"Protect the business model and prepare for the future" was the unstated theme as the National Structured Settlement Trade Association (NSSTA) hosted its 2009 Winter Meeting in Orlando, Florida January 28-30.
From NSSTA's perspective, the structured settlement model depends upon:
- Helping injury victims and improving dispute resolution;
- IRC sections 130 and 104(a)(2);
- Integrating these tax preferences with other government benefits including:
- Social Security;
- Veterans benefits; and
- Federally-assisted housing.
- Cooperation among defense and plaintiff intermediaries;
- Bi-partisan political support in Washington, D.C.;
- Controlling negative secondary market conduct and publicity;
- Continuing payment performance by all annuity providers.
The challenges facing NSSTA, and the structured settlement industry, include:
- The impact of the financial crisis;
- Anticipated legislative and regulatory changes;
- Identifying new leaders;
- Growing the market;
- Addressing 468B and the secondary market;
- Reconciling claim management and settlement planning;
- Transitioning to Internet-based technologies and business models.
Directly or indirectly, NSSTA's educational program in Orlando addressed all of these issues.
Educational program highlights:
- Andrew Imparato - Imparato, President and CEO of the American Association for Persons with Disabilities (AAPD), was NSSTA's keynote speaker in Orlando. Imparato praised structured settlements as one possible model for modernizing other federal entitlement programs. NSSTA and AAPD have collaborated previously on legislative initiatives including IRC 5891. NSSTA participated as an event sponsor at the 2008 AAPD Gala Leadership Dinner. Imparato spoke previously at NSSTA's 2007 Fall Meeting. The 2009 AAPD Gala Leadership Dinner is scheduled for March 4 in Washington, D.C.
- Eric Vaughn - NSSTA's lobbyist summarized existing federal consumer protection legislation and highlighted some of the consumer and investment protection legislative proposals and issues now before Congress. Although he anticipates federal reforms, Vaughn did not predict whether the primary or secondary structured settlement markets will end up inside or outside any legislative and regulatory net.
- Congressman Kendrick Meek - Congress Kendrick B. Meek, a Democrat representing Florida's 17th district, addressed economic challenges facing President Obama and Congress. TARP has not served the purpose Congress intended according to Congressman Meek. He predicted continued economic problems "for at least 15 months" including the structured settlement industry. To be effective legislatively, Congressman Meek recommended NSSTA feature "real stories and real people". Congressman Meek further stated: "now is the time to come together" legislatively to protect and improve the structured settlement industry. Congressman Meek also confirmed his candidacy for the U.S. Senate seat which will be vacated when Florida Republican Mel Martinez retires in 2010.
- Eric Vaughn - Vaughn's summaries of NSSTA's political challenges and strategies highlight every NSSTA meeting. In Orlando, Vaughn discussed lobbying opportunities for structured settlements both in Congress and within the Obama Administration. Vaughn provided his political analysis of current Congressional committees as well as proposed legislation important for structured settlements. Vaughn urged all NSSTA members to attend NSSTA's 2009 Annual Meeting April 29 to May 1 in Washington, D.C.
Plaintiff and Defense Brokers - NSSTA's educational program featured two panels addressing plaintiff and defense structured settlement cooperation.
- James Early and Ronald Sullivan - Early (defense) and Sullivan (plaintiff) agreed on most issues: their collaborative objectives include facilitating settlements and taking care of injury victims; both plaintiff and defense brokers are needed; clients should not be able to dictate whether and how brokers share commissions; most brokers are "good people"; 468B funds should be limited to multi-claimant cases and not utilized to eliminate defense brokers. Their only stated disagreement concerned "approved lists" with Sullivan asking what is wrong with injury victims selecting their own annuity providers?
- Roger Bernstein; Bruce DeBacher; and Michael Goodman - Bernstein (special needs attorney), DeBacher (defense) and Goodman (plaintiff) discussed how each helps to settle cases by adding value. Bernstein deconstructed a sample life care plan and integrated collateral benefits to reach "reasonable" settlement expectations. DeBacher and Goodman explained how to build a settlement in an adversarial context, emphasized the need for early involvement and agreed upon the advantages of having both a plaintiff and defense structured settlement broker. They expressed shared concerns: trust companies using factoring to sell against structured settlements; and the decline in small cases resulting from defendants' de-emphasis of structured settlements.
Settlement Consulting - Joseph DiGangi addressed problems the structured settlement industry faces with its historic "annuity broker" business model. According to DiGangi, these problems include a stagnant market, negative perceptions of roles and value, limited knowledge base and resources as well as a single product offering. DiGangi proposed an alternative "consultant" business model with multiple products and services providing added value. Using a case example, DiGangi constructed a planning solution matching the injury victim's "needs and wants" for which he utilized a structured settlement annuity as the foundation product. For structured settlement professionals who lack the expertise or licensing to offer comprehensive solutions, DiGangi recommended teaming up with other professionals.
IRC Section 468B - With Henry Strong moderating, William Winslow and James Klapps discussed the use of 468B funds in cases involving multiple claimants. Their presentation objectives included helping brokers use 468B to expand their structured settlement business and highlighting errors that brokers and their clients should avoid. The presentation purposely omitted references to controversial single claimant 468B issues as well as technical tax and administrative issues. Instead, Winslow and Klapps provided a general introduction to IRC 468 plus encouragement for uninitiated structured settlement professionals that IRC 468B business opportunities and issues do, in fact, exist.
Note: for persons interested in understanding the single claimant 468B controversy, see: Robert Wood's article titled "Single-Claimant (468B) Qualified Settlement Funds?" and Richard Risk's article titled "A Case for the Urgent Need to Clarify Tax Treatment of a Qualified Settlement Fund Created for a Single Claimant" ". For information about technical 468B tax and administrative issues, see Wood's new book "Qualified Settlement Fund & 468B". For information about structured settlements and 468B funds, see Section 3.08B of "Structured Settlements and Periodic Payment Judgments" (Release 44) written by Daniel Hindert, Joseph Dehner and Patrick Hindert.
The Secondary Market
- As part of the NSSTA Legal Committee's "All Things Considered" presentation, Illana Hanau and Michael Miller spoke about structured settlement secondary market issues. Hanau summarized historic abuses and continuing bad business practices by structured settlement factoring companies. Her examples: In re Wiggins, a 2001 Idaho case involving Peachtree Settlement Funding, and the Fresno County cases involving 321 Henderson (a J.G. Wentworth affiliate). Henderson is appealing the Fresno County cases. Hanau also summarized results from a "random sample" of factoring cases as evidence of bad business practices by factoring companies. Miller summarized other business activities in which some structured settlement companies engage: the secondary market for life insurance; the purchase of taxable annuity products; and litigation funding.
- During his "Business Ethics" discussion, Rev. Oliver Williams asked the audience to identify structured settlement business conduct that has caused "shocked disbelief" among NSSTA members. As one example of such "shocked disbelief", NSSTA attendees identified structured settlement factoring. More specifically, that factoring has dismantled many "permanent" structured settlement case "solutions" and that NSSTA's "proscriptive" political strategy for factoring (IRC 5891and the state protection statutes) has resulted unexpectedly in substantial secondary market growth.
Internet Transition - Patrick Hindert, S2KM's blog author, led a discussion titled "Web 2.0: How to Improve NSSTA's Online Communication. Learning and Collaboration". Hindert introduced and proposed a NSSTA wiki prototype designed to support NSSTA's committee policies and procedures.
For S2KM reports about prior NSSTA meetings as well as other settlement planning professional associations, see S2KM's structured settlement wiki.