When one unclaimed property reporting deadline comes to an end, holders give a sigh of relief and enjoy a brief respite before the next deadline is quickly upon them. Often times holders’ must turn their attention away from their normal everyday work to focus on preparing and finalizing the compliance requirements for the next filing cycle.
Holders that manage unclaimed property reporting in house face many challenges including: allocating resources, being up to date with legislative changes, complying with each jurisdictions requirements to fulfill due diligence and reporting guidelines, as well as, reviewing all types of property to ensure they have not over or under reported. Due to these, and other challenges, holders often contemplate if outsourcing is a better path to follow.
As with any outsourcing discussion, there will be pros and cons to each option. Here are a few key areas that should be considered when you are looking at options and can help you create the pros and cons for your company.
Unclaimed Property Legislation is Always Changing
Do you have confidence that you were able to track, understand and implement all of the unclaimed property law changes in the past year? Although there are always many changes each year, hundreds if not thousands of individual changes, it has been particularly busy recently with the adoption of the Revised Uniform Unclaimed Property Act at the end of 2016 combined with the continuing litigation going on between holders and states and the states versus each other. The state legislatures had busy sessions in 2017 tying to update and revise their unclaimed property laws.
There are 55 unclaimed property reporting jurisdictions within the US (the 50 states, Puerto Rico, Guam, the Virgin Islands, DC and the Northern Mariana Islands). The states do a good job of updating their online reporting guidelines to account for any process changes each year and some will also send out emails to remind/update holders on the reporting requirements before the reports are due. This is all helpful for holders. However, do you have the time and resources it takes to scour available resources and make adjustments quickly to your internal processes to maintain compliance? When the unclaimed property compliance process is outsourced, the holder is able to rely on industry experts to review, track, and help interpret the continuing changes to reporting requirements based specifically on that holder’s needs freeing up valuable internal resources.
Some of the key components of reporting unclaimed property are:
There are numerous third party software packages out there that can handle these tasks. But as with any software, it must be updated and maintained for it perform its functions accurately. In order to ensure this accuracy, dedicated personnel will need to update the software for changes in reporting requirements as they occur. Also, IT assistance would be required to make sure that the software is supported, maintained, and backed up sufficiently. Keep in mind, most states have at least a 10 year record retention requirement for unclaimed property reports. Furthermore, the unclaimed property personnel would have to make sure that the reportable items being stored in the system are updated for any status changes.
When outsourcing the unclaimed property process to a third party, there is no need for a company to purchase reporting software. The service provider would only request the relevant data that needs to be analyzed for reporting, which can be maintained as part of a company’s accounting processes.
The point of unclaimed property law is to reunite the properties with the rightful owner. Because of this core principal, all of the 55 states/jurisdictions now have a due diligence requirement that must be met before the items can be escheated to the state. These letters, which can number in the thousands depending on how many items are reportable each season, must be mailed and the responses tracked. Some states are also starting to require an email be sent to the owner in addition to a letter. For many states, an email and/or phone number must be listed on the communication to allow due diligence recipients to inquire. When performing this process in house, it may subsequently turn your department into a mail/call center for a few months a year.
When due diligence is outsourced, the service provider can mail out and receive/record the responses on the holder’s behalf while often doing so at a much lower cost than if the process was kept in house. They can also set up email addresses and phone numbers to field the follow up questions on the holder’s behalf.
Additionally, service providers can offer the ability to perform address updates for the properties that require due diligence. These properties by definition have aged and become unclaimed because contact has not been established with the owner for years. Having an updated address for the owner may be all it takes to reestablish contact and reunite the funds to the owner before they are reported to the state.
Having knowledge about one’s own company is not all that is required in order to be an effective unclaimed property administrator for your organization. The person in charge must coordinate many processes including (but not limited to):
For most companies, there isn’t one person tasked with unclaimed property responsibilities as their sole assignment. They have tasks and other duties related to other day to day business activity of the company as well. The complexities of escheat compliance adds tasks that come in cycles and when combined with the employees’ other assignments, results could include a loss of focus putting the organization at risk for non-compliance or cause other tasks to be put on the back burner.
If you’re fortunate to have an experienced unclaimed property coordinator in place, managing the compliance processes internally can run smoothly in most cases. However, what happens if that person transitions to a new position or department or leaves the company? All of that knowledge leaves the company with them and the company could be left in a reactive mode while they figure out:
When a company uses a third party to process their annual compliance, these issues can be avoided. Employees can be freed up to focus on day to day operations of the business and the company does not have to be concerned with turnover leading to a complete loss of unclaimed property knowledge.
There are many benefits to outsourcing a company’s unclaimed property reporting processes to a service provider. That’s not to say a company cannot or should not perform this process in house. Many organizations have very good internal processes in place along with good personnel overseeing those processes. However, for those that may not be as confident in their current processes and level of compliance, it may be worth taking a look at how an unclaimed property service provider can benefit your company.
Visit MarketSphere’s Knowledge Vault for free resources covering a wide range of unclaimed property topics and contact us to schedule a brief discovery call to learn how we can help you tackle your specific escheat challenges.
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