Beyond Structured Settlements

NSSTA CSSC Celebrates 25th Anniversary

The National Structured Settlement Trade Association (NSSTA) Certified Structured Settlement Consultant (CSSC) Certification Program hosted its 25th class this past month at the University of Notre Dame. The structured settlement industry's "oldest and most respected designation", the CSSC Program continues to establish educational standards for structured settlement professionals throughout the United States.

More than 600 structured settlement professionals have earned their CSSC certification which consists of extensive pre-program study, more than three full days of on-site (at Notre Dame) class room study plus a final examination. The courses, which provide a unique, foundational understanding of structured settlements, include lectures, class discussions and case analyses.

To satisfy a demand for continuing education, NSSTA recently added a Masters Certificate in Structured Settlement Consulting (MSSC) which also includes classes taught by Notre Dame professors on the Notre Dame campus. Instead of an exam, MSSC candidates are required to submit an original paper on a structured settlement topic of their selection. Completed papers are posted on the NSSTA website.

No one is more closely identified with the CSSC Program than Karen Meyers, who (with Joseph O'Reilly and others) helped to organize the CSSC Program in 1992 and who (with Patricia Fairhurst) continues to co-Chair NSSTA's CSSC Committee today. Throughout its history, Karen has also been featured as one of the CSSC faculty members along with NSSTA Executive Director Eric Vaughn plus an esteemed group of Notre Dame professors.

This past week, during its Fall 2017 Conference in San Antonio, NSSTA recognized and celebrated the success of its CSSC and MSSC programs. Concurrent with NSSTA's Conference, Karen agreed to discuss both programs - their history, current status and future prospects.

S2KM: Karen, congratulations for the continued success of both the CSSC and MSSC programs. Twenty-five years (or classes) represents an incredible milestone. Who, in addition to yourself, deserves credit for the success of these programs?

KAREN MEYERS: Joe O'Reilly, CSSC, who had the original idea for the CSSC Program, all Board Members and Liaisons who have served since 1992 and engaged in dialogue/requests/criticism which has made the Programs stronger. All Co-Chairs, Patricia Fairhurst, CSSC and MSSC, Bill Wakelee, CSSC and MSSC, and Big Red, John Roeser, CSSC, Eric Vaughn, CSSC, Debbie Sink, you for sending me to Washington the day after I joined your firm on the then CSSC Project, All CSSC Committee Members since 1992, Frank McKellar, CSSC who helped spread our program into Canada and mentored me along the way, Tom Little who taught me the industry, Elvie Luetge and Randy Dyer, CSSC who kept the Program going in the early years, all broker and life and property casualty companies who have sent people to the programs, and the industry professionals who have taken the Programs.

S2KM: Looking back, what have been the greatest challenges in developing and maintaining the CSSC and MSSC programs - and what are you most proud of?

KAREN MEYERS: Let me start with the part of the program of which I am most proud -- the over 600 persons who have taken the CSSC Program and MSSC Program. It is their accomplishment and the cases they touch and the families, counsel, governments, self-insureds, and insurers whom they serve that give me the greatest sense of satisfaction. The greatest challenges are without a doubt spreading the word of how powerful the CSSC and MSSC Programs are, how they are immensely helpful in pursuing one’s career, and developing a system to support that spread.

S2KM: Given all of the changes currently impacting the structured settlement industry (generational; internet; settlement planning; etc.), how do you see these changes impacting CSSC and MSSC going forward?

KAREN MEYERS: Ever respectful of our stakeholders and varying interests, the CSSC and MSSC Programs will continue to be responsive to market changes and members’ needs as the settlement world changes. As examples I hope that we will add more interactive webinars prior to the Programs’ start on topics requested by participants, orient programs to comprehensive settlement planning concepts from the perspective of all stakeholders, and maybe even a List Serve where ideas can be readily exchanged.

S2KM: Has the CSSC been too successful? Where is NSSTA going to find additional CSSC candidates? Or do you believe that industry growth and generational change will solve this problem?

KAREN MEYERS: First and foremost, generational change will solve a great deal of this issue. That said, the saturation theory is one of the most frustrating myths that has permeated our industry. There are slightly over 300 active members (given a 7.5% variance possibility at any given time) or associates or top administrative support who have not taken the CSSC Program. If one includes life company member staffs, the number is larger. Recognizing there are complex issues around it which must be addressed, if we ever opened the CSSC Program, or more likely a Hybrid of it, to paralegals or attorneys or adjusters as CLE or CE, the numbers could skyrocket.

S2KM: Every program has its critics. What do you believe are the most valid criticisms of the CSSC program and how do you propose they be addressed?

KAREN MEYERS: This question provides a wonderful opportunity to affirm that criticism is always a source of continuous improvement. Criticism has provided a wealth of ideas that have improved and will continue to improve the Programs. Some opportunities that criticism has brought forward on which we are currently working are: how we can include more topics in the Programs, improve marketplace recognition of the MSSC and CSSC Programs, and the potential use of continuing education to enhance our members’ industry participation and knowledge base. It should also be noted that CSSC program participants themselves have consistently provided extremely favorable reviews of their CSSC educational experiences.

Looking to the future we plan to continue our solicitation of input on the Programs as was conducted at the NSSTA Regional Meeting in San Antonio last week, keep checklists of ideas, and commit to make the CSSC and MSSC Programs the best they can be. Indeed without criticism there is a risk of stagnation. With an open mind criticism will continue to be our friend, not our enemy. In that way we will support the growth of our industry. Even if an idea is not utilized the dialogue around it is critical. For in that dialogue respect and learning can be apparent and stakeholders served.

S2KM: Many NSSTA members (S2KM included) believe that NSSTA has substantially improved its educational programing in recent years - including introductory programs like Structures 202 plus NSSTA University. What challenges, if any, does that present for CSSC?

KAREN MEYERS: Continuous improvement is a requirement of any Program, business, profession, or service. The exciting improvement in NSSTA Education Programs represents a wonderful opportunity for the CSSC and MSSC Programs to continue to improve and complement those programs. Certification Programs demand additional rigor and in-depth study. The credibility of our industry and its professionals is significantly enhanced by certification opportunities. One does not become for instance a CLU or CPCU by attending a Basic or even Advanced Program without pre-reads/study and testing and like functionality.

S2KM: By reputation and example, your structured settlement practice represents one of the most professional and sophisticated examples within our industry. Do you believe the CSSC accurately presents the "best practice" developments of structured settlements? If so, how?

KAREN MEYERS: Yes, through participant and industry member input the CSSC Program has evolved into a knowledge base that supports best practices by CSSCs be they brokers, life company staff, or administrative personnel. It would be naïve/incorrect to state the CSSC Program covers all best practices for all stakeholders. That is physically and mentally impossible. Best Practices require a knowledge base. The CSSC Program is a major contributor to that knowledge base as reflected in participant evaluations compiled by Notre Dame. The MSSC and its topics and papers are a tremendous opportunity to grow one's practice and expand one's knowledge base while serving the industry. We will continue to focus on those best practices as the Programs and associated training continue to evolve.

S2KM: What do like best about the structured settlement profession generally and the CSSC and the MSSC Programs more specifically?

KAREN MEYERS: That can be answered in a few words as to the structured settlement profession—THE OPPORTUNITY TO SERVE. (Karen's emphasis). The lives we touch be they on the plaintiff or defense side or during Court oversight are forever changed for the better (or as noted in the song from musical "Wicked", changed for the good) by what our industry Professionals do. We face horrific and small injuries every day and come up with solutions no other professional can.

As to the CSSC And MSSC Programs, the answer requires the addition of one word. These Programs provide an enhanced Opportunity to Serve. (Karen's emphasis) The Programs have provided our Committee Members and myself an opportunity to give back to a unique service based industry. What is learned in those Programs is designed to be second to none, while providing unparalleled opportunities to network with other industry professionals.

S2KM: What, if anything, especially distinguished this year’s CSSC program and/or its program participants?

