Handling Unclaimed or Abandoned Wages - Ascentis...Handling Unclaimed or Abandoned Wages Presented on Wednesday, November 1, 2017 ©2016 The Payroll Advisor 2 Housekeeping ©2016 The

©2017 The Payroll Advisor1

Handling Unclaimed or Abandoned Wages

Presented on Wednesday, November 1, 2017

©2016 The Payroll Advisor 2

Housekeeping

©2016 The Payroll Advisor

3

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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


Abandoned wages

Unclaimed property

Escheat

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Pronunciation and Definition


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.

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http://www.yourdictionary.com/ahd/pron/E0209700.wav

More Definitions


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

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More Definitions


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

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How Long To Hold the Money


Governed by

state law

Period of

inactivity

Known as the

“dormancy

period”

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Why Are the States Involved?


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

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Uniform Unclaimed Property Act


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

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Property Covered by the Act


Bank deposits

Securities

Dividends

Traveler’s checks

Other or miscellaneous debts

(wages, credit balances etc)

This is where payroll comes in

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Derivative Rights


Rights of the state to collect

unclaimed property are

derived from the owner

“The state stands in the

shoes of the owner”

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The States and the Courts


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

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Private Efforts v State Efforts


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!

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Why So Important


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

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State Efforts to Collect from Businesses


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!

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The Laws


Each state has its own

laws

These include:

When considered

abandoned

When to report/remit

How to report/remit

Due Diligence

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Finding Those Laws


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”

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http://www.unclaimed.org/reporting/

Using Google (any search engine)


Google “unclaimed property”—example for

Nebraska

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And We Get…


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And We Get…


Then click on “Report Unclaimed Property”

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And We Get…


And access the information you need…

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NAUPA Website


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

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NAUPA Website


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

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And We Get…


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Holder Reporting Four-Step Process


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Step 1

• Identify the checks that should be reported

Step 2• Attempt to locate the owner

Step 3• Prepare your report

Step 4

• Submit your report and remit funds due

When Considered Abandoned


Wages are generally one year after becoming payable

Example: California, Florida, Louisiana and most other states with the exceptions of:

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Two Years Three Years Five Years

North Dakota Kentucky Delaware

Pennsylvania Maryland Mississippi

Massachusetts Missouri—3 years

after 1-1-15

Oregon

Agent Issued Stale Dated Payroll Checks


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 re-

deposited payroll checks as unclaimed.

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Agent Issued Stale Dated Payroll Checks


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.

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When to Report/Remit


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…

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States that Differ From Nov 1


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State Due Date End Date

Connecticut Within 90 Days (March 31st) 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

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

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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

MS >25 must file on CD or diskette WY >10 must file online, CD or encrypted email

How to Report


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

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Negative Reports


Negative reports may be required to be submitted

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Negative Reporting Required

Requires Does Not Require Encouraged/Recommended

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

AZ, CA, CO,

How to Remit


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

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What is Due Diligence?


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

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Examples: Due Diligence


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.

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Due Diligence-Example Iowa


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MT

WY

ID

WA

OR

NV

UT

CA

AZ

ND

SD

NE

CO

NM

TX

OK

KS

AR

LA

MO

IA

MN

WI

IL IN

KY

TN

MS AL GA

FL

SC

NC

VAWV

OH

MI

NY

PA

MD

DE

NJ

CTRI

MA

ME

VT

NH

AK

HI

120 days before filing

Due Diligence Requirements by State

30 days prior to filing

<12 months >6 months

<180 days but >90 days


180 days

<120 days >60 days

Must attempt to

contact<120 days >30 days

60 days prior to filing

<180 days but >60 days Between May 1 & August 1

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.

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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.

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46 ©2017 The Payroll Advisor

What if the Owner Responds?


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.

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To Former Employer

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%

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$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

MS $5 per day up to $100 WY $100 per day

How Should Payroll Handle This?


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

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Steps in Handling Abandoned Wages


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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


Create a spreadsheet that lists each check that is

outstanding

Owner name

Check number

Check amount

Check date

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Columns for audit trail are

also needed

Checks in Question


How old should the check

be?

Depends on your policy

6 months is common

But the sooner the better!

53

Research Each Check


Yes, 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

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Researching the Checks


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

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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

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Reissuing Checks


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

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Terminated Employees and the Rest


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

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Create A Liability Account


Now create a liability account

for the remaining checks

Balance should match the

spreadsheet total

Will help with any audits

Keep it in balance

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Sending Out the Letters


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

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Undeliverable Letter


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

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No Response


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

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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

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File Report and Remit Funds


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

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Record Retention65

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?

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• 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%.

To earn RCH credit you must


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Be watching using your unique URL

Certificates delivered by email, to registered email,

by December 1st

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Handling Unclaimed or Abandoned Wages - Ascentis...Handling Unclaimed or Abandoned Wages Presented on Wednesday, November 1, 2017 ©2016 The Payroll Advisor 2 Housekeeping ©2016 The