Abandoned wages

©2016 The Payroll Advisor1

Handling Unclaimed or Abandoned Wages

Presented on Wednesday, June 15, 2016

Housekeeping

©2016 The Payroll Advisor

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Our Focus For Today


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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

About the Speaker


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Vicki M. Lambert, CPP, is President and Academic

Director of The Payroll Advisor™, a firm specializing

in payroll education and training. The company’s

website www.thepayrolladvisor.com offers a

subscription payroll news service which keeps

payroll professionals up-to-date on the latest rules

and regulations.

As an adjunct faculty member at Brandman

University, Ms. Lambert is the creator of and

instructor for the Practical Payroll Online payroll

training program, which is approved by the APA for

recertification credits.

http://www.thepayrolladvisor.com/

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, uncashedchecks, 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


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/reporting/ 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…


Then click on “Unclaimed Property; Drop Down Menu; 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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And We Get…


Then click on “Unclaimed Property Drop Down Menu Report Property”

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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

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

New York March 10 Preceding December 31

Pennsylvania April 15 Preceding Calendar Year

Tennessee May 1 Preceding December 31

Vermont May 1 Preceding December 31

How to Report


State usually has a report you can complete

States allow electronic filing or internet

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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How to Report


Some states may have reciprocal agreement filing such as Massachusetts and Wisconsin—usually not to California

Negative reports may be required—example OH—Yes; MA—No

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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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

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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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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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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 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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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 Wages45


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

Columns for audit trail are also needed

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Checks in Question


How old should the check be?

Depends on your policy

6 months is common

But the sooner the better!

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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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Are There Any Questions?


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How Can Ascentis Help Me?

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