KAREN MEYERS: This year’s Program was enhanced by input from last year’s participants and Committee Co-Chair, Patricia Fairhurst, CSSC and MSSC, and Committee Member Chris Shumate, CSSC and MSSC, Geoff Hunt, CSSC, Bill Wright, CSSC and you, Patrick Hindert, CSSC. The "What is a Bond" Pre- Program was expanded. The "Fixed Income" Section was subdivided into three sections. The "Negotiation" Section addressed adding value through needs identification and handling objections. The review slides were updated. Additional links to our industry were added to all subject matters. The best part was the interaction by this year’s participants! They were terrific and made the sessions outstanding, as did the attendance by Committee Members. You could feel the industry growing in professionalism, production, and service as the sessions move forward.

S2KM: How does the MSSC Program enhance the CSSC Program?

KAREN MEYERS: There is no such thing as a stagnant Program. The CSSC is an important platform for industry best practices. The MSSC Certification and its continuing education value takes the Program to a higher level from a myriad of aspects including, but not limited to, an expanded knowledge base, mentoring and networking opportunities to grow the profession, profession presence opportunities through the designation and associated paper and research, and continuous improvement in service and quality aimed at best practice. The associated papers are something of which our industry and the writer can be incredibly proud.

Thank you, Karen for agreeing to participate in this interview. And, again, congratulations to you and all CSSC and MSSC recipients as NSSTA recognizes the 25th Anniversary of the CSSC Program.

ASNP 2017 Annual Conference

For the past 11 years, the Academy of Special Needs Planners (ASNP) annual conferences have consistently improved the educational scope and standards for an expanding professional landscape which, in addition to, and overlapping with, special needs planning, also encompasses personal injury settlement planning, including various types of settlement trusts as well as structured settlements, Medicare set-aside arrangements and life care planning.

ASNP's 2017 Annual Conference, which occurred March 23-25 in New Orleans, maintained its deserved reputation and also highlighted an increasing number of opportunities, issues and challenges for both the traditional structured settlement industry and the "emerging" personal injury settlement planning industry - relatively few of whose combined members have historically attended this, or other, national special needs conferences.

ASNP 2017 TOPICS AND SPEAKERS

PRE-SESSION

• Drafting the World's Best Special Needs Trusts - Kevin Urbatch; Nancy Chudacoff; Ray Falcon; Travis Finchum; Michele Fuller; Robert Mescali
• Online Marketing for Attorneys Intensive Workshop - Conrad Saam

MAIN PROGRAM

• Developments and Updates on Special Needs Topics - Blaine Brockman
• Ethically Representing Persons with Disabilities and their Families - Dr. Roberta Flowers and Sheila Moragas
• To SNT or not SNT: How to Systematically Review a Client's Situation to Provide the Best Advice - Travis Finchum and David Lillesand
• Understanding the Issues that Arise When Persons with Disabilities Interact in Family Law Situations - Emily Kile and Jennifer Kupiszewski
• Taxation Issues that Arise for Persons with Special Needs - Vincent Russo
• SSI Update - David Lillesand
• Ask the Experts Panel - Moderated by Kevin Urbatsch
• The Arc - Robin Shaffert

CONFERENCE HIGHLIGHTS - A STRUCTURED SETTLEMENT / SETTLEMENT PLANNING PERSPECTIVE

Legislative Developments - Multiple legislative developments addressed at the ASNP conference represent expanding business opportunities for structured settlement and settlement planning professionals.

• Affordable Care Act - The political future of the Patient Protection and Affordable Care Act (ACA) and Medicaid remain uncertain. In fact, House Speaker Paul Ryan pulled the Republican ACA replacement bill concurrent with the ASNP conference. At present, however, both the ACA and Medicaid continue to represent critical health care alternatives for disabled individuals as David Lillesand and Travis Finchurm discussed in their presentation "To SNT or not SNT". In discussing these options, Lillesand highlighted the need for a "cost benefit analysis" to determine whether advisors should recommend private health insurance or a special needs trust (SNT). Both d(4)(A) (self-settled) SNTs and ACA premium payments continue to represent excellent funding opportunities for structured settlements as well as important settlement planning considerations.
• Special Needs Trust Fairness Act - Blaine Brockman summarized Section 5007 of the 21st Century Cures Act - a section referred to as the "Special Needs Trust Fairness Act" (SNTFA), which was signed into law by President Obama on December 13, 2016. The SNTFA adds “the individual” to the list of persons/entities who can establish a special needs trust pursuant to 42 U.S.C. 1396p(d)(4)(A) and thereby corrected a long -standing oversight in the OBRA 1993 legislation that created SNTs. Among the anticipated results of the SNTFA: more self-settled special needs trusts with more opportunities for structured settlements.
• The Achieving a Better Life Experience (ABLE) Act - Since the Federal ABLE Act became law in December 2014, 18 states have opened ABLE programs. ABLE Accounts "seemed pretty simple at first", according to Brockman. However, "as programs have developed, accounts have opened, and people with disabilities have begun using ABLE funds," Brockman added "what seemed like simple financial accounts have given way to more nuanced issues about the best use of the ABLE Act." Brockman's presentation addressed many of these ABLE issues and confirmed that, in appropriate cases, ABLE accounts provide a valuable new tool for special needs and personal injury settlement planners. Although Brockman did not specifically address structured settlements, special needs attorney Stephen Dale will be speaking about ABLE Accounts (and presumably structured settlements) later this week at the National Structured Settlement Trade Association (NSSTA) Annual Conference.

Collaboration Opportunities

• Structured settlement annuities represent a strategic product within the larger and more complex personal injury settlement planning (settlement planning) market. From a legal perspective, special needs planning and settlement planning increasingly overlap. Settlement planning is now viewed as a growth opportunity by many special needs and elder law attorneys.
• Although their signature products are special needs trusts (SNTs), special needs attorneys play a variety of settlement planning roles (legal advisor; guardian; conservator; trustee; QSF administrator) and provide a variety of settlement planning products and services. Their expertise encompasses government benefits including: Social Security; Medicare; Medicaid; the ACA; ABLE Act; Veterans benefits; and public housing.
• ASNP's commitment to settlement planning has included a 12-part settlement planning webinar series (including a section on structured settlements) as well as its joint 2016 Annual Conference with the Society of Settlement Planners (SSP)
• Noticeable by their general absence from the ASNP conference, as speakers, attendees, exhibitors and/or sponsors, were members of NSSTA and SSP - which might be explained, in part, by the calendar proximity of their own annual conferences. In S2KM's experience, however, NSSTA and SSP members are also general "no-shows" at other national special needs conferences such as those sponsored by Stetson Law School and the University of Texas.
• By comparison: among the 17 exhibitors at the 2017 ASNP Annual Conference, there were at least: seven settlement trustees, one life care planner, one MSA administrator, and one seller of Medicaid annuities. The Platinum Sponsor of the ASNP Annual Conference was MassMutual, a life insurance company which exited the structured settlement market in 2007. MassMutual now appears to be the leading national special needs life insurance provider - focusing on developmentally disabled individuals and their families rather than personal injury victims. MassMutual acquired Metlife's retail advisory force in 2016 including its special needs division.
• Why should members of NSSTA and SSP attend national special needs conferences? For NSSTA (and its "Growth Initiative") and SSP (and its "Emerging Professionalism"), attendance and participation at national special needs conferences is important, of course, for education and marketing. Beyond those objectives, however, It is also about:
  • Understanding special needs and special needs planning - and how they impact structured settlements and settlement planning;
  • Identifying special needs knowledge leaders and collaboration partners;
  • Establishing (or re-establishing and improving) professional and association identities within the special needs community;
  • Recruiting "next generation" structured settlement and settlement planning professionals;
  • Improving multi-professional work product and building better business models.
  • Becoming part of the local, state and national special needs community - as described during the ASNP conference by Robin Shaffert, Senior Executive Officer of the Arc.

