Beyond Structured Settlements

SSP 2008 Annual Meeting - 2

The Society of Settlement Planners (SSP) hosted its 2008 Annual Meeting in Washington, D.C. on March 5-7.  Approximately 75 persons attended the SSP meeting including settlement planners, special needs attorneys and annuity provider representatives. Under direction from 2007 SSP President Anthony Alfieri and Program Chairperson Jack Meligan, SSP's 2008 educational program matched the high standards of previous SSP programs.

During SSP's business meeting, SSP members:

• Adopted the "Standards of Professional Conduct for Settlement Planners"; and
• Elected new officers and directors .
  
  • SSP elected Greg Maxwell as 2008 President and Joseph Tombs as SSP Vice President.
  • SSP Directors include: Richard Bishop; Charles Derenne; Paul Lesti; Tim Nay; and Richard Risk.
  • Nay, the first-ever President of NAELA, is also the first-ever special needs attorney to serve on SSP's Board of Directors.

SSP's Educational Program

• Ethics
  • The SSP Code of Ethics (titled: "Standards of Professional Conduct for Settlement Planners") represents a multi-year SSP project initiated and managed by SSP Director and attorney Richard Risk.
    • Carl A. Pierce, distinguished professor of law at the University of Tennessee and a reporter for the latest revision of the American Bar Association's Model Rules of Professional Conduct, assisted SSP with this ethics project.
    • Pierce introduced drafts of SSP's Code of Ethics at both the 2007 and 2008 SSP Annual Meetings.
  • Frank Johns, a leading special needs attorney and settlement planning ethicist, also advised SSP on its Code of Ethics. Johns, an SSP member, delivered SSP's featured dinner address. Johns' comments focused on ethical considerations for judges, plaintiff attorneys and trustees when selecting a structured settlement or settlement planning professional. Johns' 2008 SSP presentation also featured his proposed Request for Proposal (RFP) for settlement planners. Johns first introduced his ideas for a settlement planner RFP at the 2007 Advanced Elder Law Institute.
• Tax Panel
  • Organized by structured settlement attorney and moderator Richard Risk, SSP's Tax Panel has become the best tax discussion in the structured settlement industry.
  • In addition to Risk, SSP's 2008 tax panel participants included:
    
    • Jody J. Brewster, Tax Partner with Skadden Arps Slate Meagher & Flom;
    • Glenn F. Mackies - Tax Partner at Deloitte & Touche.
    • Michael J. Montemurro - Branch Chief at the Internal Revenue Service responsible for Income Tax and Accounting;
  • The SSP tax panel addressed several topics with single claimant 468B receiving the most attention. The structured settlement industry is waiting for written guidance from the United States Treasury Department as to whether IRC section 468B applies to single claimant cases. SSP's tax panel provided a detailed look at these single claimant 468B issues:
    • The language in IRC section 468B and existing regulations;
    • Technical and policy Issues created by the language;
    • Technical and policy arguments for and against single claimant 468B funds;
    • Impact of economic benefit on single claimant and multiple claimant 468B funds;
    • Defining single claimant and multiple claimants within IRC section 468B.
• Government Benefits -SSP devoted three presentations to government benefit issues.
  • Medicaid
    • David Lillesand, a national leader among social security and special needs trust attorneys, dropped a bombshell on the structured settlement industry at the SSP meeting.
    • Based upon Lillesand's discussions with Social Security officials including Ken Brown, Lillesand declared "inoperative" Nancy Veillon's January 31, 2006 letters to attorneys Roger Bernstein and Jay Sangerman representing the National Structured Settlement Trade Association (NSSTA).
    • NSSTA's letters from SSA are inoperative, according to Lillesand, because:
      • NSSTA's letters from SSA do not represent meaningful authority inside the SSA. POMS yes. Letters no.
      • NSSTA's letters predate (by one week), and fail to address or consider, the Deficit Reduction Act of 2005.
    • Lillesand said he expects the SSA to issue new POMS within the next few weeks.
    • However, the new POMS will not address structured settlements. Lillesand stated "The SSA Office of General Counsel will not approve structured settlement POMS at this time".
    • Lillesand and Ken Brown of the SSA will be featured speakers at the ASNP 2008 Annual Meeting March 27-29 in New Orleans.
    • Lillesand's 2008 SSP presentation focused on the "life or death" issue of Medicaid insurance for disabled persons - plus the challenges and risks for special needs attorneys who recommend annuities as funding and investment options.
    • Lillesand's SSP presentation, and his excellent supporting SSP paper, define serious immediate challenges for structured settlement and settlement planning professionals.
    • Lillesand's proposed solution:
      
      • A collaborative (multi-trade association) initiative focused on annuities and government benefits.
      • And specifically for Medicaid and structured settlements:
        
