Holders have 30-60 to respond to all IDRs, or
o 30-day letter
o Subpoena, if necessary
Slide 25
Claims
May 19-21, 2019 | Walt Disney World® Resort, FL
https://unclaimedproperty.delaware.gov/
Slide 26
Claims
May 19-21, 2019 | Walt Disney World® Resort, FL
• Searchable online database
-Smart device accessible
-Process improvements
-Technology improvements
-Fraud prevention enhancements
• Businesses are also “owners” and may claim property.
-Holder reimbursement claims
-Wrongful escheatment
-Business as owner claims
-Must designate & authorize representative to file claims
Slide 27
What can AP Professionals Do?
May 19-21, 2019 | Walt Disney World® Resort, FL
➢ Implement robust policies & procedures to track potential unclaimed property, conduct owner outreach, and
report to all states.
➢ Comply with annual unclaimed property reporting deadlines and requirements for all jurisdictions.
➢ If your company is not reporting annually to Delaware, begin filing annually and consider the SOS VDA program
for historical liability for Delaware legal entities.
➢ Other states offer a variety of VDA/amnesty programs.
➢ Search for unclaimed property owed to your company as an owner and pursue claims in all states.
➢ If you receive correspondence regarding Delaware unclaimed property, treat it seriously and respond in timely
manner.
➢ Annual Reporting Reminder / Follow-Up Request
➢ Invitation to SOS VDA Program
➢ Annual Compliance Review Request
➢ Notice of Examination
➢ Escalate to company leadership, if needed, to ensure that sufficient internal and external resources are available
to meet compliance obligations.
Slide 28
Resources
May 19-21, 2019 | Walt Disney World® Resort, FL
Statute: http://delcode.delaware.gov/title12/c011/sc02/index.shtml
Regulations (Reporting & Exams): http://regulations.delaware.gov/AdminCode/title12/1000/100/104.shtml#1041398
Regulations (SOS VDAs): http://regulations.delaware.gov/AdminCode/title12/300/301.shtml#1040963
Holder Reporting Guidelines: https://unclaimedproperty.delaware.gov/app/reporting-guidelines
Holder Reporting Submission Portal: https://unclaimedproperty.delaware.gov/app/submit-a-report
Claims: https://unclaimedproperty.delaware.gov/
Slide 29
Q & A?
May 19-21, 2019 | Walt Disney World® Resort, FL
Brenda R. Mayrack
State Escheator / Director, Office of Unclaimed Property
D: 302-577-8891
https://unclaimedproperty.delaware.gov
Slide 30
Contact Information
May 19-21, 2019 | Walt Disney World® Resort, FL
Brenda R. Mayrack
State Escheator / Director, Office of Unclaimed Property
D: 302-577-8891
https://unclaimedproperty.delaware.gov