Standards, Practices and Certification - In addition to developments noted above, some progress is being made toward improving professional standards, practices and certification within both the special needs and settlement planning (including structured settlement) markets.

• MassMutual, which sponsors the American College of Financial Services Center for Special Needs , announced during the ASNP conference that the American College now offers a new Chartered Special Needs Consultant (ChSNC™) program. The Mission of the Center is "to elevate the knowledge of financial service professionals in the area of special needs planning." However, its new certification program does not appear to encompass structured settlements or settlement planning.
• In her ASNP discussion titled "Ethically Representing Persons with Disabilities and their Families", Professor Roberta Flowers referenced the proposed and newly revised "Aspirational Standards for Professionalism and Ethical Behavior for Elder and Special Needs Law" published by the National Academy of Elder Law Attorneys (NAELA) which NAELA will introduce to its members later this summer.
• During its 2017 Annual Conference, SSP announced a four-step plan to elevate settlement planning to professional status: 1) re-focusing SSP on professionalism; 2) updating SSP's Standards of Professional Conduct; 3) renewing and upgrading the RSP Designation program; 4) adopting and embracing new proposed SSP Practice Standards.
• NSSTA, as an association, has been slow to embrace "settlement planning" and to investigate "special needs planning." NSSTA, however, has recently formed a "Special Needs Attorney Task Force" and its 2017 Annual Educational Conference will feature an unprecedented (for NSSTA) three special needs attorneys as speakers. NSSTA is a major contributor to the American Association for People with Disabilities (AAPD) for which Eric Vaughn, NSSTA's Executive Director, currently serves as Vice Chairman. Ringler, a founding NSSTA member and historically the largest structured settlement broker, recently re-branded itself as "Objective Settlement Advisors" and now claims to be "the largest settlement planning company in the nation." NSSTA currently is updating its CSSC certification program and is expected to increase emphasis on government benefit issues.
• Important, but often overlooked, in discussions about special needs planning and settlement planning are life care planners. The two most prominent U.S. based life care planning professional associations are the International Association of Life Care Planners (IALCP) and the American Association of Nurse Life Care Planners (AANLCP). Both offer or promote certification programs.

CONCLUSION - For S2KM, the ASNP Conference continues to be a "must attend" annual event providing "top tier" analysis of special needs and settlement planning developments, valuable perspectives on structured settlements plus the opportunity to converse with industry icons and next generation leaders. For S2KM reports on past ASNP conferences, as well as other structured settlement and settlement planning national conferences, see the structured settlement wiki.

S2P2J Release 60

The United States structured settlement market has been in existence for almost 40 years and continues to expand its scope, complexity and importance within the context of personal injury settlement planning.

Since it was first published in 1986, "Structured Settlements and Periodic Payment Judgments" (S2P2J), has provided structured settlement stakeholders with an authoritative reference guide, consisting of 16 chapters with extensive footnotes and Appendix documents, to help them understand issues and fashion settlements and judgments utilizing periodic payments. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) have utilized S2P2J as an educational resource for their certification programs.

Co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert, S2P2J now features an online version as well as the traditional hardcopy. Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

Publisher Law Journal Press anticipates a late September 2016 distribution date for hardcopy supplements for S2P2J Release 60 with online S2P2J subscribers receiving their update simultaneously with no additional subscription charge. Competent professionals confronted by structured settlement issues should have access to an up-to-date copy (or the online version) of this indispensable source book.

Release 60 Highlights - Release 60 will feature new, updated and/or expanded sections addressing the following structured settlement topics:

• History Chart - To help structured settlement and settlement planning stakeholders analyze the comprehensive changes impacting their professions, S2P2J inserted a History Chart into Chapter 1 several years ago, developed by Timothy Morbach and Patrick Hindert, which tracks legislative, regulatory, financial and market developments impacting structured settlements since 1975 and organizes these developments into three stages of industry development. Release 60 updates this History Chart.
• Primary Market Business Practices - Release 60 continues to update S2P2J's analysis of changes impacting primary market structured settlement business practices including public policy, guidelines for use, industry standards and product suitability.
• Secondary Market Business Practices - An update of Chapter 16 provides background coverage of the Consumer Financial Protection Bureau's civil investigation of J.G. Wentworth as well as historical context for recent Washington Post reporting about continuing abusive business practices by some factoring companies in Maryland which resulted in a civil lawsuit by the State of Maryland Office of Attorney General Consumer Protection Division.
• Taxation Examples - To increase clarity for various tax concepts, Professor Ken Milani, of the University of Notre Dame Mendoza College of Business, provides multiple case examples which have been added to Chapter 2 with this Release. In addition to his other teaching responsibilities, Professor Milani teaches the tax section of NSSTA's Certified Structured Settlement Consultant (CSSC) program which is hosted by the University of Notre Dame.
• Settlement Trusts - As structured settlements increasingly fund settlement trusts, structured settlement stakeholders require greater knowledge of such topics as the duties of settlement trustees under the Uniform Prudent Investors Act plus factors settlement trustees must consider when making investments. Release 60 addresses those topics in Chapter 3.
• NSSTA Surveys - Prior updates of S2P2J provided summary analyses of structured settlement marketing surveys of claims executives and claims professionals sponsored by NSSTA and conducted by CLM Advisors. Release 60 features analysis of Part 3 of NSSTA's three marketing surveys in Chapter 5 which examines how plaintiff attorneys view structured settlements and structured settlement consultants.
• Plaintiff Attorney Malpractice - Also in Chapter 5, Release 60 summarizes a 2015 California lawsuit against a plaintiff law firm (Mraz v. Lief, Cabraser) which, although the jury determined the plaintiff law firm did not breach its duty of care, warns of several potential malpractice dangers for plaintiff attorneys who are: 1) uninformed; 2) lack competent advisors; and/or 3) act carelessly; with regards to structured settlement issues.
• Product Suitability - Recent updates of S2P2J have expanded Section 6.02 which addresses "Settlement Consultant" issues. Release 60 expands prior discussion within this section about the topic of "product suitability" and how it impacts structured settlement and settlement planning professionals.
• Judicial Authority to Impose Structured Settlement - Release 60 features a recent New Jersey Superior Court case (Impink v. Reynes) in Chapter 7 that determined (despite conflicting authority in other states) that a motion judge's inherent parens patriae powers did not permit the judge to change the terms of a settlement to impose a structured settlement for a minor without consent of the parties.

Previous S2P2J releases have highlighted and addressed the following structured settlement developments and growth opportunities:

• Wrongful Convictions Tax Relief Act of 2015.
• Court decisions analyzing "safe harbor annuity rules under the Deficit Reduction Act of 2005 when annuities are used to preserve Medicaid eligibility.
• New cases where courts have identified questions to held judges determine whether proposed transfers of future payment rights meet the "best interest" test under various state Structured Settlement Protection Acts.
• Non-qualified assignment issues - including tax and security issues raised by off-shore assignment companies.
• Templates for: 1) approval of MSAs; and 2) disclosure of consultants' roles and compensation.
• Expanded coverage of Workers Compensation MSAs.
• Summary and discussion of recent PLR for indexed annuities and commutation riders.
• Summarized results of CLM Advisors surveys commissioned by NSSTA to determine the value claims executives and claims professionals place on structured settlements and structured settlement consultants.
• Introduction to ABLE Accounts.
• A new section to introduce and explain federal and international regulatory developments and entities resulting from the 2008 global financial crisis.
• Updated analysis of the changing role of and standards for plaintiff attorneys engaged in personal injury settlement planning and when negotiating structured settlements.
• Summary and analysis of recent U.S. Treasury Regulations for IRC 104(a)(2).
• Practice tips for minimizing the risk of an IRS settlement challenge.
• Updated summary of lessons learned from the Executive Life Insurance of New York (ELNY) insolvency.
• Periodic payment reinsurance as an alternative means of funding structured settlements.