        • Convince SSA to draft POMS favorable to annuities and structured settlement annuities.
        • Incorporate the January 31, 2006 NSSTA letters into the POMS.
  • Medicare
    • SSP offered two presentations about Medicare.
      • One titled "Medicare Compliance - Medicare Set Asides (MSA) - Beware of the Medicare Super Lien" featured Paul K. Isaac and Benjamin M. Basista.
      • The other titled "Nuts and Bolts of Medicare Set Aside Arrangements" featured Douglas L. Shaw and Marge George-Ratz of Medivest.
    • For this author, neither SSP  Medicare presentation focused satisfactorily on annuity issues related to Medicare Set-Aside arrangements.
    • Request for future SSP and NSSTA presenters about Medicare Set-Aside arrangements:
      • Summarize in your presentations CMS Policy Memoranda addressing structured settlement annuities - especially the CMS October 15, 2004 Policy Memorandum;
      • Context the CMS structured settlement policy memoranda within Medicare legal authority generally;
      • Identify any Medicare legal authority that updates or supersedes the October 15, 2004 CMS Policy Memorandum;
      • Identify the issues, opportunities and risks for settlement planners and structured settlement professionals.
      • Recommend strategies to advance the use of annuities as part of developing government benefit legislation and regulations.
• Secondary Life and Annuity Markets
  • SSP's panel discussion titled "What Settlement Planners Need to Know about the Secondary Markets" expanded previous trade association discussions about structured settlement transfers (aka factoring).
  • This author moderated the SSP secondary market panel discussion which featured:
    • Rhonda Bentzen - a secondary market intermediary who is an honorary member of SSP and serves as Chairperson of SSP's Membership Committee.
    • Stephen R. Harris - a partner at Drinker Biddle & Reath who represents annuity providers;
    • Earl S. Nesbitt - the Executive Director of the National Association of Settlement Purchasers (NASP) who represents factoring companies.
  • The SSP secondary market discussion offered multiple informative perspectives on this controversial topic. It also included questions by SSP members to Nesbitt for NASP members focused upon:
    • Alleged predatory advertising by factoring companies;
    • Alleged improper use of the term "structured settlement" by factoring companies;
• Nesbitt promised to communicate SSP's concerns to NASP members.
• Legislation and Litigation Update
  • 2008 SSP President Greg Maxwell provided a summary of recent legal developments impacting settlement planners and structured settlement professionals.
  • 2007 SSP President Anthony Alfieri updated a tax analysis of sexual abuse cases.
• Case Studies - SSP offered three presentations about settlement planning advice and developments.
  • Professor Joseph Tombs introduced the "Tombs' Dissipation Index" as a settlement planning tool;
  • Jack Meligan and Michele Whitmore analyzed multiple settlement planning scenarios and recommended settlement planning techniques and tools.
  • Ward Zimmerman moderated a panel discussion about negotiation tactics featuring Charles Derenne, Michele Whitmore and Jack Meligan.
• Internet Marketing
  • Mathew Hayes provided insights and strategies to improve SSP member email marketing.
  • Hayes' SSP presentation paralleled Mark Wahlstrom's marketing presentation at the NSSTA 2008 Winter Regional Meeting;
  • In this author's opinion, Hayes and Wahlstrom should expand their Internet presentations to include emerging web 2.0 technologies and tools such as blogs, wikis and podcasts.
    

For prior S2KM coverage about:

• SSP - see this S2KM blog post.
• Web 2.0 - see this S2KM blog post
• Deficit Reduction Act of 2005 - see this S2KM blog post
• Medicare, etc. Extension Act of 2007 - see this S2KM blog post.
• Secondary Life and Annuity Markets - see this S2KM blog post.

Patrick Hindert, S2KM's blog author, is a member of SSP.

Addendum 03132008

S2KM's original post above failed to report two important events from the SSP meeting:

• David Synder - SSP honored Snyder as a founding member of the Society of Settlement Planners and historic leader among settlement planners and structured settlement professionals.  Snyder recently announced the sale of his former company Delta Settlements to Michael Upchurch.
• AAPD Leadership Gala dinner - The 2008 AAPD Gala was even better than advertised and raised more than $1 million.  Both SSP and NSSTA members attended. NSSTA was an event sponsor.

Structured Settlements in 2007

Happy holidays from S2KM Limited. Thank you for reading S2KM's blog during 2007. This final 2007 S2KM blog post highlights some of this year's important structured settlement developments and issues.  For additional background information, see:

• S2KM Mid-2007 Structured Settlement Report
• Structured Settlements in 2006

Industry Growth and Development

• Industry insiders are predicting final 2007 structured settlement annuity sales (qualified and non-qualified) will match or slightly exceed total 2006 production of $6.1 billion.
• Membership growth in 2007 for the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP), the primary structured settlement trade associations, also appears flat. Neither of these associations has articulated a strategy for growing the structured settlement industry.
• NSSTA replaced long-time Executive Director Randy Dyer in 2007 with association management company Smith Bucklin. NSSTA has announced it will continue a business relationship with Dyer. However, NSSTA has not yet announced Dyer's new role or responsibilities.
• Annuity provider Mass Mutual exited the structured settlement industry in 2007 joining other recent industry departures such as Genworth, Travelers and Aegon. No new annuity providers entered the structured settlement market in 2007.
• The secondary life and annuity markets continued to be controversial within the structured settlement industry in 2007. Semetra resigned from NSSTA in 2007 based in part on their disagreement with NSSTA's Bylaw Amendments related to structured settlement factoring. Neither NSSTA nor SSP allows factoring companies to join their associations.
• Although the secondary structured settlement market continues to grow in 2007, the overall pace of its growth appears to have leveled off for many, but not all, participants.
• Preliminary strategic recognition and some consolidation continued during 2007 within these overlapping markets:
  
  • Structured settlements;
  • Personal injury settlement planning;
  • Litigation funding;
  • Special needs planning;
  • Secondary insurance and annuity markets.

