Handling Unclaimed or Abandoned Wages Presented on Wednesday, November 1, PDF Free Download

Handling Unclaimed or Abandoned Wages Presented on Wednesday, November 1, 2017 1

2016 The Payroll Advisor 2

Housekeeping 3 Credit Questions Today s topic Speaker 2016 The Payroll Advisor

To earn RCH credit you must 4 Stay on the webinar, online for the full 60 minutes Be watching using your unique URL Certificates delivered by email, to registered email, by December 1st 2016 The Payroll Advisor

Our Focus For Today 6 Definitions of and for Abandoned Wages Uniformed Unclaimed Property Act State Requirements When considered abandoned When to report How to report Due diligence Setting up the procedures

Names It Goes By 7 Abandoned wages Unclaimed property Escheat

Pronunciation and Definition 8 es cheat [ s-ch t ] [ĭs - chēt Reversion of land held under feudal tenure to the manor in the absence of legal heirs or claimants. Law a. Reversion of property to the state in the absence of legal heirs or claimants. b. Property that has reverted to the state when no legal heirs or claimants exist.

More Definitions 9 Unclaimed Property: Consists of various types of personal property including intangible. Items such as checking and savings accounts, uncashed checks, insurance refunds and wages are examples of unclaimed property

More Definitions 10 Holder Holders include financial institutions, business corporations and retailers The one who is holding the money has the liability to report the wages As the employer you are the holder for the wages

How Long To Hold the Money 11 Governed by state law Period of inactivity Known as the dormancy period

Why Are the States Involved? 12 Each state is involved in unclaimed property as a service to the citizens of its state There is one place to look for the property State attempts to find the owner Money held forever until owner found Citizens benefit since earned interest is used to fund public programs

Uniform Unclaimed Property Act 13 Each state and DC have enacted a version of the law Considered a consumer protection law Revenue measure as well Various revisions-last one in 1995

Property Covered by the Act 14 Bank deposits Securities Dividends Traveler s checks Other or miscellaneous debts (wages, credit balances etc) This is where payroll comes in

Derivative Rights 15 Rights of the state to collect unclaimed property are derived from the owner The state stands in the shoes of the owner

The States and the Courts 16 1965 U.S Supreme Court ruling ended question of who has the right Texas v New Jersey State of the owner s last know address of record gets the money

Private Efforts v State Efforts 17 Some corporations tried private bylaws to avoid turning over the property Example: company includes statement in writing that indicates forfeiture if the owner fails to negotiate the instrument within a certain time frame. Courts have said NO to that one!

Why So Important 18 Many property holders are unaware of their obligations Not uncommon for holders take back into income uncashed payroll checks States see unclaimed property as a potential revenue source

State Efforts to Collect from Businesses 19 Usually an understaffed agency in the past Controller or Treasurer Turning to outside collection Bounty hunters, third party, contingent fee examiners Using sampling techniques if records are not available-inaccurate but profitable!

The Laws 20 Each state has its own laws These include: When considered abandoned When to report/remit How to report/remit Due Diligence

Finding Those Laws 21 Google abandoned property or Link to states websites http://www.unclaimed.org/repor ting/ part of NAUPA (National Assoc. of Unclaimed Property Administrators) Look for holder reporting

Using Google (any search engine) 22 Google unclaimed property example for Nebraska

And We Get 23

And We Get 24 Then click on Report Unclaimed Property

And We Get 25 And access the information you need

NAUPA Website 26 Link to states websites http://naupa.org/ Click on state you want Begin the same process as with Google search except website comes right up Example--Nebraska

NAUPA Website 27 Link to states websites http://naupa.org/ Click on state you want Begin the same process as with Google search except website comes right up Example--Nebraska

And We Get 28

Holder Reporting Four-Step Process 29 Step 1 Identify the checks that should be reported Step 2 Attempt to locate the owner Step 3 Step 4 Prepare your report Submit your report and remit funds due

30 When Considered Abandoned Wages are generally one year after becoming payable Example: California, Florida, Louisiana and most other states with the exceptions of: Two Years Three Years Five Years North Dakota Kentucky Delaware Pennsylvania Maryland Mississippi Massachusetts Oregon Missouri 3 years after 1-1-15

Agent Issued Stale Dated Payroll Checks 31 If an employer uses a payroll processing agent to issue checks that clear on the agent s account, the agent will periodically notify the company of stale dated payroll checks that have not cleared their account. They will then redeposit these funds to the company s checking account and the checks will no longer be negotiable. The company then has the responsibility for controlling and reporting the redeposited payroll checks as unclaimed.

