Keane Insights: Unclaimed Property Issues & News

Posted on Friday, 3rd February 2012 by Keane Unclaimed Property Team

Maryland recently became the third state to propose legislation similar to the NCOIL Model Unclaimed Life Insurance Benefits Act, requiring insurance companies to conduct Death Master File (DMF) searches to proactively identify deceased policy owners. Meanwhile, a US Representative has introduced a bill to Congress that would prevent the Social Security Administration (SSA) from making the information in the DMF public. As a result, the House of Representatives conducted a panel hearing this week to discuss the validity and proper use of the DMF. The DMF and its use continue to be a point of discussion, and various opinions are sure to be heard in the coming weeks.

“While the Death Master File is certainly a valuable source of information, it should not be treated as gospel. The SSA itself has noted that there is incorrect information contained within the DMF,” said Keane’s Chief Compliance Officer, Debbie Zumoff. “Just because you get a positive hit when searching an owner’s SSN in the Death Master File does not mean you should move forward with a definitive action on the account or policy. Another step of research or due diligence is always recommended to truly verify that the person is deceased.”

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Posted on Wednesday, 1st February 2012 by Keane Unclaimed Property Team

Continuing a nationwide trend, South Dakota recently introduced legislation that would reduce the dormancy periods for unclaimed property from five to three years. Specifically, South Dakota’s HB 1270 would decrease the dormancy periods for the following types of unclaimed property:

• Money Orders
• Any sum payable on a check, draft, or similar instrument
• All Banking Property
• All Life Insurance Property (from 4 years)
• All Securities Property Types
• All property held by a fiduciary including IRA property
• Gift certificates and credit memos
• Any tangible and intangible property held in a safe deposit box
• All other property not specifically addressed in the South Dakota’s unclaimed property law

Posted on Monday, 30th January 2012 by Keane Unclaimed Property Team

Recently, Val Jundt, Keane’s Managing Director of Consulting and Advisory Services, had the opportunity to sit down with the National Association of Credit Management (NACM) and give a few pointers on reporting unclaimed property. Val notes some of the more common mistakes in unclaimed property compliance, as well as some hints for companies that have not previously reported unclaimed property. You can read the entire article from the NACM by clicking here or read more below.

The article below is from the National Association of Credit Management Blog.

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Posted on Wednesday, 25th January 2012 by Keane Unclaimed Property Team

The recent settlement between Prudential and 19 states resolved auditors’ inquiries into use of the Death Master File (DMF) and guidelines on beneficiary location for deceased policy owners. While Prudential is the second life insurance company to agree to such a settlement, they will not pay a fine and have denied any wrongdoing.

In the official agreement release, Prudential notes that “in view of the complex issues raised,” there is “the probability that long-term litigation and/or administrative proceedings would be required to resolve the disputes.” As a result of the settlement, Prudential has agreed to enhance its unclaimed property policies to include incomplete or missing social security numbers, transposed letters in first and last names, or transposed digits in birth dates and social security numbers. Prudential’s Chief Communications Officer, Robert DeFillippo, noted that these improvements “will supplement Prudential’s extensive prior efforts” to identify decedents and locate beneficiaries of life insurance policies. Read More »

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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