Legislation and Regulations    

• New York Governor Eliot Spitzer announced a $750 million "agreement in principle" for Executive Life of New York in 2007. The agreement is designed to continue paying all ELNY annuitants 100% of their benefits. The announcement represents a public relations victory for the structured settlement industry. Many questions about the agreement, however, remain unanswered. For example: the amount of contributions from indemnity (casualty) insurers who own or have assigned structured settlement annuities.
• State Medicaid Agencies are continuing to adopt annuity provisions from the Deficit Reduction Act into their state Medicaid Plans. Interpretations and applications of these new annuity rules remain inconsistent creating process bottlenecks and denials. The impact of the secondary annuity markets on Medicaid qualification remains unclear in 2007. The Social Security Administration (SSA) announced in 2007 that it will draft POMS for annuities in 2008. For additional information about the Deficit Reduction Act, see:
  • Release 41 of "Structured Settlements and Periodic Payment Judgments";
  • Inconvenient Questions; and
  • NAELA Annuity Policy White Paper.
• 48 states have enacted structured settlement protection statutes. Overall, these statutes appear to be accomplishing their purposes and functioning with increasing certainty and efficiency. Pennsylvania's judiciary adopted Pennsyvania Rule 229.2 in 2007 tightening some rules and processes within that state's protection statute.
• The U.S. Treasury has not ruled on single claimant 468B funds in 2007.

Case Law - some of the significant 2007 cases:    

• DOJ Sovereign Immunity Defense - see "Drinker Biddle's Structured Settlement Update" for analysis of two DOJ sovereign immunity cases: Transamerica v. Settlement Capital and Continental Casualty v. United States.
• Primary Market Disclosure Case - "Pullman & Comley's Structured Settlement Insights" provided the first Internet analysis of Joseph v. The City of New York which Pullman & Comley characterizes as ""the first court opinion to analyze the requirements in structured settlement protection acts that disclosures be made when negotiating a structured settlement."
• Rapid Settlements cases challenging secondary market laws and business practices including:
  
  • Rapid v. Symetra; and
  • CNA v. Rapid Settlements

• Murphy v. IRS - Eleven months after ruling that taxing damage awards for nonphysical compensatory damages violated the United States Constitution, the United States Court of Appeals for the District of Columbia Circuit has reversed itself in Murphy v. IRS by holding that the United States can tax awards for emotional distress and injury to reputation.
• Macomber v. Travelers - the parties agreed to a confidential settlement in 2007.  It is unclear what legal precedents, if any, the earlier Connecticut State Supreme Court rulings in this case will hold for current or future structured settlement litigation.
  

Educational Programs and Resources

• Both NSSTA and SSP offered certification programs in 2007.    
• S2KM attended educational programs for the following trade associations in 2007 and wrote blog posts (see links) evaluating their structured settlement educational programs:          
  
  • National Structured Settlement Trade Association (NSSTA).          
  • Society of Settlement Planners (SSP)          
  • American Association for Justice (AAJ)          
  • National Academy of Elder Law Attorneys (NAELA)          
  • Academy of Special Needs Planners (ASNP)          
  • National Association of Settlement Purchasers (NASP)    
• The structured settlement industry continued to offer various additional educational resources in 2007:          
  
  • Blogs, podcasts, wikis and concept maps;          
    
  • Digital and hardcopy newsletters;          
    
  • Hardcopy legal textbooks.

Business Standards and Practices

• 2007 developments
  
  • Broker Relations Initiative - status report provided in this S2KM blog post.
  • SSP Ethics Project - status report provided in this S2KM blog post.
• 2007 issues:
  
  • Structured settlement public policy
  • Claim management vs. settlement planning
  • Consumer and investor protection including:
    
    • Compensation disclosure;
    • Informed consent;
    • Single claimant 468B funds;
    • Unfair claim practice legislation;
    • Fiduciary responsibilities for professional advisors.

• Additional compensation issues:
  • Rebating
  • Affinity programs
  • Secondary market transactions
• Unauthorized practice of law.

NASP 2007 Annual Meeting - 2

This blog post continues S2KM's reporting about NASP's 2007 Annual Meeting.  For earlier S2KM reporting: see NASP 2007 Annual Meeting - 1.

S2KM continues to update and improve the nasp wiki where S2KM is capturing key components of a conversation about "The Structured Settlement Market" initiated October 19, 2007 at the Grand Hyatt Hotel in Washington, D.C.

Recent additions to the nasp wiki include summary outlines for these NASP educational presentations:

• Stephen R. Harris - topic: "Transfer Issues";
• Patrick J. Hindert - topic: "The Primary Market".