For S2KM's most recent analysis of the structured settlement industry, see: "Structured Settlements 2015":

• Part 1 - Market Metrics
• Part 2 - Market Issues and Developments

NSSTA 2015 Fall Conference

Although the National Structured Settlement Trade Association (NSSTA) did not promote a specific theme for its 2015 Fall Educational Conference, one of the speakers succinctly captured the program's overall purpose and accomplishment when he described NSSTA's new Industry Growth Initiative as "changing the focus of our future."

Industry Growth Initiative

NSSTA's website description of its Industry Growth Initiative highlights "a significant decline in production since its peak at $6.3 Billion in 2008" and asserts "we do an excellent job protecting our industry" before announcing that "this year we want all NSSTA members to focus their time, energy and resources on new opportunities to expand the use of structured settlements-to grow our industry."

NSSTA President Michael Goodman utilized his Opening Conference Comments in Phoenix (as well as a preconference interview with S2KM) to describe the status and organizational structure of the NSSTA Industry Growth Initiative.

"My first priority as President of NSSTA," Goodman stated, "is to identify growth opportunities for the structured settlement industry. First, we asked all NSSTA members to submit ideas for growth at [email protected]. . Second, I tried to put together a NSSTA Growth Committee consisting of a highly talented cross section of industry leaders with diverse perspectives. Third, the Committee evaluated all of the 28 (to date) NSSTA member growth proposals and selected three for NSSTA Board of Directors approval to develop immediate implementation plans with success metrics."

Goodman introduced the NSSTA Growth Committee members including co-Chairmen William Goodman, Sean Coleman, John McCulloch and John Arendt. Speaking for the Committee, Coleman enthused: "I love our change of focus. Historically, NSSTA has been reactive, dodging bullets. The Growth Initiative redirects our mindset and focus. It encourages us to become proactive. The Growth Committee has already surpassed by highest expectations."

Goodman and the Committee co-Chairmen identified the following three NSSTA Growth Initiatives already selected and approved:

• Rejuvenate Defense Programs (including casualty insurers, commercial insureds and TPAs) - Originally the prime movers for structured settlements, many defense insurers have reduced or completely abandoned their structured settlement programs citing a variety of reasons. Beginning with three target carriers, the Committee plans to analyze the causes, and ultimately revitalize the programs, to create new prototype defense program models. Note: NSSTA recently commissioned surveys of Senior Claims Executives; and front line Claims Professionals which S2KM summarized and evaluated in prior blog posts.
• Amend the Federal Employee Compensation Act (FECA) - FECA, which provides workers compensation like benefits for federal workers, currently does not permit structured settlements. With payouts totally approximately $4.5 billion per year, FECA represent an attractive potential market for structured settlements with administrative cost savings being one justification for a legislative amendment. Based upon preliminary interviews, the Growth Committee believes FECA stakeholders view structured settlements favorably. The Committee is gathering statistical data to support its proposal and building grassroots support.
• Convertible Deferred Lump Sums - As a sales response to "low interest rates", the Growth Committee is proposing a new structured settlement feature. As envisioned, the convertible deferred lump sum would allow a structured settlement recipient to select a future lump sum that would automatically convert on its payment date into a series of predetermined periodic payments payable at whatever annuity rates offered at the time of conversion by the issuing life company. A Canadian broker attending the NSSTA conference stated that at least one Canadian life company already offers this structured settlement product feature. The Committee anticipates whichever annuity provider introduces this product feature in the U.S. will probably also seek an IRS private letter ruling.
• Note: NSSTA's Growth Committee identified a fourth preliminary initiative (Dissipation Study) - to confirm that injury victims squander lump sums. However, this initiative is currently on hold. For background, see this 2009 S2KM review of Jeremy Babener's legal research paper analyzing historic dissipation studies.

Factoring Update

Goodman also addressed the state of the structured settlement industry including a "factoring update". As part of this report, Goodman confirmed that NSSTA and the National Association of Settlement Purchasers (NASP) have agreed to cooperate legislatively in several states to seek the following consumer protection amendments for state structured settlement protection statutes:

• No forum shopping.
• Payee required to attend hearing.
• Stricter application of approval requirements.
• Advanced notice of transfer.
• Required disclosure of prior transfers.

Supporting this cooperative initiative, NSSTA has begun offering its members a new Judicial Education Training Seminar - taught in Phoenix by John McCulloch and Stephen Harris. Goodman also announced he will be a featured speaker at NASP's 2015 Annual Conference next week in Las Vegas - the first serving NSSTA President to do so. Perhaps anticipating his NASP appearance, and cognizant of the recent Washington Post article ("a perfect storm for factoring"), Goodman advised the NSSTA Conference attendees: "Factoring is not a zero sum game. What is bad for them is not always good for us."

Additional Conference Presentations

Many structured settlement participants believe control of the primary structured settlement market, and future market growth, have shifted from the defense to plaintiff attorneys and their injury victim clients. Although NSSTA has been slow to embrace plaintiff-focused personal injury settlement planning, NSSTA's Fall Conference included two presentation featuring plaintiff representatives:

• A Trial Lawyer Panel - moderated by Ryan Garrison with plaintiff attorneys Julio Zapata and Francisco Gutierrez; plus
• An introduction to the National Association of Trial Lawyers Executives (NATLE) by Gayle Bennett, Deputy Director of the New Mexico Trial Lawyers Association.

Both plaintiff presentations emphasized opportunities to expand the market for structured attorney fees. Both plaintiff attorneys expressed a preference for advisors who are "knowledgeable not just about structured settlements but also other investment vehicles."

In addition to the Judicial Education Training session mentioned above, three other NSSTA presentations addressed educational issues and programs:

• Best Practices for Structured Settlement Case Resolution - During her excellent review of structured settlement fundamentals, Betty Gregware expressed serious concern about the general quality of structured settlement documentation and the need to increase competence across the industry.
• Professional Broker Education - Gregware, Melissa Price and Debbie Sink introduced a new educational program NSSTA is developing primarily for individuals who are new to the structured settlement industry. They also provided an administrative overview of "NSSTA University" whereby NSSTA partners with members to secure CE credits for member-sponsored educational seminars for insurance claims departments or law firms.
• MSSC Paper Presentation - Mal Deener moderated a panel featuring Trish Fairhurst, Richard Carroll and other members of the first graduating class of NSSTA's new Masters Structured Settlement Consultant (MSSC) professional designation. Each MSSC graduate is required to submit a paper and these papers will be published on NSSTA's website. NSSTA will offer its next MSSC program beginning April 27, in conjunction with its Certified Structured Settlement Consultant (CSSC) program, at the University of Notre Dame

Separate from, but related to, NSSTA Growth Initiative, NSSTA's Board of Directors has appointed a Special Needs Attorney Task Force to develop strategic relationships with special needs attorney professional associations and to identify collaborative marketing opportunities with special needs attorneys more generally. NSSTA member Carola Davis and Special Needs Alliance attorney Patty Sitchler initiated a NSSTA presentation/discussion in Phoenix which hopefully will continue and expand to the benefit of both professional communities.

A critical factor, both challenge and opportunity, for growing the primary structured settlement market concerns succession planning. What new generation of distributors, or distribution channel(s), or business models, will emerge (and when) to replace and build upon the accomplishments of the pioneering generation (now in their 60s and 70s) who originated the structured settlement market in the late 1970s? NSSTA's Fall Conference featured two presentations addressing these issues:

• Succession Planning - Presenter Jim Early looked at the succession issue primarily from the point of view of the individual producer. Among his observations: "nepotism works in the structured settlement industry" and "a lack of capital has prevented the primary market from bringing in and training new people."
• Diversity Discussion - Angel Viera and Stacy McCall offered a convincing case for promoting greater diversity among new structured settlement professionals as a key component for future growth. Their presentation included and elicited several thought-provoking observations including: 1) "From a demographic perspective, our industry should mirror the people we serve" and 2) "Our industry suffers from a lack of diversity of thinking. Where do we find new voices and perspectives?"

