Unclaimed Property Unclaimed Property 2013 Webinar - First Quarter Update

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1 Unclaimed Property 2013 Unclaimed Property 2013 Webinar - First Quarter Update

2 Today s Presenters: Barbara Blick Vice President Keane Cornel Lupu Manager, National Consulting & Advisory Services Group Keane Matt Murphy Director of Marketing and Sales The Berwyn Group, Inc. Moderator: Melanie Hinds Director, Advocacy and Public Policy American Fraternal Alliance

3 Matt Murphy Director of Marketing and Sales The Berwyn Group, Inc.

4 Proposed and Active Legislation Kentucky KY BR 487, HB /16/2011 4/13/2012 Tennessee HB 2283, S /10/2012 Failed Maryland MD SB 77 1/16/2012 5/2/2012 Alabama AL HB 126 2/2/2012 5/15/2012 New York NY SB 6943, AB /16/ /17/2012 Montana D /23/2012 Pending Massachusetts HB 20 1/7/2013 Pending North Dakota HB /11/2013 Pending Keane

5 Are You Prepared for an Audit? Cornel Lupu, Manager Keane Consulting & Advisory Services Group

6 Holder s Responsibilities Annual Filing Obligations Dormancy Periods Negative Reports Due Diligence Claims process - rightful owner/beneficiary Aggregate Amounts Burden of Proof Record Retention

7 Un-cashed checks Unidentified Deposits Customer credits Refunds Unapplied payments Dormant accounts Benefit payments Proceeds due beneficiaries Accounts receivable Accounts payable Retirement assets Workers Comp Relevant Property Types Travelers checks Matured bonds Un-exchanged shares Unpaid dividends Underlying stock Other general ledger items Tangible property Commissions Rebates Un-cashed payroll Unidentified cash/credits

8 Insurance Specific Property Types Proceeds Due Beneficiaries Premium Refunds Individual and Group Policy Benefits Proceeds from Matured Policies, Endowments or Annuities Retained Asset Accounts (RAAs) Other Amounts Due Under Policy Terms Unidentified Remittances Other (Shares of Stock, Dividends, etc.) Demutualization Proceeds Policy Dividend Payments Agent Credit Balances

9 Audit Triggers State registration and payment of other taxes with no unclaimed property compliance history Filing only negative unclaimed property reports Failing to file all property types Claiming property without being compliant Merger & acquisition history Transient workforce State of incorporation Media event / publicity

10 Suggested Best Practices Centralization over the Governance of Policies and Procedures Compliance Department Internal Audit Department HR Department (Payroll and Benefits) Finance Department o Accounts Receivable and Accounts Payable o Bank Account and G/L Account Reconciliations IT Department Unclaimed Property Department Preparation for an Unclaimed Property Audit Ensure appropriate documentation is kept and available High Risk Areas of Audit Focus

11 Laws Am I holding unclaimed property beyond the dormancy period? TPA Agreements Review current contracts Define responsibility for reporting unclaimed property Be Proactive and not Reactive in Identifying Property to be Escheated Establish an Unclaimed Property Compliance Committee Suggested Best Practices (Continued) Include key personnel, including, but not limited to, compliance, risk management, internal audit, legal counsel, upper management, treasurer, controller, IT, and tax director. Create, Implement and Evaluate Policies and Procedures Engage an independent specialist to assist

12 Determine potential unclaimed property exposure. Suggested Best Practices (Continued) Perform early outreach to payees as a first round of due diligence prior to the statutory due diligence period. Get into compliance with applicable state requirements. Develop and maintain centralized, detailed policies and procedures to identify, record and report unclaimed property. Periodically evaluate current procedures to ensure compliance Conduct internal audits of unclaimed property processes and procedures.

13 Proactively Identify Death Proceeds due Beneficiaries* Suggested Best Practices (Continued) Compare the insureds of all in-force life insurance policies against the DMF. Compare using all available data (i.e. S.S.#, name, address, date of birth, etc.) for highest level of accurate results. Confirm the death and determine if benefits are due, which can be attained by obtaining a death certificate. Mail the appropriate claim forms to the beneficiary in order to process and pay the death claim. If the beneficiary can t be located then document good faith efforts in attempting to locate the beneficiary. If unable to locate beneficiaries, then escheat death benefits after the applicable dormancy period has expired All efforts should be consistent with state statutory requirements, but need not exceed those requirements; please consult with legal counsel to determine precise steps.

14 Document the entire compliance process Designate responsibility for each component Identification, recording, reporting Policy and Procedure Basics Claims, Policy Admin, Treasury/Finance (A/P, Payroll, Acct. Recs.) Clearly define roles and responsibilities Include personnel responsible for upstream processes that may affect unclaimed property Review all existing activities Ensure appropriateness of records Evaluate internal controls: Monitor and report variances Confirm TPA compliance

15 Strengthens relationships with state regulators Avoid assessment of penalties and fines Benefits of Compliance and Best Practices Decreases your reputational risk and increase consumer confidence Maximize asset retention Accurate Financial Data Greater efficiencies that ultimately result in increased revenues, time and resources

16 To prepare for an Audit Review and draft new policy & procedures to mitigate any potential UP liability. In Summary Claims Process Premium Refunds Account Reconciliations RPO Process Review current org. structure and assist with implementing (if necessary) a Compliance Oversight Committee. Review life and annuity policy data to determine potential UP liability. Review life data for terminated policies where a non-forfeiture provision was initiated. Ensure accuracy of Company s UP reporting process: Correct State Correct Amount Correct dormancy period used

17 Delaware Voluntary Compliance Program Recently enacted legislation established a Voluntary Compliance Program with the Department of State for holders who are not currently subject to DE audit. Key Provisions: Holders that indicate in writing their intent to enter into an unclaimed property voluntary disclosure agreement by June 30, 2013, and make payment in full or enter into a payment plan on or before June 30, 2014 will be subject to a look-back period of Holders that intend to enter into an unclaimed property voluntary disclosure agreement by June 30, 2014, and make payment in full or enter into a payment plan on or before June 30, 2015 will be subject to a look-back period of 1993.

18 Delaware Voluntary Compliance Program continued After the Secretary of State enters a voluntary disclosure agreement with a holder, the State will not seek further payment of abandoned property covered by that agreement unless it can establish evidence of fraud or willful misconduct in the voluntary disclosure. The State Escheator shall not initiate an examination of any holder participating in the voluntary disclosure program administered by the Secretary of State unless the Secretary of State refers that holder to the State Escheator for examination. This provision is effective immediately. This legislation will cease to be effective on July 1, 2015.

19 Key Benefits Accurate financials (SOX) Improved chance of penalty and interest abatement Limited look-back period Reduced assessments Mitigate the Risk of Audit Avoid laborious auditor requests Set own timetable for compliance Avoid whistleblowers Avoid litigation Consider Voluntary Compliance

20 Unclaimed Property Resources

21 Questions and Answers Barbara Blick Vice President Keane Cornel Lupu Manager, Keane Consulting & Advisory Services Group Matt Murphy Director of Marketing and Sales The Berwyn Group, Inc. Moderator: Melanie Hinds Director, Advocacy and Public Policy American Fraternal Alliance

22 Thank You for Attending! Legal Disclaimer This presentation does not constitute legal, financial, accounting or any other type of advice. It is provided solely for educational and informational purposes for the attendees of this webinar which is sponsored by the American Fraternal Alliance. Attendees are urged to consult with their own attorneys and/or other advisors. The content and opinions expressed herein are those of the presenters and do not necessarily represent the views of the American Fraternal Alliance.

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