The structured settlement industry currently is facing many challenges. Among the most difficult and important is whether and how structured settlement laws and products can be successfully integrated with government benefit laws and funding vehicles.
The primary structured settlement laws include federal tax laws and state protection statutes as well as state periodic payment of judgment statutes. The primary structured settlement product is the annuity funded qualified assignment. The relevant government benefit laws include Medicaid and Medicare. The primary funding vehicles for structured settlements related to Medicaid and Medicare are special needs trusts and Medicare set-aside arrangements.
The Deficit Reduction Act of 2005 (DRA), which is now being implemented by the Center for Medicare and Medicaid Services (CMS) and the state Medicaid agencies, represents the most immediate and serious challenge for structured settlements. Although the DRA does not specifically reference (or exclude) structured settlements, it does impose serious restrictions on annuities as qualification requirements for Medicaid long term care eligibility. These requirements, which potentially negate (or at least reduce) the advantages of structured settlements, include:
- Irrevocable
- Non-assignable
- Actuarially sound
- No balloon payments or deferrals
- State as beneficiary
In an article titled "The DRA of 2005 - What Havoc has Congress Wrought", attorney Sylvius von Saucken analyzes the arguments for and against applying the DRA to structured settlements - including structured settlements used to fund special needs trusts. Earlier this year, von Saucken summarized his article and conclusions in separate presentations to the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA). For a detailed review of von Sauken's article, see S2KM's three earlier blog posts titled "Inconvenient Questions".
To date, neither SSP nor NSSTA has announced any strategies to address the issues created by the DRA for structured settlements - or any long term plans to successfully integrate structured settlements with government benefit laws. Neither organization has significant internal expertise with government benefit laws or lobbying. As an additional challenge, Medicaid lobbying requires both federal and state strategies and resources. SSP has limited lobbying experience or resources. Although NSSTA has some experience with state lobbying (structured settlement protection statutes), most of its lobbying experience and expertise focuses on federal issues - primarily federal tax issues.
In contemplating their options and strategies for addressing the DRA and for positively integrating structured settlements with government benefits, both SSP and NSSTA should consider developing closer relationships with the following associations which do have expertise with government benefit laws and lobbying - as well as the human resources to effectively track changes and challenges created by state-specific Medicaid rules:
- The National Academy of Elder Law Attorneys (NAELA);
- The Academy of Special Needs Planners (ASNP); and
- The Special Needs Alliance (SNA).
For additional information about structured settlements and government benefits see Release 41 of "Structured Settlements and Periodic Payment Judgments".
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