Keane Insights: Unclaimed Property Issues & News

Posted on Friday, 20th January 2012 by Keane Unclaimed Property Team

In recent months, the life insurance industry has experienced an increased level of scrutiny, as two individual states have proposed legislation that mandates stronger beneficiary location requirements, as well as the use of the Social Security Administration Death Master File (DMF) to identify deceased policy holders and potential decedents. Despite many proposals and discussions, there is still debate around the question of when an insurer is obligated to pay out any benefits. However, insurers such as John Hancock and Prudential have reached settlements with various states to establish a process for identifying deceased owners and paying out policies to the beneficiaries who had not previously contacted the insurers. If unable to locate beneficiaries within the allotted timeframes, the companies are required to report the policy proceeds to the states as unclaimed property.

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Posted on Friday, 13th January 2012 by Keane Unclaimed Property Team

A second state has now introduced a bill proposing periodic death master file searches and more routine life insurance beneficiary location. In what is likely the beginning of a trend, Tennessee has proposed rules similar to those found in the Model Unclaimed Life Insurance Benefits Act recently adopted by the National Conference of Insurance Legislators.  Specifically, on January 10, 2012, the Tennessee legislature filed House Bill 2283 proposing the Unclaimed Life Insurance Benefits Act. The provisions contained within this bill are almost identical to those found in the recently proposed Kentucky bill. To summarize, here are the key points of Tennessee HB 2283:

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Posted on Friday, 6th January 2012 by Keane Unclaimed Property Team

On January 5, 2012, the United States Court of Appeals for the Third Circuit issued its opinion in the case of New Jersey Retail Merchants Association v. Sidamon-Eristoff which concerns several plaintiffs’ challenges against NJ A3002, the bill passed on June 30, 2010.  The bill featured major changes to New Jersey’s approach to unclaimed gift certificates, stored value cards, and gift card escheatment; beginning with the requirement that they be reported, which was previously not the case in New Jersey.  Also, holders were to record the zip code of gift card purchasers and, if the address of the purchaser was unknown, holders were to report those cards to New Jersey on the basis of a “place of purchase” presumption.

As previously discussed here, Keane had described how the District Court in New Jersey held that the “place of purchase” presumption ran afoul of the priority rules outlined in the United States Supreme Court opinion of Texas v. New Jersey and granted the plaintiffs’ motion for a preliminary injunction, and now the Third Circuit has affirmed that decision of the District Court.

While the Third Circuit agreed with the District Court that the “place of purchase” presumption was invalid, the Third Circuit upheld New Jersey’s right to require holders to collect zip codes from gift card purchasers.  The District Court had granted the preliminary injunction against the zip code collection requirement, also referred to as the data collection requirement, on the basis that its only purpose was to facilitate the escheatment of gift cards pursuant to the “place of purchase” presumption.  The Third Circuit held that the zip code collection requirement was severable from the “place of purchase” presumption.  The Third Circuit stated that this data collection is consistent with the Supreme Court holdings in Texas v. New Jersey and other decisions because those decisions have consistently allowed for states to escheat pursuant to the last known address of the purchaser.  The opinion of the Third Circuit is vague as to whether or not the Third Circuit considered a zip code as solely sufficient to establish an address to report unclaimed property under the first priority rule in Texas v. New Jersey.

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Posted on Wednesday, 4th January 2012 by Keane Unclaimed Property Team

On January 1, 2012, Delaware published two proposed unclaimed property regulations numbered 959 and 965.  The first details new due diligence requirements, the second sets forth, in detail, audit appeals procedures.

Regulation 965 is titled, “Regulation on Practice and Procedure for Establishing Running of the Full Period of Dormancy for Certain Securities and Related Property.”  While the title purports to address the abandonment of securities property, the regulation, in fact, seeks to create a brand new obligation to perform due diligence in Delaware with respect only to “Securities and Related Property.”

“Securities and Related Property” is defined to mean Property that consists of:

1. Intangible ownership interests in corporations, whether or not represented by a stock certificate, bonds and other securities
2. Dividends, cash, stock and other distributions made (or attempted to be made) by issuers of securities in respect of the securities issued
3. Certificates of membership in a corporation or association
4. Funds deposited by a Holder with fiscal agents or fiduciaries for payment to Owners of dividends, coupon interest and liquidation value of stocks and bonds
5. Funds to redeem stocks and bonds

The new due diligence obligation does not include non-securities related properties or general ledger items.  As such, it appears that this is an effort on the part of Delaware regulators to respond to the backlash caused by the wave of Kelmar (Delaware initiated) audits across the securities arena over the past 18 months.

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Posted on Wednesday, 28th December 2011 by Keane Unclaimed Property Team

This past year, the State of New York instituted a small change to its Unclaimed Property Handbook.  Through their rounds of unclaimed property audits within the mutual fund industry, it has come to light that this seemingly minor change will have a significant impact on accounts with a Dividend Reinvest option. More specifically, this update to the unclaimed property handbook results in accounts becoming eligible for escheatment based upon three (3) years of inactivity as soon as the two (2) SEC Rule 17Ad-17 mandated searches are completed. The State of New York no longer requires a full two (2) year period of return mail. This may accelerate Dividend Reinvestment reporting by as much as 2 years.

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Posted on Wednesday, 21st December 2011 by Keane Unclaimed Property Team

On December 16, 2011, Kentucky Representative Robert R. Damron proposed a new law known as the Unclaimed Life Insurance Benefits Act. The proposed law would impose requirements on life insurance companies similar to those found in the model law passed by the National Conference of Insurance Legislators (NCOIL) at the end of November – which requires life insurers to match Social Security Death Master File (DMF) records, or an equally comprehensive service, with in-force life insurance policies and retained asset accounts (RAAs) each quarter.

