Although predictions for annual structured settlement annuity premium remain flat for 2006 (approximately $6 billion), many 2006 developments promise to eventually change and grow the industry. What follows are this blogger's selections as the 2006 events which will most significantly impact the future of structured settlements.
Web 2.0 - The online changes resulting in Time Magazine naming "You" as 2006 Person of the Year have similarly resonated within the structured settlement industry. Although most industry participants remain unfamiliar with these new Internet concepts, tools and technologies, Web 2.0 leaders and distribution channels began to emerge within the structured settlement industry in 2006.
- Podcasting - The structured settlement industry has quickly
developed outstanding industry-specific podcast producers.
Congratulations to:
- The Settlement Channel - Mark Wahlstrom and the industry commentators at The Settlement Channel (which include this writer) provided podcast reports for many industry news stories during 2006. These stories included the Macomber case; the Murphy case; the Saltzburg and Chemerinsky memos; balanced commentary about factoring; plus in depth coverage of structured settlement related trade association conferences.
- Ringler Radio - With sponsorship from several annuity providers, Ringer Radio produced solid reporting of structured settlement related events highlighted by Larry Cohen's interviews with industry leaders.
- NSSTA - Although not generally recognized as a technology leader, NSSTA did feature an Introduction to Podcasting during its Winter 2006 Regional Meeting and permitted The Settlement Channel and Ringler Radio to record podcast interviews at NSSTA conferences.
- Blogging - Following the launch of "Beyond Structured Settlements" in 2004, four additional bloggers now write regularly about the structured settlement
industry - including settlement transfers (aka factoring). Hopefully
more structured settlement leaders will begin blogging in 2007. Congratulations to
these industry pioneers:
- Mark Wahlstrom - Mark's blog posts integrate with his Settlement Channel podcast interviews.
- John Darer - John's blog has focused primarily upon factoring company business practices including online business practices.
- Matt Bracy - Matt's blog (sponsored by Settlement Capital) offers one factoring company's perspective on structured settlements.
- Rhonda Bentzen - Rhonda's blog provides one transfer intermediary's perspective on structured settlements.
- Mashups - S2KM produced several mashups during 2006 related to structured settlements. These mashups, which integrate multiple Web 2.0 subject experts and tools, feature Denham Grey's wikis, Barbara Bowen's concept maps, podcast interviews with the Settlement Channel as well as Beyond Structured Settlement blog posts.
Factoring - Factoring (aka settlement transfers) continues to be one of the most controversial and important structured settlement issues. During 2006:
- State Statutes - Alabama and Hawaii became the 45th and 46th states to enact structured settlement protection statutes.
- Symetra - Symetra, successor to Safeco Life Insurance Company, was one of the founders of NSSTA and the structured settlement industry. Symetra began 2006 by launching Clearscape Funding Corporation, its own factoring company, and ended 2006 by resigning from NSSTA.
- NSSTA - NSSTA adopted three Bylaw Amendments in 2006 which revised NSSTA's Mission and Membership Qualifications to prevent NSSTA members from participating in factoring transactions either directly or indirectly. Although Symetra has stated it plans to continue in the structured settlement industry, Symetra is no longer a NSSTA member.
- NASP - NASP, the National Association of Settlement Purchasers, held its first Affiliate Member Conference. Approximately 50 transfer attorneys attended in addition to NASP member representatives.
- Release 39 - Release 39 of "Structured Settlements and Periodic Payment Judgments" (July 2006) features a new Chapter 16 titled "Transfers of Structured Settlement Payment Rights".
- Online Commentators - While factoring companies continue to dominate online structured settlement traffic, several structured settlement commentators actively addressed factoring issues online throughout 2006 using Web 2.0 tools (blogs, podcasts, wikis and concept maps).
Disclosure - Disclosure related issues continued to appear on the structured settlement strategic radar screen in 2006. Two law professors, Stephen Saltzburg and Erwin Chemerinsky, issued related opinion letters (first distributed at ATLA's 2006 Winter Meeting) highlighting the duty of plaintiff attorneys under the ABA's Model Rules of Professional Conduct to obtain the informed consent of their clients for structured settlement compensation arrangements. Frank Johns and Jack Meligan provided detailed analyses of these opinion letters at the SSP 2006 Annual Meeting. Mike Miller provided an alternative analysis during the NSSTA 2006 Fall Regional meeting. See also: the Deficit Reduction Act of 2005 below.
Unfair Claim Practices - The Connecticut Supreme Court remanded Macomber v. Travelers ( a class action lawsuit alleging rebating and shortchanging) to the trial court for a second time in 2006 denying the plaintiffs' most recent motion for class certification. Also note: a separate class action (Spencer v. Hartford) was filed in Connecticut in 2006 alleging breach of contract, RICO violations, and common law fraud among other allegations.
Deficit Reduction Act of 2005 (DRA) - Enacted in January 2006, the DRA creates substantial changes to Medicaid long term care eligibility rules. These changes include new rules for annuities, including annuities used to fund special needs trusts. CMS issued an interpretive memorandum on July 27, 2006. Only some of the states have yet to enact supporting laws and/or regulations and to submit them to CMS for approval. These new federal rules for annuities require:
- Disclosure - Applicants for long term care Medicaid assistance must now disclose if they or their community spouse have any interest in an annuity.
- State as Remainder Beneficiary - Certain annuities purchased on or after February 8, 2006 must name the state as the remainder beneficiary in the first position for the total amount of the Medicaid medical assistance paid on behalf of the annuitant - unless there is a community spouse or a minor or disabled child.
- Look Back Period - To qualify for Medicaid, a potential recipient must now satisfy a “look-back period” of 60 months meaning that any financial transfers must be completed at least five years in advance of qualification.
- Exceptions - Among the annuities that will not be treated by CMS (or the states) as disqualifying transfers of assets: annuities which are irrevocable and non-assignable; actuarially sound; and provide payments in approximately equal amounts with no deferred or balloon payments. CMS considers these requirements as being in addition to the remainder beneficiary requirements.
Murphy v. IRS - In this controversial case, the D.C. Circuit Court of Appeals ruled that IRC Section 104(a)(2) is unconstitutional to the extent it categorizes compensatory damages for emotional distress and loss of reputation as gross income for income tax purposes. The Department of Justice has requested a rehearing in the case. If upheld, the Murphy case will likely increase structured settlement cases.
Broker Relationship Initiative - formed with NSSTA's financial assistance in 2005, the Broker Relationship Initiative held its first meeting in March of 2006. According to NSSTA leadership, the purposes of this initiative are:
- “to determine how we can strengthen the future of structured settlements for the benefit of all concerned”; and
- “to identify and, where we can appropriately, discuss and address key issues of concern to the structured settlement industry.”
SSP Certification Announcement - in October 2006, SSP announced the formation of the "Registry of Settlement Planners" (RSP) identified as the credentialing organization for a planned professional certification program of the same name. The registry board, according to SSP, is currently developing an educational curriculum in collaboration with the Center for Financial Responsibility located at Texas Tech University.
Happy holidays from S2KM. Best wishes for 2007.
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