Proposed revisions to the Uniform Unclaimed Property Act were under debate this past week in Washington, DC as the Uniform Law Commission (ULC or Commission) Committee to Revise the Uniform Unclaimed Property Act (Drafting Committee) continued the process of crafting a new Uniform Act. The Drafting Committee focused heavily on issues affecting (1) securities; (2) life insurance; and (3) gift cards and stored value cards. On securities, the Committee discussed a range of issues, including the standards for owner directed activity and dormancy, but the Committee declined to modify the current draft which sets a dormancy trigger of two pieces of undeliverable first class mail. On life insurance, the Committee reached no conclusions on several areas of disagreement between state administrators and the life insurance industry, including the role of the Death Master File in unclaimed property; further discussion is expected at a future meeting. And on gift cards, in the face of widespread disagreement, it seems the Committee may ultimately leave the issue to the individual states by including two options in the revised act.

The most recent draft of a revised Uniform Act was released in advance of the October 9-10 meeting, along with the Drafting Committee Reporter’s compilation of changes suggested by various stakeholders. Notwithstanding the many disputed issues and the wide range of stakeholders, the ULC has set an ambitious schedule for release of a new Uniform Act by 2016. The current drafting schedule calls for submission of a final version to the full ULC for consideration in the summer of 2016. The Drafting Committee indicated at the meeting its desire to continue on that schedule despite many open issues and areas of disagreement among stakeholders.

Some of the key issues addressed in the October 2015 meetings included the following:

1. Securities. The Drafting Committee considered expanding, narrowing or otherwise changing various definitions concerning securities in the Act, including “holder,” “ascertainable market value,” “worthless security” and “security.” The Committee Reporter will consider the way these terms are used throughout the Act, determine which definitions are holdovers from the 1995 Act, and consider the implications and consequences of altering the definitions. Similarly, the Committee discussed what constitutes “owner directed activity,” specifically focusing on whether certain automatic electronic interactions with accounts and non-return of mail sufficiently asserts ownership over the contents of accounts. The Committee agreed to take all of the comments regarding these activities under advisement, but opted not to pass a motion at the meeting. The Committee also discussed the time periods and events necessary to trigger escheatment of securities in IRA, college savings and 529/529A accounts, but deferred making a final determination on these issues until a later date. The Committee entertained a proposal to prohibit a holder or its agent from requiring or soliciting fees in order for an owner to recover his or her property. The Committee stated it would draft a provision that prohibits this practice, excluding the fees that a holder may ordinarily charge in the course of its business.

2. Life Insurance. The Committee announced five major areas of change that it is considering in the unclaimed life insurance benefits sphere: (1) the date from which the abandoned property dormancy period begins; (2) the length of the dormancy period after which property is presumed abandoned; (3) the role of Death Master File matching, whether life insurers should have a duty to perform searches and, if so, the effect of a possible match for unclaimed property purposes; (4) the legal significance of an insurance company’s receipt of notice of an insured’s death from any source other than the Death Master File; and (5) the extent to which a state and/or its auditors can use the Death Master File. After extensive discussion among the Committee, state representatives and life insurance industry representatives, the Committee declined to pass a motion or make a formal decision on any of these issues.

3. Gift Cards and Stored Value Cards. Preliminarily, the Committee discussed changing, narrowing and otherwise clarifying the definitions of “stored value cards” and “gift cards.” Specifically, the Committee agreed to consider at a future Drafting Committee meeting: (1) the consequences of excluding or including gift cards that expire in the definition of gift cards or stored value cards; (2) confusion about whether various types of electronic customer applications, such as smartphone apps, qualify as either stored value or gift cards; and (3) whether store credit for returned merchandise should be included in either definition. Given widespread disagreement among stakeholders, the Committee Reporter recommended that the Committee leave the issue of exempting gift cards from escheatment to individual states. The Committee decided to draft separate clauses for states to consider, one of which will provide that gift cards are exempt from escheatment. The Committee will consider including a comment expressing a preference for exempting gift cards from escheatment. After discussion, the Committee passed a motion to exclude “loyalty cards” from escheatment. The Committee engaged in extensive discussion regarding the applicability of the derivative rights doctrine to gift cards, but declined to make a motion on the matter.

4. Other Issues. Other issues discussed at the meeting included: (1) whether ERISA property should be exempted from the Act; (2) what information should be included in due diligence mailings and mailings to potentially lost customers; (3) altering the proposed definition of “game related digital content,” which would be excluded from unclaimed property under the current draft; and (4) various alterations to the way the Act addresses business-to-business transactions. The Committee also approved a motion to draft language that allows foreign property to be escheatable to states under certain circumstances.

The Reporter for the Drafting Committee will proceed to prepare a new draft based on discussions at the meeting, and various stakeholders will also continue to meet to prepare recommendations. None of the Drafting Committee’s determinations are final, however, so all issues can be raised at future sessions or before the full ULC.