Lifetime payments represent a valuable, optional structured settlement benefit which can be further enhanced from a pricing perspective when rated ages are applicable. Kevin Puckett and Ken Kiefer expounded on these important issues during their presentation about Mortality, Morbidity & Rated Ages.

NSSTA members Susan Clark and Robert Caples introduced Arnie Begler and Scott Henry, representing Pipitone Group, NSSTA's new public relations firm, and together they discussed NSSTA's Communications Program. Because journalists, as well as their readers, frequently confuse the primary and secondary structured settlement markets, Pipitone's "first test" was responding to the aforesaid Washington Post article. Pipitone's stated assignment is "to find the best communications practices and bring them to NSSTA" which will include designing a new NSSTA website. Among NSSTA's priorities, and Pipitone's challenges, will be attempting to reclaim the "structured settlement" brand inclusive of Google searches which currently are dominated by secondary market companies.

NSSTA Executive Director Eric Vaughn concluded NSSTA's Fall Conference with a Government Relations Update - his characteristically insightful and energizing overview of structured settlement legislative and regulatory activities. Among other accomplishments, Vaughn was recently named Vice Chairman of the American Association of People with Disabilities (AAPD).

Other recent NSSTA-related S2KM blog posts:

• Michael Goodman Interview
• NSSTA Marketing Surveys
  • Senior Claim Executives
  • Claim Professionals
  • Plaintiff Attorneys
• NSSTA 2015 Structures 202 Conference
• NSSTA 2015 Annual Conference

NSSTA 2015 Annual Meeting

Continuing to advance a theme of "industry unity", which now appears to encompass some collaborative political lobbying as well as education, the National Structured Settlement Trade Association (NSSTA) hosted its 2015 Annual Meeting April 22-24 in Washington, D.C.

Incoming NSSTA President Michael Goodman highlighted these developments during his introductory address when he listed among other recent NSSTA successes: 1) a strong relationship with the American Association for Justice (AAJ); 2) improved dialogue with the Society of Settlement Planners (SSP); 3) guest educational participation involving SSP and National Association of Settlement Purchasers (NASP) representatives; as well as 4) successful cooperation with NASP to enact revised structured settlement protection legislation in Illinois.

The new Illinois legislation provides an antidote for problems created by the Brenston case. Among other changes to the prior Illinois statute, the new legislation also includes provisions to: 1) restrict forum shopping; 2) require the seller of payment rights to appear in person at the court hearing (unless the court determines that good cause exists to excuse the payee from appearing); and 3) require disclosure of prior transfers.

Representatives of both NSSTA and NASP have expressed their intent to cooperate in pursuing similar legislative reforms in other states including Florida, Tennessee, Virginia and Wisconsin.

Goodman also identified several goals for NSSTA during his term as President. These include: 1) modifying NSSTA's traditional "protect and preserve" message to inspire primary market growth; 2) moving beyond "interest rate selling"; 3) moving beyond a focus on factoring; 4) identifying and pursuing new markets for structured settlement annuities; 5) adding one or more new life company providers; 6) engaging new, younger structured settlement brokers; 7) providing a new and improved training initiative.

Goodman will be joined on the NSSTA Board by two newly-elected Directors: Jim Early and Geoff Kissel. They replace retiring Directors John Machir and Dan Goodmann. John McCulloch was re-elected to a new three year term of directorship. McCulloch was also honored as NSSTA's annual President's Award winner. Karen Meyers and Bill Wakelee were named recipients of NSSTA's annual Leadership Award.

NSSTA Executive Director Eric Vaughn updated members on the Structured Settlement Caucus which is co-chaired by Congressmen John Lewis and James Sensenbrenner and currently consists of 53 congressional members. The objectives of the Caucus include: 1) expanding the base of Congressional support for structured settlements; 2) educating new members of Congress about structured settlements; and 3) protecting and promoting structured settlements.

As an important auxiliary portion of its meeting, Vaughn and 125 NSSTA members "Took the Hill" to meet with Senators and Representatives. Their efforts received strong encouragement from Congressman Lewis who exhorted NSSTA members "to make some noise."

"Stand up! Speak up!" Lewis urged. "Structured settlements have always enjoyed strong bipartisan Congressional support. They are the right and necessary thing to do. They work by providing long term financial security for injury victims to live with dignity."

NSSTA and its Education Committee face a continuing challenge: how best to educate its members, who possess varying degrees of experience and who market to a diverse group of structured settlement producers and decision makers, to deliver high value services to their respective clients. NSSTA has addressed this challenge with multiple new initiatives:

• Structures 202 provides a comprehensive program of case management fundamentals and business development opportunities. Unlike Structures 101 (a prior NSSTA educational program for case managers), Structures 202 is also designed for structured settlement brokers who are new to the market and therefore includes an important, primarily plaintiff-oriented, business development component.
• Complementing and extending its Certified Structured Settlement Consultant (CSSC) Professional Certification Program, NSSTA has added a new Master's Certificate in Structured Settlement Consulting (MSSC). NSSTA recognized and honored the most recent graduates of both programs during its 2015 Annual Meeting.
• During its Fall 2014 Conference, NSSTA announced a new "NSSTA University" service whereby NSSTA will partner with any member to secure CE credits for member-sponsored educational seminars or insurance claims departments or law firms.
• In partnership with CLM Advisors, NSSTA's Marketing Committee has commissioned a three part survey project to provide its members with valuable marketing tools for discussions with the audiences surveyed. Part 1 (claims executives) and Part 2 (claims adjustors) have been completed. Part III will survey plaintiff attorneys.

In addition, from S2KM's perspective, NSSTA continues to upgrade its traditional educational conferences.

SPEAKERS AND TOPICS - NSSTA 2015 Annual Meeting

• Kevin Silo - Opening Remarks
• Congressman John Lewis - Keynote Speaker
• Michael Goodman - NSSTA Agenda and Objectives
• Sally Greenberg - Consumer & Legal Protections for Injury Victims
• Mike Montemurro and John Stanton - Internal Revenue Service Update
• Taylor Smith, Ronna Ruppelt, Robert Sampson - Delivering High Value Services to Claims Professionals
• Karen Meyers, Anne Marie VonBank, Cody Shively - Trigger Trusts
• Christi Fried, Paul Hansen, Phil Sanders - Trust Asset Allocation and Structured Settlements
• Stephen Harris, Timothy O'Driscoll and Peter Vodola - Judicial Education
• Susan Clark and Melissa Price - NSSTA Took the Hill
• Michael Miller, Earl Nesbitt, John McCulloch - Factoring Panel Discussions
• Dr. Quincy Krosby - Macro Economics and the Financial Markets
• Nancy Bond - Life Care Planning

For additional S2KM reporting about past NSSTA conferences, see the structured settlement wiki.

Settlement Planning Market - 1

Following three 2012 settlement planning conferences, what have we learned, and what do we still need to know, before settlement planning can be recognized and analyzed as a business and professional market?

The settlement planning conferences provided:

• Definitions for Settlement Planning - Joseph Tombs, Director of the Registered Settlement Planner (RSP) certification program, defined settlement planning as "a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life. Settlement planners represent a blend of several professionals: part tax lawyer, trial lawyer, special needs lawyer, financial planner, annuity specialist, social worker, and medical case worker."
• Descriptions of an Emergent Profession - Several conference speakers described settlement planning as a larger and more complex successor business and profession for structured settlements. For example, Jack Meligan stated: "SSP and its members have been promoting the practice of Settlement Planning as a more comprehensive solution for the financial issues facing personal injury victims and their families, and the profession of Settlement Planning as the next evolutionary step for members of the financial and legal communities that serve these injured Americans."
• Product Introductions and Descriptions - In addition to structured settlement annuities, conference speakers discussed multiple financial and insurance products in the context of settlement planning including: settlement trusts; blended structures; alternative asset management options; market linked CDs; long term care insurance; life insurance; and reinsurance.
• Government Benefit Updates - Integrating financial and insurance products with available government benefits represents one of the most important settlement planning priorities and requires effective interaction among multiple settlement planning participants. The conferences highlighted settlement planning roles for special needs attorneys as well as financial and insurance professionals. In addition, government benefit developments related to settlement planning were discussed including new requirements for liability Medicare Set-Asides (MSAs) and special needs pooled trusts as well as the Patients Protection and Affordable Care Act.
• Tax Law Updates and Improvements - In addition to integrating tort settlement proceeds with government benefits, settlement planning requires careful tax planning and specialized document drafting. The SSP conference featured Robert Wood and Jeremy Babener, who provided tax law tips and updates for settlement planners, as well as David Higgins, who proposed a potential tax law alternative to expand the use of structured settlement annuities in settlement planning.
• Business Standards and Practices Discussions - The SSP's "Standards of Professional Conduct for Settlement Planners" (SSP Standards) represents a significant accomplishment and valuable industry resource.  Professor Carl Pierce, who helped review and draft the SSP Standards, continued his analysis of related settlement planning issues as part of the Risk Settlement Planning Practicum. Karen Meyers, Director NSSTA's Certified Structured Settlement Consultant (CSSC) program, led a discussion about product suitability during the SSP Annual Meeting.