SSP 2007 Fall Meeting

The Society of Settlement Planners (SSP), hosted its 2007 Fall Meeting September 8 at the Camelback Inn in Scottsdale AZ. SSP is a national nonprofit educational and public policy association of professional structured settlement producers and other professionals who assist injured claimants in the settlement process.

During the past three years, SSP has offered outstanding structured settlement and settlement planning educational programs. Earlier this year, SSP announced the creation of a new Registered Settlement Planner (RSP) professional designation. The first RSP program is scheduled to begin today in affiliation with Texas Tech University.

For summaries of prior SSP educational programs, see these earlier S2KM blog posts:

• SSP 2007 Annual Meeting
• SSP's 2007 Educational Seminar
• SSP to Create Professional Designation
• SSP 2006 Annual Meeting
• SSP's 2005 Annual Meeting

Highlights of SSP's 2007 Fall meeting included educational presentations by SSP members for the following topics:

• Medicaid Liens - At SSP's 2007 Annual Meeting, Matt Garretson summarized his paper titled "What does the Ahlborn Case Really Mean?" In Ahlborn, the U.S. Supreme Court unanimously affirmed the Eighth Circuit's decision limiting a state Medicaid agency to reimbursement from only that portion of a judgment or settlement that represents payment for medical expenses. At SSP's Fall 2007 Meeting, attorney Greg Maxwell continued SSP's analysis of Medicaid liens. Maxwell discussed preliminary responses by state Medicaid agencies to Ahlborn and identified lien resolution services as an increasingly important settlement planning service and skill set. For additional information about Medicaid lien resolution, see section 15.04[4] of "Structured Settlements and Periodic Payment Judgments" as well as Matt Garretson's new book "Negotiating and Settling Tort Cases".
• Personal Injury Tax Planning - Jesus Longoria, a Texas-based financial planner, discussed several settlement planning tax issues including punitive damages; confidentiality agreements; alternative minimum tax; and commutation riders. Longoria's presentation also featured a product developed by Amicus Financial Advisors that calculates projected taxes on various settlement options. Longoria's presentation did not detail two important settlement planning tax issues addressed by attorney Robert W. Wood in recent S2KM blog posts and podcasts - IRC section 468B funds and structured attorney fees. Wood also authors "Taxation of Damage Awards and Settlement Payments", a definitive hardcopy textbook that encompasses personal injury tax planning.
• Dissipation Risk - Professor Joe Tombs of Texas Tech University delivered an entertaining presentation about dissipation risk titled "The Elephant in the Room". Tombs' conclusions: 1) Financial planners generally ignore dissipation risk; 2) Dissipation risk defines settlement planning; and 3) Settlement planners must teach personal injury claimants how to manage their impulses. Tombs also introduced a new Amicus product that he has titled the "Tombs' Dissipation Index" (TDI). According to Professor Tombs', the TDI measures (on a scale of 1 to 100) the relative propensity of individual settlement recipients for dissipation risk. The most important indicators: education and physical fitness. Had time permitted, it would have been interesting to hear Professor Tombs address these additional dissipation-related topics:
  • How inadequate settlement amounts (compared with projected injury-related expenses) and unexpected (and unplanned for) future events impact settlement planning and dissipation analysis?
  • What impact, if any, pre-litigation funding and post-settlement funding (factoring) have on settlement planning and dissipation analysis?
  • How factoring, from a dissipation perspective, impacts a settlement planner's financial and insurance product recommendations?
• Annuities and Managed Money - Paul Lesti, author of a structured settlement treatise, repeated a presentation he originally delivered at the AAJ 2006 Winter Meeting as part of a debate with Rich Halpern. One of the results of Lesti's debate with Halpern was the distribution by Halpern of widely-discussed (within the structured settlement industry) opinion letters by two law professors, Stephen Saltzburg and Edwin Chemerinsky. These opinion letters highlight the obligations of plaintiff attorneys, under the ABA's Model Rules for Professional Conduct, to understand and inform their clients about proposed structured settlement compensation arrangements and to secure their client's "informed consent" for any such compensation arrangement. Although Lesti's presentation provided a persuasive summary of the advantages of structured settlement annuities, Lesti did not:
  • Address the settlement planning issues raised by Professors Saltzburg and Chemerinsky;
  • Define "managed money" for purposes of settlement planning;
  • Discuss the role and interaction of settlement trusts (managed money) and annuities in preserving government benefits.
• Settlement Planning - Jack Meligan summarized examples of Settlement Professional Inc's (SPI) settlement plans and settlement planning strategies. SPI's settlement planning approach focuses on empowering personal injury victims to control and direct their own settlement planning. For future SSP educational programs, Meligan should be encouraged to expand his excellent presentation to address the following issues:
  • What is settlement planning and how does it differ, from a product and knowledge perspective, from:
    • Structured settlements?
    • Special needs planning?
  • How do settlement planners identify and collaborate with settlement trust providers?
  • How does factoring (and the secondary insurance markets generally) impact settlement planning?
• Annuity Testimony - Jack Meligan and Paul Lesti teamed up to provide a valuable and enlightened analysis of annuity testimony. When offered as proof of present value in personal injury litigation, annuity testimony generally is provided by defendants as a trial strategy for limiting economic damages. Chapter 12 of "Structured Settlements and Periodic Payment Judgments" provides a traditional, defense-oriented analysis of annuity testimony. In their presentation, Meligan and Lesti looked at annuity testimony from the perspective of settlement planners working with  plaintiff attorneys to challenge and defeat annuity testimony by defendants. Their analysis included trial tactics as well as how to use annuity testimony expertise as a marketing advantage.
• Medical Imagery - What does medical imagery have to do with settlement planning? Quite a bit - if you listen to the representatives of Bio-Sim Corporation, who made a brief presentation at the SSP meeting. Bio-Sim, whose work is featured on the television show, Grey's Anatomy, believes their work product can substantially reduce settlement time - and improve settlement results for plaintiffs. Bio-Sim also offers referral fees to settlement planners. Which raises this question: if you are a settlement planner focused on marketing to plaintiff attorneys, what products and services should you be offering?