Agent Issued Stale Dated Payroll Checks 32 If the payroll processing agent does not redeposit stale dated payroll checks back to the company s account you need to contact the agent to determine if they review outstanding payroll checks for unclaimed funds reporting. If the agent reviews outstanding payroll checks for unclaimed funds reporting purposes then no additional work is required. If they do not then you should obtain an outstanding checklist from the agent, or the issuing bank, and request that funds for dormant accounts be returned so that they can be reviewed to identify reportable unclaimed accounts.

When to Report/Remit 33 Each state again has their own rule: Typical: Before Nov 1 of each year for any wages unclaimed as of June 30 or July 1 that year although some are Oct 31 CA only state that requires 2 reports one by Nov 1 and 1 in June Other states require

States that Differ From Nov 1 34 State Due Date End Date Connecticut Within 90 Days (March 31 st ) Close of Calendar Year Delaware March 1 Preceding December 31 Florida Prior to May 1 Preceding December 31 Illinois May 1 Preceding December 31 Michigan July 1 March 31 New York March 10 Preceding December 31 Pennsylvania April 15 Preceding Calendar Year Tennessee May 1 Preceding December 31 Texas July 1 March 1 Vermont May 1 Preceding December 31

35 How to Report State has a report you must complete All states have electronic filing available Some require electronic filing only of reports Some only diskette or CD Some want paper with electronic filing Some still allow paper for small reporting of less than a certain amount of checks UPExchange is one of the free common software Another is HRS Pro Software

State Requirements State Requirements AK >20 or more submit on diskette or CD MT Must file electronically AL Electronic reporting is voluntary NC >50 submit via CD or diskette AR >100 ND Electronic filing available; may submit on diskette or CD AZ >25 report on CD or DVD provide hard copy printout NE >5 submit via disk or CD CA >10 report using provided software NH >20 must report electronically CO Electronic reporting voluntary NJ May file on CD, diskette or via encrypted email CT Must be submitted on CD or flash drive NM >25 must submit electronically DE Online as of 3-1-18 NV >11 must submit electronically or on CD or flash drive FL >25 electronically NY May submit online or on Diskette GA >25 submit CD-ROM OH >50 must submit online, by diskette or CD HI >5 report on CD or diskette OK May submit online, by diskette or CD IA Must submit on diskette or CD OR >15 must file on CD, diskette or by email ID File on state s website PA >10 must report electronically IL >10 report on diskette or CD RI >25 required to file on CD or diskette IN Report electronically SC >5 must report electronically KS Online report voluntary SD >10 must file electronically KY File electronically on CD, USB stick or online TN Must file electronically LA >25 file on CD or diskette TX Must use online submission method MA All must file electronically UT >25 must file online, diskette, CD or on state website MD >25 file online, CD, diskette or email VA >25 must file by diskette, CD or on state website ME >10 file by email or online VT >10 required to file on CD or diskette MI >10 file on CD or diskettes WA May be filed online, diskette or CD MN >5 must submit electronically WI Must file electronically MO Electronic filing is voluntary WV Must file electronically 36 MS >25 must file on CD or diskette WY >10 must file online, CD or encrypted email

How to Report 37 Some states may have reciprocal agreement filing such as Massachusetts and Wisconsin usually not to California Aggregate reporting: may be allowed for small dollar amounts such as under $100 for MA be careful some states don t allow CT Due Diligence Reports may have to be filed with the state