Unanswered Questions

Despite continuing educational progress, however, certain questions about the settlement planning market still need to be prioritized and addressed before settlement planning becomes a recognized business and profession. Among the most fundamental and important:

• What types of settlements comprise the settlement planning market?
• How large is the settlement planning market?
• Is the settlement planning market increasing or decreasing?
• What informational resources exist to help answer these questions?

Towers Watson Updates

Beginning with the last question, S2KM recommends the Towers Watson updates on "U.S. Tort Cost Trends" as a starting point for discussing the settlement planning market. Since 1985, Towers Watson (and its antecedent Towers Perrin) have published 15 such updates with the most recent 2011 update analyzing U.S. tort costs from 2010. Each study:

• Consists of three components: 1) losses paid to third parties; 2) defense costs; and 3) administrative expenses.
• Calculates tort costs resulting from five insured plus uninsured business lines: 1) commercial multi-peril; 2) medical malpractice; 3) product liability; 4) other liability; and 5) commercial auto;
• Excludes: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs - example: tobacco litigation.

Highlights from Towers Watson's "2011 Update on U.S. Tort Cost Trends"

• The tort costs in 2010 ($264.6 billion) were the highest in U.S. history and represent a 5.1% increase from $251.8 billion in 2009. Towers Watson estimates the 2010 U.S. tort system cost approximately $857 per person, versus $820 per person in 2009.
• Towers Watson attributes the increase to the April 2010 Deepwater Horizon drilling rig explosion and resulting oil spill in the Gulf of Mexico. Absent the costs from this event, Towers Watson estimates 2010 tort costs would have decreased 2.4% from 2009.
• Since 1984, tort costs as a ratio of U.S. Gross Domestic Product (GDP) have ranged from a low of 1.70% to a high of 2.30% with relatively rapid increases in the ratio during the mid-1980s and early 2000s offset by intermittent and multi-year declines in the ratio.
• Since 1950, even adjusting for inflation, increases in U.S. tort costs have far exceeded U.S. population growth. However, inflation-adjusted tort costs per capita were 16% lower in 2010 than in the peak year of 2004.
• The weak U.S. economy has had a notable impact on commercial auto insurance claims. 2010 tort costs were the lowest since 2000 and 19% lower than 2004.
• Although medical malpractice costs have increased at an average annual rate of 9.7%, versus 7.5% for all other tort costs, since 1975, growth in medical malpractice costs from 2005 to 2010 averaged only 0.3% per year.
• Looking ahead, Towers Watson:
  • Anticipates employee practices litigation to be significant in the future despite the U.S. Supreme Court's 2011 ruling in favor of Wal-Mart in the sexual discrimination and civil rights class action case Wal-Mart Stores Inc. v. Betty Dukes et al.
  • Identifies "fracking" (a natural gas drilling process that extracts natural gas from shale by using water and chemicals which could result in contaminated drinking water) as a new area of litigation where defense costs are beginning to mount.

Up until its 2002 update of "U.S. Tort Cost Trends", Towers Watson also translated annual tort costs into the following cost categories (with 2001 percentages): 1) administrative costs - 21%; 2) defense costs - 14%; 3) plaintiff attorneys -19%; 4) economic loss - 22%; and 5) non-economic loss - 24%.

Note: Towers Watson discontinued this latter portion of its analysis in 2002, according to Russ Sutter, a Tillinghast principal and actuary who directs the Towers Watson study, "primarily because we lack reliable information from plaintiff attorneys". These percentages therefore represent Towers Watson's "best estimate" in 2002.

S2KM assumptions: lacking alternative estimates of tort cost payment categories and percentages, Towers Watson's "best estimate" in 2002 for 2001 U.S. tort costs continues to represent the most reliable annual analysis of U.S. tort dollars paid to claimants and their attorneys.

Applying Towers Watson's percentages for 2001 to the results of Towers Watson's analysis of 2010 U.S. tort costs ($264.6 billion total), produces the following assumptive results: 1) administrative costs - $55.6 billion; 2) defense costs - $37.0 billion; 3) plaintiff attorneys - $50.3 billion; 4) economic loss - $58.2 billion; and 5) non-economic loss - $63.5 billion.

Utilizing both Towers Watson's 2011 update of its "U.S. Tort Cost Trends" plus S2KM's assumptions based upon Towers Watson's additional 2002 "best estimate" for 2001 produces the following assumptive results for 2010:

• Economic loss of $58.2 billion plus non-economic loss of $63.5 billion (both amounts presumably paid to claimants) equals $121.7 billion of tort-related dollars paid to claimants.
• $121.7 billion plus $50.3 billion paid to plaintiff attorneys equals $172 billion of tort-related dollars paid to plaintiffs and their attorneys.

S2KM will reference and utilize these 2010 annual assumptive "tort cost results" in subsequent blog posts while continuing to discuss the settlement planning market. For additional S2KM reporting about settlement planning, see the structured settlement wiki.

S2P2J Release 51

Publisher Law Journal Press anticipates an April 2012 distribution date for hardcopy supplements for Release 51 of "Structured Settlements and Periodic Payment Judgments" (S2P2J). Online S2P2J will also be updated April 2012 to include Release 51 materials. First published in 1986, S2P2J is co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) utilize S2P2J as an educational resource for their certification programs.

Release 51 Highlights

Release 51 for "Structured Settlements and Periodic Payment Judgments" features a comprehensive Executive Life update including expanded and updated coverage for the Executive Life of New York (ELNY) liquidation proceedings now in progress. In related reporting, Release 51 also:

• Expands and updates prior reporting for life insurance insolvency procedures and state guaranty association laws;
• Offers advice to plaintiff attorneys about how to address the risk of non-payment by annuity providers; and
• Summarizes recent case developments impacting Aurora, the successor company to Executive Life Insurance Company of California (ELIC),

Release 51 also updates Medicare Secondary Payer (MSP) developments and conditional Medicare payment requirements. Contributing author Peter H. Wayne IV provides current analysis and advice about Medicare Set-Aside (MSA) arrangements in liability cases discussing new and related case law, new CMS pronouncements and new CMS field office guidance with practice tips for structured settlement and settlement planning consultants, attorneys and claim supervisors.

Release 51 expands existing coverage of structured settlement business standards and practices including analysis of the following legislation impacting settlement planners:

• The NAIC Suitability in Annuity Transactions Model Regulation;
• The NAIC Annuity Disclosure Model Regulation;
• Dodd-Frank's impact on fiduciary and suitability standards; and
• The Uniform Prudent Investor Act.

Other topics addressed in Release 51:

• Structured settlement metrics for defendants and liability insurers.
• The Treasury's final regulations for IRC section 104(a)(2) incorporating amendments resulting from the Small Business Job Protection Act of 1996.
• The new IRS Lawsuits, Awards and Settlements Audit Techniques Guide.