For an association that purports to be a protector of claimants rights, it was surprising SSP did not address the following important settlement planning issues as part of its Fall 2007 Meeting:

• Executive Life of New York - NSSTA has created a Task Force. SSP should at least provide its members with a status report.
• 2007 POMS - how are SSP and NSSTA tracking this issue? - specifically what new POMS sections are being proposed for annuities, structured settlements, assignment rights and special needs trusts?
• State Medicaid responses (and related judicial responses) to the Deficit Reduction Act of 2005 - Sylvius von Saucken introduced this issue to SSP members at SSP's 2007 Annual Meeting and to NSSTA members at the NSSTA 2007 Annual Meeting.
• Transparency and informed consent for all settlement planning compensation. SSP should continue its leadership with these issues.
• Single Claimant 468B Funds - What is the strategy to secure clarification by the U.S. Treasury confirming single claimant 468B funds? 
• Rebating
  • Which statutes define rebating?
  • Which rebating practices (plaintiff and defendant), are:
    • Legal vs. illegal; and
    • Represent good vs. unacceptable business practices?
• Macomber case - Having featured this case at its 2006 Annual Meeting, SSP should provide an update for its members about the Macomber settlement.
• State structured settlement protection statutes - NSSTA provides educational presentations about these statutes for its members.  Why not SSP?

In addition to SSP's educational presentations in Scottsdale, SSP's President Anthony Alfieri chaired a discussion about SSP's organizational and promotional issues. Here are some related and unsollicited S2KM recommendations for SSP:

• Continue to identify and recruit structured settlement and settlement planning industry leaders who share SSP's values and priorities - even if they compete with you and challenge your viewpoints on important issues.
• Establish communication with other settlement planning associations - including NSSTA; NAELA; NAMSAP; NASP; ASNP; and SNA. Focus on shared issues and collaboration opportunities. Attend the Stetson Law School SNT seminar.
• Use a wiki to publish online (publicly or privately) the current draft of SSP's Code of Ethics. Sollicit and review comments and improvements.
• Learn web 2.0 (aka social network) technologies to improve SSP's online identity as well as SSP's  communication, learning and operating efficiencies.

Single Claimant 468B Settlement Funds

Robert W. Wood, the pre-eminent authority on "Taxation of Damage Awards and Settlement Payments", analyses Single Claimant 468B Settlement Funds in his first audio podcast interview  with Ned Arthur and S2KM Limited. Rob, a partner at Wood & Porter, is a prolific and highly-respected author and commentator whose specialties include structured settlements.

The Wood & Porter website features a comprehensive listing of Rob's publications - books and articles.

Rob's first audio podcast with S2KM Limited focuses on public policy arguments for and against Single Claimant 468B Settlement Funds. Rob's audio podcast is featured on S2KM's blog (Podcast Tape 8) and S2KM's Structured Settlement Public Policy Wiki.

IRC section 468B was enacted as part of the Tax Reform Act of 1986. IRC section 468B created important settlement funding options for plaintiffs and their attorneys.  The controversial issue is whether IRC section 468B applies to single claimant cases.  The U.S. Treasury Department is currently evaluating the Single Claimant 468B issue. 

What are the stakes for structured settlement stakeholders?  There are many including who (plaintiff or defendant) controls structured settlement decisions and who (plaintiff or defense annuity agent) controls annuity commissions.

Rob Wood is the expert on IRC section 468B Settlement Fund options and issues including Single Claimant 468B Settlement Funds.

Rob's audio podcast interview:

• Outlines IRC section 468B's history and public policy;

• Initiates a strategic online conversation about Single Claimant 468B Funds.

In a separate audio podcast interview with Ned Arthur (S2KM Podcast Tape 9), Rob analyzes structured attorney fees.

AAJ 2007 Annual Convention - 2

A prior S2KM blog post (AAJ 2007 Annual Convention - 1) criticizes the American Association for Justice (AAJ) for failing to provide any structured settlement educational programs during 2007 despite:

• The importance of structured settlements for personal injury victims;
• The general lack of knowledge and professional competence of AAJ members concerning structured settlement laws and legal issues;
• The significant legal changes impacting structured settlements that have occurred since 2001;
• The prominent role of structured settlement companies as AAJ exhibitors, advertisers and sponsors.