Negative Reports 38 Negative reports may be required to be submitted Negative Reporting Required Requires Does Not Require Encouraged/Recommended AZ, CA, CO, CT, DC, GA, ID, IL, IN, KY, LA, MA, ME, MN, MO, MS, NJ, NM, NV, NY, OH, PA, VA, VT, WA, WV AK, AL, AR, DE, FL, HI, IA, KS, MD, MI, MT, NC, ND, NE, NH, OK, OR, RI, SC, SD, TN, TX, UT, WI, WY

How to Remit 39 Remit can be electronic as well Some states require EFT if over a certain amount Example: CA required if over $20K Example: MA required if over $10K Not always due with report but safest to send in when reporting

What is Due Diligence? 40 Required to notify owners that their property is in danger of being escheated to the state This is known as due diligence May not be required by state May have threshold before required Example WI s threshold is $50

Examples: Due Diligence 41 CA: The holder shall send by mail, to the address of record, a notice not less than six nor more than 12 months before the time the account becomes reportable to the controller NV: This process, known as Due Diligence, must be completed not less than 60 nor more than 120 days before the report is filed for each owner whose balance is more than $50.

Due Diligence-Example Iowa 42

Due Diligence Requirements by State AK WA MT ND ME OR ID SD MN WI NY VT NH MA HI CA NV UT WY CO NE KS IA MO IL MI OH IN KY WV VA PA DE MD NJ RI CT AZ NM OK AR TN SC NC MS AL GA TX LA FL 30 days prior to filing 60 days prior to filing <120 days >30 days <120 days >60 days Must attempt to contact 120 days before filing <180 days but >90 days 180 days <12 months >6 months <180 days but >60 days Between May 1 & August 1 43

44 What Does This Notice Need? The notice must specify when the property will escheat to the state and include the need for filing a claim to recover the property once the property escheats to the state. The holder must also provide the owner with an opportunity to indicate an interest in the property.

45 What Does This Notice Need? This is done by providing a form the owner can return to the holder to provide a current address or to express an interest State may have form for you to use Free software may do the due diligence letter for you.

What if the Owner Responds? 47 If the owner provides an address or otherwise indicates an interest in the property, the holder will consider this as a contact or activity and will not escheat the property. The escheat period will start to run again from that date of contact or any subsequent date of contact. To Former Employer

48 What Happens If a Company Doesn t Comply? Most every state does have penalties These economic times, states are turning to revenue where they can get it Can range from $100 per report, $200 per day or to up to 6 months in prison! Depends on the state In addition the interest on the monies that should have been turned over can be up to 25% $200 per day up to $5,000

State Penalty State Penalty AK 5% of tax due up to 25% MT $100 per day/$2,500; civil $1,000 per day; 25% of property AL $100 per day up to $5,000 NC $1,000 per day up to $25,000 plus 16% interest AR $200 per day up to $5,000 ND $100 per day AZ $100 per day up to $5,000 NE $100 per day up to $5,000 CA $100 per day up to $10,000 NH $100 per day up to $5,000 CO $100 per day up to $5,000 NJ $100 per day CT Interest at rate of 15% per year NM $250 per day up to $7,500 plus 25% of wages DE 0.5% per month of underreported amount max 5% NV $200 per day up to $5,000 FL $10 per day up to $500 NY $100 per day GA $100 per day up to $5,000 OH $100 per day HI $200 per day up to $5,000 OK $100 per day up to $5,000 IA No provision OR Up to $1,000 for individuals; $50,000 for corporations ID No provision PA $100 per day up to $10,000 IL Up to $500 RI $100-$500 per day up to $10,000 IN $100 per day for first 15 days more severe after that SC $100 per day up to $5,000 KS $100 per day up to $5,000 SD Up to $100 but no more than value of property KY $50-$200 TN $200 per day up to $5,000; willful $1,000 per day +25% amount owed LA $200 per day up to $5,000 TX Class B misdemeanor MA Up to $500 plus interest UT $200 per day up to $5,000 plus 20% interest of wages MD $100 per day up to $5,000 VA $100 per day up to $10,000 or 25% of wages ME $200 per day up to $5,000 VT $200 per day up to $5,000 MI $100 per day up to $5,000 WA $100 per day up to $5,000 plus 100% of wages should be remitted MN Willful failure is a misdemeanor WI $100 per day up to $5,000 MO $100 per month up to 25% WV $200 per day up to $5,000 49 MS $5 per day up to $100 WY $100 per day