"Structured Settlements and Periodic Payment Judgments" is now available in both hardcopy and online versions. For summaries of prior Release Highlights, see the structured settlement wiki.

Product Suitability Standards - 1

To what professional "product suitability standards", if any, should structured settlement "consultants" be held responsible when they recommend structured settlement annuities for claimants in the context of personal injury settlements? And where should they look for guidance?

Should it matter:

• Whether the structured settlement consultant is working on behalf of the defendant or the plaintiff?
• Whether the structured settlement consultant is also a:
  • Registered Settlement Planner (RSP); or a,
  • Certified Structured Settlement Consultant (CSSC); or a,
  • Registered Representative (RR); or a,
  • Certified Financial Planner (CFP); or a,
  • Registered Investment Adviser (RIA)?
• Whether the proposed structured settlement annuity will be paid into a trust set up for the claimant as opposed to the claimant directly?

The National Structured Settlement Trade Association (NSSTA) is the largest national structured settlement professional association in the United States.  NSSTA has adopted a "Statement of Ethics and Professional Responsibility" (Code of Ethics) to provide "guiding principles" to its members and member organizations.  The Preamble to NSSTA's Code of Ethics provides:

"Implicit in the acceptance of this Statement is an obligation to act in a professionally responsible and ethical manner when providing structured settlement services."

Although Principle VI directs NSSTA members to:

"…comply with all material federal and state laws and regulations applicable to the structured settlement services that are provided",

NSSTA's Code of Ethics does not directly address product suitability standards. Nor does NSSTA's Code of Ethics include any penalties or enforcement procedures for member violations.

By comparison, the Society of Settlement Planners (SSP), whose members also sell structured settlement annuities, has adopted the "Standards of Professional Conduct For Settlement Planners" (Standards of Conduct).  Related to product suitability, Rule 5 (Conflict of Interest and Loyalty) of SSP's Standards of Conduct states in part:

"A settlement planner shall make and implement only recommendations that are appropriate for the client and consistent with the client’s objectives" (emphasis added).

In the event of a conflict between SSP's Standards of Conduct and any:

"laws, court rules, licensure requirements or other standards imposed on any regulated profession such as law, accounting, financial planning, securities trading or insurance", the SSP's members "should abide by the laws or professional standards imposed on the members discipline (emphasis added) ..."

Rule 5 also requires SSP members to obtain their client's "informed consent" which their Standards of Conduct define as:

"…agreement by a person to a proposed course of conduct after the settlement planner has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct."

The Preamble to SSP's Standards of Conduct addresses enforcement, stating in part:

"Compliance with these Rules depends upon voluntary adherence and, secondarily, upon reinforcement by peer and public opinion.....Although it is not intended that a violation of these Rules will, in itself, subject a settlement planner to civil liability to a person injured by such a violation, it is expected that these rules may be used as evidence of the conduct expected of reasonable settlement planners."

What does "appropriate" mean under the SSP Standards of Conduct? And what "laws or professional standards" could impact whether a structured settlement is appropriate for a particular injury victim?

One potential source for answers is the "Suitability in Annuity Transactions Model Regulation" (Suitability Regulation) promulgated and most recently revised in 2010 by the National Association of Insurance Commissioners (NAIC) and subsequently enacted by several states.  The purpose of the NAIC Suitability Regulation is:

“…to require insurers to establish a system to supervise recommendations and to set forth standards and procedures for recommendations to consumers that result in transactions involving annuity products so that the insurance needs and financial objectives of consumers at the time of the transaction are appropriately addressed."  However, the NAIC Suitability Regulation adds:  "Nothing herein shall be construed to create or imply a private cause of action for a violation of this regulation."

Section 6A of the NAIC Suitability Regulation provides in part:

"In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to his or her investments or other insurance products and as to his or her financial situation and needs, including the consumer's suitability information ..."

The NAIC Suitability Regulation defines "suitability information" to include: age; annual income; financial situation and needs, including financial resources used for the funding of the annuity; financial experience; financial objectives; intended use of the annuity; financial time horizon; existing assets, including investment and life insurance holdings; liquidity needs; liquid net worth; risk tolerance; and tax status; prescribes duties and penalties for insurers and insurance producers.

The NAIC Suitability Regulation applies "to any recommendation to purchase, exchange or replace an annuity made to a consumer by an insurance producer, or an insurer where no producer is involved, that results in the purchase, exchange or replacement recommended."

Significantly for structured settlements, however, Section 4 of the NAIC Suitability Regulation exempts "settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process".

Does this exemption encompass structured settlements?

By way of explanation, the legislative history of the NAIC Suitability Regulation specifically references "structured settlements" and adds:

"A regulator pointed out that this type of contract did not generally result from a recommendation by an insurer or producer but agreed that it did not hurt to have the exemption there."

If the NAIC Suitability Regulation exempts structured settlements, why is it relevant to structured settlement consultants and/or settlement planners?

• First, some structured settlement consultants and most settlement planners also sell annuity products (example SPIAs) that are covered by the NAIC Suitability Regulation.
• Second, some states now require all licensed insurance agents to complete a one-time annuity suitability training program as a condition for selling any annuity products. NSSTA already offers qualifying training programs for its members.

• Third, some structured settlement consultants may also be licensed to sell financial securities in addition to annuity products and may therefore be held to a higher product suitability standard by their broker-dealer.

• Fourth, some structured settlement consultants and/or annuity providers may proactively decide to adopt product suitability standards regardless of legal requirements. See, for example, the SSP "appropriate" standard highlighted above. Also note: under Section 8 of the NAIC Suitability Regulation, insurers are responsible for compliance and subject to penalties for non-compliance.
• Fifth, many structured settlement competitors (examples: financial planners and settlement trustees) are held to higher, more specific product suitability standards. To improve their sales success, structured settlement consultants should understand their competitors' product suitability standards including "fiduciary" and "best interest" standards in addition to, and in contrast with, the NAIC annuity suitability standard.

In subsequent blog posts, S2KM will identify and discuss product suitability legislation and regulations, in addition to the NAIC Suitability Regulation, that could impact structured settlement consultants and settlement planners.

For additional S2KM blog posts concerning structured settlement business standards and practices, see the structured settlement wiki and Section 6.02 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

SSP and NSSTA 2011 Annual Meetings - 4

One of the notable features of the 2011 educational conferences sponsored by the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) was how relatively few speakers focused on traditional structured settlement issues.

Of those who did, some offered external perspectives on structured settlements (attorneys, judges, financial planners, unions). In addition, NSSTA's Legal Committee provided an update on structured settlement legal issues.

Most of the other SSP and NSSTA 2011 educational speakers addressed structured settlements in the context of either:

• Peripheral topics such as: strength of life companies; state guaranty associations; Executive Life of New York (ELNY); internet marketing; certification programs; and the sale of structured settlement payment rights; or
• Settlement planning topics such as: Medicare set-asides (MSAs); special needs trusts (SNTs); 468B qualified settlement funds (QSFs); taxation (income and estate) of damages; lien resolution; non-qualified products; and allocation of medical expenses.

Two SSP presentations were also noteworthy for providing both a general understanding of settlement planning and the role of structured settlements as a core component of settlement planning:

• Kevin Urbatsch and Michele Fuller - "Working with a Special Needs Attorney";
• Jack Meligan - "Dissecting a Settlement Plan".

Urbatsch and Fuller, special needs attorneys and members of the Academy of Special Needs Planners (ASNP), addressed a variety of settlement planning topics:

• What is a settlement plan?
• What types of injury victims require settlement planning?
• What professionals should comprise a settlement planning team?
• What special needs issues should a settlement plan address?
• In addition to Medicare, Medicaid and Social Security, what government programs should a settlement plan consider?
• What benefits do these various government programs provide?
• Why are damage allocations important for settlement planning?
• Who is, and who is not, qualified to make damage allocations?
• What are the disadvantages of, and alternatives to, special needs trusts (SNTs)?
• How does health care reform impact settlement planning, Medicaid and SNTs?
• Why are 468B Qualified Settlement Funds (QSFs) important for settlement planning?

