Companies are generally familiar with the unclaimed property that they generate and the process for reporting and remitting that property to the various states. Having good policies and procedures that help you identify, evaluate, mitigate and ultimately report unclaimed property housed on your books and records allow for companies to comply with state statutes.
But what happens when any unresolved liabilities are not recorded on your books and records?
This situation occurs when a company uses the services of a third-party administrator (TPA). Companies use TPA’s for a variety of property types, including stocks and bonds, payroll, rebates, gift cards and benefit programs.
In these cases, the TPA’s maintain the records and the company may have limited to no visibility about any unresolved liabilities. Why is this a problem? Unless the contract between a company and a TPA includes specific language transferring the escheat responsibility to the TPA, states will consider the company the holder of any related unclaimed property and expect the company to report that unclaimed property. Obviously, this is a problem if the TPA has all the relevant books and records.
What should a company that employs TPA’s do to ensure it remains compliant with the unclaimed property statutes?
In the past few years, states and their third-party auditors have begun to focus more heavily on TPA arrangements. In fact, the major stock transfer agents (companies who handle shareholder ownership and related records) are currently the subject of on-going audits. You may not even be aware that an audit of your stock transfer agent or other TPA is happening and may only learn about this if your company becomes the subject of an audit.
As states are increasing the number of unclaimed property audits and knowing that TPA arrangements are a focus of these audits, having a pro-active attention on this area will allow you to determine whether any risk exists for your company.
Holders may want to consider engaging an unclaimed property professional who can provide guidance when working with a TPA to ensure unclaimed property is being managed and support you on the right track of managing escheat compliance.
If you received a letter or an email, please check out our FAQ section to learn more about next steps.
We offer a customized approach to fit your specific needs.