The DMA Way

Important Takeaways: 2016 Revised Uniform Unclaimed Property Act

by DMA Staff | Aug 26, 2016

 After almost four years of deliberation, commentary and debate, the Uniform Law Commission (ULC) in July passed the 2016 Revised Uniform Unclaimed Property Act (RUUPA). This new act recognizes technological changes in property management, provides power tools of compliance through strong definitions of properties and procedures, and creates boundaries for government administration.

The greatest weakness of RUUPA is that historically such uniform acts, whose purpose is to add certainty through uniformity for holders, owners, and state administrators, has never been fully enacted by all jurisdictions; thus, holders will still be tasked with trying to fulfill compliance in a world where there is great variation between jurisdictions. At the same time, it is a noble attempt to provide guidelines that will allow holders and administrators to better perform their respective duties within established guidelines. Some key aspects to RUUPA:

  • Modernized definitions: Since the prior uniform act (1995), the financial world has changed considerably. To meet that change, RUPPA has provided new definitions for various properties not generally existent in the prior act: stored value cards, gift cards, loyalty and promo vehicles, and other properties given definitions. Procedurally, electronic owner contact for the purposes of dormancy provisions and due diligence are emerging into their own.
  • Uniformity for holder compliance: Several provisions provide long-overdue tools that will make holder’s burdens easier. RUUPA provides for uniform due diligence letters and waiting periods, dormancy periods, aggregation, and provisions for electronic reporting and remittance, all of which will make compliance more certain and reporting less burdensome.
  • Holder protections: One key area of friction between holders and state administrators has been the aggressive audit methods employed to correct compliance deficiencies, which often became punitive.  The new act provides limitations on audit lookback, proposing a 5-year statute of limitations on auditing non-fraudulent reports and a 10-year lookback limitation on auditing where no reports have been filed.  Holders are provided effective means for challenging audits on protest or review. New provisions for holder records’ safety and confidentiality are recognized. Priority rules have been re-interpreted to prevent states of second priority from taking properties exempt in the state of first priority, thereby negating the exemption. New record retention provisions help holders to better ascertain those records necessary for confirmation of compliance and offer further protection from egregious audits.
  • Owner protections: Owners too receive protections under RUUPA. New provisions prevent states from circumventing their obligations to owners’ properties through quick liquidation. Holders are required to make paper notifications of ownership, redemption, and reporting in many instances where the owner may have either a buy-and-hold philosophy or has elected electronic notification in lieu of paper, particularly where securities are concerned. Rules for recognition of death, particularly use of the Social Security Administration’s Death Master File (DMF) in conjunction with other proof, have been better defined.

RUUPA failed to address several general issues for unclaimed property, which will remain areas of contention. Sadly, holders, owners, and state administrators are often so polarized on their positions concerning these matters that the ULC ultimately decided to avoid the issues. These include:

  • Foreign property: States of second priority, in particular Delaware, continue to take aggressive positions and require the escheatment of properties owned by foreign owners. As many non-US citizens are unaware of our unclaimed property laws, these properties provide a rich windfall for the states possessing no interest in the property except that of the holder’s incorporation. 
  • Derivative Rights Doctrine: This legal principle recognizes as the surrogate of the owner, a state may not take unclaimed property beyond the rights of the property’s true owner. State administrators in some jurisdictions will continue to take properties for which the true owner is not entitled, but for which the state extends its reach regardless.     
  • Third-party and contingency fee auditsStates’ use of private audit firms and payment through contingency fees has a documented history of holder abuse and public corruption. The new uniform law does little to reign in either state administrators or their private auditors.
  • Appropriate exemptions: By failure to provide uniform provisions for the business-to-business (b2b) and de minimus exemptions, their attractive public advantages are ignored. The b2b recognizes that unclaimed funds between businesses remain in the flow of commerce, thus meeting the intent of unclaimed property taking laws to return such assets into the flow of commerce. De minimus provisions serve to allow holders to absorb properties of trivial value, thereby easing the administrative burden of holders and states alike.  

RUUPA is not yet a finished product ready for enactment. The proposed new laws must be approved by the American Bar Association, and the ULC will also provide comments to its statutes through which it is hoped that greater understanding and clarity of policy and application may be gained. Once completed, RUUPA will still face challenges in adoption in every state before its provisions will be executory.

Please do not hesitate to contact your local DMA office should you have specific questions or requests.