Meligan's discussion focused on a case-specific settlement plan. Meligan's recommended planning considerations included: "better quality of life"; new care facility; medications and therapy; estate planning; whether an SNT is appropriate; and whether a Medicare set-aside (MSA) is necessary. His proposed settlement plan recommended specific products and product and service providers for:

• A structured settlement payable into a SNT.
• An MSA funded in part with a structured settlement.
• Resolution of Medicaid and Medicare liens.
• A Treasury bill money market account.
• A "laddered" certificate of deposit portfolio.
• Investment in silver coins to address inflation.
• A will plus consideration of estate taxes.
• Prescription medications.
• Family evaluation to assist with life style changes.

S2KM comments about structured settlements and settlement planning:

• The future of structured settlements depends upon whether, how, when and by whom structured settlements are integrated into settlement planning.
• Settlement planning requires and deserves greater educational attention - by SSP and NSSTA as well as by special needs attorney associations.
• The SSP discussions led by Urbatsch, Fuller and Meligan provided a good introduction to many settlement planning issues.
• If NSSTA continues to study settlement planning (or settlement consulting), it might be valuable to review and compare:
  • SSP's "Standards of Professional Conduct for Settlement Planners" with NSSTA's "Code of Ethics";
  • SSP's "Registered Settlement Planner" (RSP) certification program with NSSTA's "Certified Structured Settlement Consultant" (CSSC) program;
  • SSP's 2011 educational agenda with NSSTA's 2011 educational agenda.
• New settlement planning standards need to be identified and established. For example: definitions and vocabulary; knowledge requirements; professional planning team composition; roles and responsibilities; individual and integrated work product; product recommendation criteria; licensing and certification; business practices including compensation disclosure, conflicts of interest and informed consent; documentation; and financing products and mechanisms.
• QSFs and structured settlements can improve settlement planning and therefore should be considered in every complex personal injury case.

S2KM comments about Meligan's sample settlement plan:

• At least until someone else presents a personal injury settlement plan featuring structured settlements in an educational forum, Meligan's plan represents the industry standard.
• It would be valuable to study and compare settlement plans developed by different professionals (trustees, special needs attorneys, and financial planners) for the same case example.
• Every settlement plan recommending a structured settlement should:
  • Justify why structured settlements are appropriate (product suitability) and more appropriate than comparable alternatives products - for example: SPIAs and indexed annuities.
  • Include some tax analysis to determine whether "tax-free" products are needed or justified.
  • Justify recommended amounts allocated to purchase structured settlements. Among the most frequent and severe settlement planning criticisms of structured settlements:
    • Single product structured settlement agents have an inherent conflict of interest that should disqualify them from allocating settlement proceeds;
    • Structured settlement agents invariably over-structure cases which limits planning options and increases the likelihood of future factoring transactions.
  • Disclose compensation (including shared compensation) from all recommended products subject to the recipient's informed consent.
  • Reference IRC section 5891 and the applicable state structured settlement protection statute(s).
  • Include a comparison of projected revenues from all sources and projected expenses.

For additional S2KM reporting about:

• SSP and NSSTA 2011 Annual Meetings - see the structured settlement wiki;
• Structured Settlements and Settlement Planning - see this earlier S2KM blog post.

 

SSP and NSSTA 2011 Annual Meetings - 2

This blog post continues S2KM's discussion of the 2011 annual conferences of the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) with a strategic perspective. A prior S2KM blog post identified speakers and topics featured by SSP and NSSTA. Subsequent S2KM blog posts will summarize and provide commentary about selected speaker presentations.

SSP's conference, open to members and non-members, addressed two general topics: "Special Needs Settlement Planning" and "Practice Improvement: Marketing and New Products". NSSTA's conference, for members only, celebrated NSSTA's 25th anniversary. It also included a NSSTA business meeting with reports from immediate Past-President Michael Kelly, new President Dan Finn, Executive Director Eric Vaughn, Assistant Executive Director Peter Arnold and the Chairpersons of NSSTA's several committees.

One of the highlights of NSSTA's 2011 conference was the honoring of NSSTA's past presidents. David Ringler, NSSTA's first president, spoke briefly at the conference and re-stated his original vision for NSSTA:

"Although we do need to constantly be on the watch for legislative change, I still believe having a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs is the most important reason for NSSTA. I have called it a common “talk table”, although I agree that is not exactly a very elegant term. If we can continue this tradition, there is no problem we cannot overcome."

Many industry participants, including some NSSTA members, question whether NSSTA has lost sight of this original purpose and tradition. Does NSSTA continue to represent "a place where everyone and anyone can sit down with each other and discuss [structured settlement] issues and viewpoints regardless of beliefs"? The answer, unfortunately, is "no".

For the past several years, NSSTA's leadership has superimposed a strict political litmus test for membership as well as for topics and speakers at its educational conferences. As one result, structured settlement industry participants with alternative issues, viewpoints, beliefs and educational interests have founded two other national structured settlement associations: the National Association of Settlement Purchasers (NASP) in 1996 and SSP in 2000.

Fortunately for NSSTA members and the structured settlement industry, based upon its 2011 conference, NSSTA appears to be expanding the scope of its educational programs to address important but controversial industry topics such as IRC 468B Qualified Settlement Funds, IRC 5891 and state structured settlement protection statutes. The educational programs offered by both NSSTA and SSP also increasingly discuss three fundamental transitions reshaping the structured settlement industry:

• From structured settlements to settlement planning;
• From a singular, illiquid, and non-assignable product to multiple products with greater flexibility to address changing needs and circumstances of injury victims;
• From traditional (pre-Internet) to web-based business models, processes and skill sets.

With the structured settlement industry facing these and other challenges, including aging leadership, declining structured settlement annuity sales, anticipated legislative changes plus an increasingly complex legal and regulatory business environment, where is the strategic vision and what are the strategic priorities for NSSTA and SSP?

NSSTA President Dan Finn and Executive Director Eric Vaughn identified the following:

• NSSTA challenges:
  • Promote the expanded use of structured settlements
  • Expand the structured settlement market
  • Protect structured settlement annuitants
  • Defend IRC sections 104(a) and 130
  • Enhance the Certified Structured Settlement Consultant (CSSC) program
  • Unify the structured settlement industry
• NSSTA objectives
  • Expand IRC section 104 (a)(2) to include wrongful imprisonment and sexual abuse cases
  • Expand government use of structured settlements
  • Promote structuring of MSAs in liability cases
  • Promote the structuring of Social Security disability payments
  • Promote the professionalism of structured settlements

SSP President Jack Meligan prioritized three objectives:

• Improve SSP's marketing to plaintiff attorneys
• Create an SSP lobbying presence
• Enhance the Registered Settlement Planner (RSP) certification program

Two of NSSTA's featured speakers, Jim Morris, President, Chairman and CEO of Pacific Life Insurance Company, and William T. Robinson lll, President-Elect of the American Bar Association (ABA), added important and positive assessments for structured settlements.

Morris accentuated the current financial strength of U.S. life insurance companies and explained why structured settlement annuities represent an excellent strategic product for life companies. As corollaries to Morris' presentation:

• NSSTA announced that two highly rated annuity providers, Mutual of Omaha and Berkshire Hathaway, have re-entered the structured settlement market; and
• Thomas Ronce and Craig Ulman clarified the life and health guaranty association system and how that system applies to structured settlements.

Robinson praised structured settlements as "professional and dignified solutions" for injury victims based upon his first-hand experience as a litigation attorney. Structured settlements represent "state of the art" tools for all attorneys to consider when negotiating and resolving personal injury cases according to Robinson. In his capacity as President-Elect of the ABA: Robinson also:

• Spotlighted the current funding crisis facing state courts; and
• Suggested the ABA and NSSTA should identify shared interests and lobbying opportunities.

For S2KM's reporting and commentary about past SSP and NSSTA conferences, see S2KM's structured settlement wiki.