Pa. promotes awareness of escheat law, forgotten assets
The next time you have a spare minute, go to the Pennsylvania Treasury's unclaimed property website (www.patreasury.gov/Unclaimed) and enter your name or your company's.
If records pop up, that means the state is holding assets of yours it wants to return. There may be a rebate check you never received or funds from a bank account you forgot to close when you moved.
Each year, Pennsylvania accepts millions of dollars in inactive assets held by banks, insurance companies and other entities, assets whose rightful owners can't be found. Pennsylvania's Bureau of Unclaimed Property has more than $1.9 billion, Treasury spokeswoman Elizabeth Foose said.
Through newspaper ads, the unclaimed property website and so on, the bureau tries to reunite claimants with what belongs to them. This week, the Treasury announced it is sending out 40,000 notification letters to potential claimants.
The act of forwarding unclaimed assets to the state is known as "escheat," but that's a misnomer, said Jack Stollsteimer, director of the Unclaimed Property bureau.
In true escheatment, as defined in English common law, the sovereign took ownership of the unclaimed assets, he said. Nowadays, the state acts as a custodian.
All 50 states have escheatment laws of one sort or another, specifying how long an account must lie dormant before it is considered inactive, how holders should report them and so on.
Nationwide, states hold 117 million unclaimed asset accounts totaling $33 billion, according to the National Association of Unclaimed Property Administrators.
Generally, escheated money goes into state budgets until it is claimed, and much of it never is. In some states, recent updates to escheat laws have drawn criticism alleging lawmakers were more interested in securing a revenue windfall than in protecting rightful owners (see "New Jersey's gift card grab," page 9).
Pennsylvania hasn't changed its escheat law, but the Bureau of Unclaimed Property has made an intensive effort to improve on both the collections and returns component of its operations as part of state Treasurer Rob McCord's overall focus on efficiency and customer service, Foose said.
The bureau has increased outreach to holders and claimants via webinars, newspaper ads and other educational efforts, and has streamlined procedures, Foose said. Those efforts have helped bring about a 33-percent increase in collections of unclaimed property, and property returned to rightful owners totaled $111.2 million in 2011-12, the most since 2006-07, she said.
In March, the bureau's voluntary disclosure program received the Unclaimed Property Professionals Organization's Holder's Choice Award, Stollsteimer said.
If necessary, the bureau can audit entities believed to have unreported unclaimed properties on their books, Stollsteimer said. Audits are considered a last resort, in part because they are costly to do.
Some audits turn up major finds. In April, the Philadelphia Sheriff's Office finished transferring to the Treasury $23.4 million in unclaimed property the city agency had improperly retained from real estate foreclosure sales.
Two audits of midstate entities are posted on the Treasury's website: Capital Blue Cross and the now-defunct Lebanon County Earned Income Tax Bureau. No problems were found at Capital Blue Cross. The tax bureau, which shut down in 2009, was required to turn over to the Treasury $18,410 in unclaimed refund checks issued between 1998 and 2003.
Unlike those disclosed voluntarily, assets found through an audit may be subject to interest, fines and penalties, Stollsteimer said.
By the numbers
Unclaimed property held by the Pennsylvania Treasury: $1.9 billion
Property the Treasury collected in 2010-11: $234.6 million
Property the Treasury returned in 2010-11: $111.2 million
Unclaimed property by county:
Cumberland: $10.1 million
Dauphin: $12.7 million
Lancaster: $15.4 million
Lebanon: $3.9 million
York: $15 million
Source: Pa. Treasury
Escheat law: What you should know
The terms "escheat" and "escheatment" refer to a government entity taking custody of unclaimed property in order to return it to its rightful owner.
Banks, insurance companies and similar firms deal frequently with unclaimed property and understand the laws and procedures, said Jack Stollsteimer, director of the state Treasury's Bureau of Unclaimed Property. Other companies, not so much, he said.
Property must remain inactive or "dormant" for a fixed period of time to trigger escheatment rules, said Treasury spokeswoman Elizabeth Foose.
For most types of property, the "dormancy" period is five years. The chief exceptions are payroll checks and commissions, for which the dormancy period is two years, Foose said.
Escheatable property must be reported by April 15 each year. Full information on Pennsylvania's escheat law is available on the state Treasury website, www.patreasury.gov.
Banks flag inactive accounts and begin efforts to contact their owners years before escheatment could occur, said Steve Trapnell, a spokesman for Lititz-based Susquehanna Bank.
"If you have an account, make sure you have some activity on it on a regular basis," he said.
If that isn't feasible, at least maintain contact with your bank, he said.
Virtually any company can end up holding inactive assets, said Rob Bertram, an attorney with Harrisburg-based McNees Wallace & Nurick. Companies need good accounting controls to ensure payables are tracked and none are forgotten.
In family-owned businesses, escheatable assets can turn up during a succession, when old financial records are reviewed, he said. Problems also can arise in startup financial companies, which handle a lot of assets and may not have thought through all their obligations under the escheat law, he said.
"The important thing is for businesses to maintain adequate internal policies regarding dead assets," he said.
New Jersey's gift card grab
Escheatment is generally a quiet corner of the law. However, several states have changed their escheat laws in ways that are drawing attention — and often criticism.
New Jersey is a case in point. Two years ago, it passed a law applying escheatment to the unused balances on gift cards, saying the state could take over the money after two years.
It pitched the law as a consumer-protection measure. Consumer groups have raised concerns about the gift card industry, warning against deceptive practices and hidden fees.
Critics, however, suggested New Jersey had passed the law not to protect consumers but to create a lucrative new revenue stream. Unclaimed property goes into states' general budgets until it is claimed, and much of it never is.
The law was to apply retroactively to cards sold up to five years previously, and several measures ensured that as much escheatable money as possible stayed in the state.
Under federal rules, if the owner of an escheatable asset, such as a prepaid card, can't be located, the money goes to the state where the issuer is located. New Jersey's law required stores to collect card purchasers' ZIP codes as a way to preempt any change of venue. Another provision of the law defined purchasers' addresses to be the stores where they bought cards, unless proved otherwise.
Retailers called the reporting requirements expensive and onerous. In April, American Express stopped selling gift cards in the Garden State.
In January, a federal court threw out several portions of the 2010 law, including the retroactive provision and the use of store addresses as purchaser addresses. In late June, New Jersey Gov. Chris Christie signed a bill that makes major revisions to what remained.
The revisions increase the period before gift cards become escheatable to five years from two and delay for four years the implementation of the ZIP code collection requirement, according to a summary provided by the Unclaimed Property Professionals Organization, a national association.
In Pennsylvania, gift cards are exempted from escheat, as long as they have no expiration date and no fees applied after the initial sale, said Rob Bertram, an attorney with Harrisburg-based firm McNees Wallace and Nurick.
In general, any business that offers a rewards program or gift card program should think through the potential escheatment implications, he said.
It's important to figure out "how you handle nonuse," he said.