Here are the companies and associations AAJ identifies as exhibitors, advertisers or sponsors in the AAJ 2007 Annual Convention Program Book that participate (directly or through an affiliate) in the primary or secondary structured settlement markets:

Structured Settlement Consultants

• Creative Capital
• EnterpriZ Economic Consulting
• EPS Settlements Group
• Ferlisi Jolley Associates
• Forge Consulting
• High Impact Structures
• Lesti Structured Settlements
• Millenium Settlements
• Pressman Settlements Corporation
• Ringler Associates
• Robert W. Johnson & Associates
• Society of Settlement Planners
• The Center for Special Needs Trust Administration
• The Garretson Firm Resolution Center
• The Halpern Group
• The James Street Group
  

Structured Settlement Annuity Providers

• Aviva
• MetLife
• The Hartford
  

Structured Settlement Factoring Companies

• Bentzen Funding Solutions
• J.G. Wentworth
• LawCash
• Oasis Legal Finance
  
• Peachtree Settlement Funding
• Strategic Capital

Addendum (added July 18, 2007) - Who is missing from the above list of structured settlement advisors and stakeholders?  Which additional settlement planning product and service providers (or provider associations) should be exhibiting at AAJ meetings? 

• Trust companies
• Special needs attorneys
• Medicare set-aside professionals
• Life care planners - Beacon, a regular AAJ exhibitor, is a notable exception within this category.

SSP 2006 Annual Meeting

The Society of Settlement Planners (SSP) hosted its fourth Annual Meeting in Washington, D.C.from March 8-10, 2006. The meeting featured open discussion and diverse perspectives from leading experts who addressed priority issues applicable to the structured settlement and settlement planning industries.

For an additional report featuring an audio podcast interview, see SSP 2006 Annual Meeting - Take 2.

Organizational developments – SSP announced two organizational developments. SSP’s Board of Directors elected Charles Derenne as SSP President for 2006. Derenne succeeds past SSP Presidents Paul Lesti, Michele Whitmore and Jack Meligan. SSP also introduced The Center for Association Resources as SSP’s new Executive Director.

SSP Educational Program – During the past two years, SSP’s annual meeting has provided the best legal education programs in the structured settlement industry. SSP has featured industry and government experts with diverse perspectives addressing some of the industry’s most challenging and strategic issues – especially legal issues. The audience has been equally diverse including representatives from annuity providers, factoring companies, trust companies, structured settlement producers, settlement planners, financial planners, plaintiff attorneys, disability attorneys, and attorneys representing annuity providers and liability insurers.

Compensation disclosure – One of the hottest topics within the structured settlement industry today is compensation disclosure.

Although the NAIC addressed compensation disclosure for insurance agents and brokers in 2004, the resulting NAIC Model rules do not specifically address structured settlements. Recent lawsuits on behalf of structured settlement recipients (including Macomber v. Travelers) allege illegal activities (rebating; shortchanging) by defendant insurers resulting from failure to fully disclose structured settlement compensation arrangements. Pursuant to the 43 state structured settlement transfer statutes, transfer companies (aka factoring companies), must make disclosures to payment rights holders and state judges.

Beginning with the 2006 Winter meeting of ATLA, the debate over structured settlement compensation disclosure has broadened to include plaintiff attorneys and plaintiff structured settlement consultants. At the ATLA Winter meeting, two prominent plaintiff experts (Rich Halpern and Paul Lesti) debated the relative merits of managed funds vs. structured settlement annuities for personal injury claimants. As part of that debate, Halpern distributed two legal opinion letters addressed to the Academy of Catastrophic Injury Attorneys, an ATLA affiliate. The opinion letters, written by Stephen A. Saltzburg (a law professor at George Washington University) and Erwin Chemerinsky (a law professor at Duke) have been widely circulated and discussed. The letters reach three similar conclusions:

• Experts, including structured settlement experts, have a fiduciary duty to their clients.

• Plaintiff experts have a conflict of interest if they are paid by someone other than the plaintiff without disclosure to and consent by the plaintiff.

• Plaintiff attorneys have a duty to disclose this conflict of interest by structured settlement experts to their clients.

SSP’s educational program confronted the issues raised in these legal opinion letters head-on featuring two prominent experts: Jack Meligan and Frank Johns. Meligan analyzed the opinion letters from the perspective of a settlement planner. He highlighted the need and opportunity for full compensation disclosure by all settlement planners and structured settlement annuity salespersons. Johns analyzed the opinion letters from an ethical context based primarily upon the ABA’s Model Rules of Professional Conduct. Johns did not disagree with the conclusions expressed in the opinion letters. However, he emphasized the significance of the specific question addressed as well as the complexity of ethical issues generally in structured settlements and settlement planning.