Kentucky’s proposed law includes the following requirements:

• Like NCOIL’s model law, life insurance companies would be required to perform a comparison between its in-force life insurance policies and RAAs against the DMF, or equally comprehensive service. This comparison must be performed on a quarterly basis at minimum.
• If during this process, the life insurance company identifies a match with one of its insureds, they must complete a good faith, documented effort to confirm the death and determine whether benefits are due. This must be done within 90 days.
• If benefits are due, the insurer must use good faith efforts to locate the beneficiary(ies) and provide appropriate claim forms or instructions on how to make a claim. When permitted by law, the life insurance company may disclose some personal information about the insured or beneficiary to help identify other potential beneficiaries or entitled heirs. Life insurance companies would not be permitted to charge insureds, account holders, or beneficiaries any fees associated with the search or verification processes.
• The benefits from a life insurance policy or RAA (plus any applicable accrued interest) would be payable to the designated beneficiaries or account owners. In the event that they cannot be found, the benefits would escheat to the state as unclaimed property.

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Posted on Monday, 28th November 2011 by Keane Unclaimed Property Team

As you may know, in December of 2010 Venio LLC acquired The Keane Organization to form the premier unclaimed property firm in the country, now known in the marketplace simply as “Keane”.  Although The Keane Organization had been a member of the Better Business Bureau (BBB) for more than 20 years, the “new” Keane was required to reapply for accreditation with the BBB in the New York Metropolitan area, where the combined company is headquartered. Now that the Keane unclaimed property review is complete, we are happy to announce that we received our accreditation and an A+ rating from the BBB.  CEO Mike O’Donnell credits the success to the quality of services provided by the Legal Claimant Services division to heirs, beneficiaries and estate representatives.

Keane’s A+ rating is a result of the following factors:

• Business’ complaint history with BBB.
• Type of business.
• Time in business.
• Background information on business in BBB files.
• Failure to honor commitments to BBB.
• Advertising issues known to BBB.
• Potential advertising issues identified by BBB.

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Posted on Wednesday, 23rd November 2011 by Keane Unclaimed Property Team

On Sunday, November 20, the National Conference of Insurance Legislators (NCOIL) passed a resolution supporting a model law dealing with unclaimed property policies for insurers and mandating use of the Social Security Death Master File (DMF). This resolution comes on the heels of NCOIL’s July announcement proposing changes to the life insurance industry as a result of the findings of the Verus audits, which revealed discrepancies between the way life insurers were treating annuity obligations and the pay out of life insurance death benefits.

The final, revised model will require life insurers to match DMF records, or an equally comprehensive service, with in-force life insurance policies and retained asset accounts each quarter. It also calls for timely insurer efforts to confirm an insured or account holder’s death, locate any beneficiaries, and provide claims forms and instructions. In the event that benefits go unclaimed, the model act provides clear procedures for life insurers to notify state treasury departments and escheat the funds, per unclaimed property laws.

Insurers have faced mounting pressure in recent months as state attorneys general and comptrollers are increasingly becoming more involved with the issue out of apparent concern that state insurance regulators aren’t being aggressive enough with their actions.

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Posted on Friday, 18th November 2011 by Keane Unclaimed Property Team

Last week, Keane Senior Manager Pam Wentz and Vice President Scott Regan spoke at the Tax Executive Institute’s Philadelphia Chapter Conference on state and local tax trends and strategies. In an effort to further educate tax professionals about the implications of taxes and unclaimed property, Pam’s presentation was focused on federal and state rules and regulations, the current state of unclaimed property affairs, obligations of businesses when it comes to reporting, and the different types of audits companies can face for failure to fully report unclaimed property obligations – or failure to report them at all. Pam also outlined best practices businesses can follow to minimize audit risk and liabilities.

While unclaimed property isn’t considered a tax, it often falls within the purview of the tax department. Unclaimed property looks like a tax because there is an annual filing requirement governed by state law. It feels like a tax because unclaimed property compliance requires ongoing monitoring of changes in laws and regulations making taxes and unclaimed property reporting more complex than ever. Therefore, to ensure that companies are safe from an audit and in full compliance, tax executives and their departments need to have a firm grasp on current rules and regulations as well as the reporting process.

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Posted on Monday, 10th October 2011 by Keane Unclaimed Property Team

L-R, Val Jundt, Keane Managing Director Consulting & Advisory Services with Frederick Stollsteimer, Director of Unclaimed Property and Lindsay Caldonetti, Holder Compliance Specialist for the Commonwealth of PA

With the regulatory landscape constantly changing and evolving, unclaimed property compliance reporting is becoming more complex than ever for businesses and financial institutions. In order to keep businesses aware of these changes and to ensure that they are knowledgeable about the reporting process, Keane partnered with the Pennsylvania Treasury Department to host an Unclaimed Property Compliance Forum at the Courtyard Marriott in Philadelphia.

The forum, led by Valerie M. Jundt, Managing Director of Keane’s National Consulting & Advisory Services group and representatives from the Pennsylvania Treasury Department’s Bureau of Unclaimed Property, focused on unclaimed property compliance requirements and regulatory updates with additional emphasis on businesses incorporated in Pennsylvania, New Jersey and Delaware. Topics covered in the forum included new laws impacting 2011-2012 compliance reporting, current trends in multi-state audits, industry-specific hot-buttons, best practices for tracking and reuniting owners with their funds, implementing sufficient policies and procedures, and reporting requirements and compliance challenges unique to Pennsylvania.

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