How Should Payroll Handle This? 50 First and foremost set up written procedures for how to handle abandoned wages Written procedures will help if there is an audit Can help show intent to comply General steps and then break out for each state s requirements if multi-state employer

Steps in Handling Abandoned Wages 51 Step 1 Identify the checks in question Step 2 Perform the due diligence according to the state requirements Step 3 File appropriate reports and remit funds when due Then start all over again for the next year Not as simple as it sounds!

Identify the Checks in Question 52 Create a spreadsheet that lists each check that is outstanding Owner name Check number Check amount Check date Columns for audit trail are also needed

Checks in Question 53 How old should the check be? Depends on your policy 6 months is common But the sooner the better!

54 Yes, each check! Research Each Check Complete history of the check Why? It may not be abandoned! Could be a void gone astray Could be a check that was already replaced but no stop payment issued Could be a bookkeeping error of some kind Eliminate those first before beginning due diligence

Researching the Checks 55 If this is the first time, the list could be quite large Keep an exact paper trail of each check taken off the list-document it! some states require this as part of your documentation file--oh Don t forget to correct the original problem Note each date for each step You should be left with a list of abandoned wages so now it is time to find the owner

56 Due Diligence Start with current employees - faster with the clean up than terminated Phone calls/e-mails are okay in this case to begin with is it lying around the house? Do they remember it being issued? Most of the time can resolve quickly Keep the records straight when reissuing checks

Reissuing Checks 57 Make sure stop payments are issued before checks are reissued Do not adjust payroll records if a check is reissued. The original payroll date is still the correct date. Voiding and reissuing may require correction to Form W-2 and Quarterlies Remember to update the spreadsheet as each check is identified and processed

Terminated Employees and the Rest 58 Formal letter will be needed Sample with handout Check with your legal before using for each state Go back to the spreadsheet and add the last known address, phone number, and social security number for each of the remaining outstanding checks

Create A Liability Account 59 Now create a liability account for the remaining checks Balance should match the spreadsheet total Will help with any audits Keep it in balance

Sending Out the Letters 60 Send the letter to each owner at the last known address Check old Form W-2 files for address changes Watch the time frames to make sure it matches what the state requires Sit back and take a break

Undeliverable Letter 61 Letter comes back as undeliverable Save the letter in the envelope if possible Update the spreadsheet Extra time on your hands: try Googling the name or the phone book but your due diligence is done for now Some states are applying searching public records to employers as well as banks and financial institutions

No Response 62 Try at least three times Save each attempt Note each attempt on spreadsheet Watch the time frame as well Due diligence is then done May have to report to state where incorporated such as Delaware

63 Employee Responds Back Have system in place for identifying the owner Driver s license, bill with that address Handle each situation as to stop payments and reissues Always update the spreadsheet Try to have only one employee on this section

File Report and Remit Funds 64 Complete reports for each state upon its due date Submit report and remit funds Watch out for EFTs Close out the list and start all over again Many companies have two or three lists going at once covering several years reports

Record Retention 65 Record Retention Requirements for Abandoned Wages 3 Years 4 Years 5 Years 6 Years 7 Years 10 years OR IA, AZ, CO, FL, IL, KY, MA, MD, MO, NC, NJ, NV, NY, OH, UT, WI, WY WA CA, ID, NE, RI, AK, AL, AR, DC, DE, GA, HI, IN, KS, LA, ME, MI, MT, ND, NH, NM, OK, SC, SD, TN, TX, VA, VT, WV Connecticut requires holders to retain records for 20 years Delaware: effective 2/2/17 The following states have no provisions: Minnesota; Mississippi; and Pennsylvania

Are There Any Questions? 66

How Can Ascentis Help Me? 67 Web-based Internet payroll system that allows you to process payroll in real-time, ensuring 100% accuracy, flexibility and control Live processing and instantaneous auditing Ascentis Payroll software can reduce payroll processing time by as much as 30%.

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