Single claimant 468B funds –  The SSP Annual meeting featured multiple speakers addressing 468B fund issues. The issues include whether single claimant 468B funds qualify for structured settlements. The speakers included: attorneys Dick Risk and Jody Brewster, Jeffrey Mitchell of the IRS and Russell Sullivan, the Democratic Staff Director of the United States Senate Finance Committee. Sullivan, who is an assistant to Senator Max Baucus of Montana, specifically addressed the delay by the Treasury Department in responding to a 2003 request for guidance by SSP through SSP legal counsel.  Sullivan reported that Senator Baucus’ staff had spoken with Treasury about the need for guidance and stated “…this is an issue that must be addressed.”  For additional information about single claimant 468B funds, see this S2KM weblog post.

Legal challenges to business practices – Several outstanding speakers addressed legal challenges to traditional structured settlement business practices from multiple client perspectives. These speakers included Thomas Ciarlone, plaintiff counsel in Macomber v. Travelers; Stephen Harris, who represents annuity providers and liability insurers; Anthony Alfieri, an attorney and settlement planner; Dan Cohen, ATLA’s Director of External Affairs; and Rick Bishop, who provided an update on California Senate Bill 410.

Social security and structured settlements – Jay Sangerman, a Medicare and Medicaid expert, summarized developments impacting structured settlements including special needs trusts and medicare set-aside arrangements. Responding to a request from Sangerman, the Social Security Administration recently issued a letter confirming annuities as funding alternatives for special needs trusts provided the annuity payments are paid to the trust on an irrevocable basis. Based upon personal communications with the Center for Medicare and Medicaid Services (CMS), Sangerman also predicted that CMS will begin applying the Secondary Payer Rule to liability cases in addition to workers compensation cases. This development would substantially impact current settlement planning by requiring Medicare set aside arrangement in many liability cases.

Structured settlement transfers - Structured settlement transfers(aka factoring) remain one of the most controversial issues in structured settlements and settlement planning. SSP’s program featured Professor Adam Scales, the author of a provocative 2002 Wisconsin Law Review article title: “Against Settlement Factoring? The Market in Tort Claims has Arrived”, and Patrick Hindert, co-author (with Daniel Hindert and Joseph Dehner) of “Structured Settlements and Periodic Payment Judgments.”  Ward Zimmerman moderated. The presentation highlighted public policy arguments for and against settlement transfers and included additional advice for settlement planners. 

Settlement trusts – Chuck Derenne moderated a presentation about settlement trusts that featured  Ben Malsch of First Capital Surety and Deborah Austin of PNC Bank. Both speakers confirmed their companies provide “referral fees” to attorneys and settlement planners if related trust documents so provide without requiring any specific licensing.

Plaintiff broker vs. settlement planner – Joseph Tombs, an attorney and financial planner, addressed the differences in roles, competencies and products required of settlement planners compared to plaintiff structured settlement annuity salespersons. In separate presentations, Frank Johns addressed related ethical issues and Duane Thompson, of the Financial Planning Association, addressed related certification issues.

Structured settlement sales training – As part of SSP’s peer to peer training, the program included a panel discussion addressing structured settlement “myths and issues”. Panel participants included: Jack Meligan, Dick Risk, Paul Lesti, Charles Bradford and Jesse Spodick.

Congratulations to SSP for an excellent 2006 Annual Program.

For additional information about SSP, see SSP 2005 Annual Meeting.

Single Claimant 468B Funds

In addition to Macomber v. Travelers, one of the most important and controversial current legal issues impacting structured settlements involves single claimant 468B settlement funds.  For a definition of 468B settlement funds, including designated settlement funds and qualified settlement funds, see “468B Settlement Funds - Definitions”.

The legal issue is whether a fund, account or trust that otherwise satisfies the requirements of section 468B(d)(2) for a designated settlement fund or IRC regulation 1.468B-1(a) for a qualified settlement fund fails to be a 468B settlement fund solely because the fund, account or trust holds monies that will ultimately be paid for the benefit of a single claimant pursuant to IRC section 130.

The related business issue is who should control structured settlements, plaintiffs or defendants and their liability insurers.  Many liability insurers and some self-insured defendants currently operate "in house" structured settlement programs for the purpose of “re-capturing” claim dollars.  These internal structured settlement programs generally involve partnerships with brokers and product providers, including commissions, which are not always disclosed to plaintiffs and their attorneys.  To promote their own economic interests, these liability insurers and defendants frequently restrict a plaintiff’s structured settlement funding options to  their “approved companies” and/or require commission payments to their “approved brokers”.  Plaintiffs who refuse to cooperate may be forced to accept a cash settlement and denied a structured settlement including its tax benefits and spendthrift protection.

As one response, plaintiffs and their attorneys are increasingly petitioning courts to establish 468B settlement funds ex parte, meaning the opposing party does not have standing to object.  When cash settlement proceeds are paid into a 468B settlement fund, the defendants and liability insurers are released and dismissed preventing them from controlling any aspect of the settlement funding.  Whomever the plaintiff selects to oversee the 468B settlement fund is free to select whatever investment alternatives are appropriate to meet the plaintiff’s financial needs, which may or may not include a structured settlement.  A separate settlement agreement between the 468B settlement fund and the plaintiff(s) is drafted which may include a structured settlement using an IRC section 130 qualified assignment. 

