As long as you cancel at least 31 days prior to arrival, the points will go back into his account without penalty. The points will have the same status as they did before he made the reservation - banked, borrowed, current or holding. If the points were current use year points and he is not past his banking deadline, he can bank them.
If you cancel 30 days or less before check in, the points are returned, but will be in holding status. There are restrictions on using them for future bookings and they cannot be banked.
If you cancel on the day you were supposed to check in, all of the points used for that reservation will be forfeited.