Although this strategy is permissible for cases involving multiple plaintiffs, the language in the IRC 468B regulations and Rev Proc 93-34 is unclear as to whether 468B settlement funds can be used to arrange structured settlements in single claimant cases.  Defendants and liability insurers argue to judges that structured settlements resulting from single claimant 468B settlement funds create an “economic benefit” resulting in immediate taxation to the plaintiff for the future periodic payments.  Judges, as a result, are more reluctant to approve 468B settlement funds in single claimant cases.

In a June 19, 2003 letter on behalf of the Society of Settlement Planners (SSP), a non-profit trade association whose members are primarily plaintiff brokers, the law firm of Skadden, Arps, Slate, Meager & Flom requested public guidance from the US Department of Treasury on issues related to IRC Sections 130, 468B and single claimant cases.   Treasury agreed to address the issues by including them within its 2003-2004 Guidance Plan which has been subsequently carried over to 2004-2005.  In addition to technical tax arguments favoring single claimant 468B settlement funds, the SSP business arguments focus on the fairness and efficiency of allowing injury victims to select their own financial advisors, financial products and product providers without interference or coercion from defendants.

In response to SSP’s June 19, 2003 letter, the National Structured Settlement Trade Association (NSSTA), a non-profit trade association whose members include insurers and brokers who benefit from "in-house" programs, opposed the issuance of any such guidance.  According to NSSTA’s President Mal Deener, “if the current approach to structured settlements – in which both sides participate in negotiating periodic payments matched to needs – is cast aside and the defense is unable to participate, the claims community will no longer have a stake in the process or in promoting the use of structured settlements.”

For additional information about structured settlements, see:

“Structured Settlement Definition”, “Introduction to Annuities” and “Advantages and Disadvantages of Annuities”. 

For additional information about 468B Settlement Funds, see

“Structured Settlements and Periodic Payment Judgments”.

468B Settlement Funds - Definitions

Congress added IRC Section 468B to the Internal Revenue Code in 1986 as part of the Tax Reform Act of 1986 to allow defendants and their insurers to obtain  immediate tax deductions in tort claims rather than waiting for “economic performance” to occur.  IRC Section 468B and related Treasury regulations define two similar types of funding vehicles, “designated settlement fund” (DSF) and “qualified settlement fund” (QSF) to accomplish this objective.  When used to settle tort claims involving physical injuries, these funds may also incorporate structured settlements.

IRC Section 468B(d)(2) defines a “designated settlement fund” as follows:

“The term designated settlement fund means any fund—

(A) which is established pursuant to a court order and which extinguishes completely the taxpayer’s tort liability with respect to claims described in subparagraph (D),

(B) with respect to which no amounts may be transferred other than in the form of qualified payments,

(C) which is administered by persons a majority of whom are independent of the taxpayer,

(D) which is established for the principal purpose of resolving and satisfying present and future claims against the taxpayer (or any related person or formerly related person) arising out of personal injury, death, or property damage,

(E) under the terms of which the taxpayer (or any related person) may not hold any beneficial interest in the income or corpus of the fund, and

(F) with respect to which an election is made under this section by the taxpayer.”

Treasury Regulation 1.468B-1(c) defines a “qualified settlement fund” as follows:

“A fund, account, or trust satisfies the requirements of this paragraph(c) if—

(1)   It is established pursuant to an order of, or be approved by, the United States, any state (including the District of Columbia), territory, possession, or political subdivision thereof, or any agency or instrumentality (including a court of law) of any of the foregoing and is subject to the continuing jurisdiction of that governmental authority;

(2)   It is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event (or related series of events) that has occurred and that has given rise to at least one claim asserting liability—

(i)                 Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (hereinafter referred to as CERCLA), as amended, 42 U.S.C. 9601 et seq.; or

(ii)               Arising out of a tort, breach of contract, or violation of law, or

(iii)             Designated by the Commissioner in a revenue ruling or revenue procedure; and

(3)   The fund, account, or trust is a trust under applicable state law, or its assets are otherwise segregated from other assets of the transferor (and related parties).”

Revenue Procedure 93-34 provides additional rules for either type of 468B Fund to qualify under IRC Section 130 as a “party to a suit or agreement” for the purpose of completing a structured settlement:

1.      The claimant must agree in writing to the assumption by a IRC Section 130 Qualified Assignee of the IRC Section 468B Fund’s obligation to make periodic payments;

2.      The Qualified Assignment must relate to a claim “on account of personal injury or sickness (in a case involving physical injury or sickness)”;

3.      Each Qualified Funding Asset purchased by the Qualified Assignee must relate to a liability to make periodic payments for damages to a single claimant;

4.      The Qualified Assignee must not be “related” to the Section 468B Fund;

5.      The Qualified Assignee must not be controlled by nor control, directly or indirectly, the Section 468B Fund; and

6.      The transaction must meet all other requirements set forth in IRC Section 130.

For additional information, see "Structured Settlement Definition", "Settlement Trusts" and "Introduction to Annuities" as well as “Structured Settlements and Periodic Payment Judgments”.