Beyond Structured Settlements

Structured Settlements in 2010 - 2

Beginning in 2004, S2KM has utilized this blog ("Beyond Structured Settlements") and related web 2.0 publications to report and analyze strategic developments impacting the structured settlement and special needs settlement planning (aka settlement consulting) industries.

Featuring industry leaders, commentators and professional association conferences, S2KM has attempted to highlight how legal and technology changes are redefining the traditional (pre-2001) structured settlement market including structured settlement public policy as well as structured settlement business standards, business practices and business models.

From S2KM's perspective, the following categories, people and developments defined the structured settlement and special needs settlement planning industries in 2010:

Professional associations

• S2KM attended seven professional educational conferences during 2010 which addressed structured settlement and/or special needs settlement planning issues:
  • National Structured Settlement Trade Association (NSSTA) - 2
  • Society of Settlement Planners (SSP)
  • National Association of Settlement Purchasers (NASP)
  • National Alliance of Medicare Set-Aside Professionals (NAMSAP)
  • National Academy of Elder Law Attorneys (NAELA)
  • Academy of Special Needs Planners (ASNP)
• As a general observation, all of these conferences were valuable and complementary. For S2KM's 2010 (plus historical) conference reports, see S2KM's structured settlement wiki.
• SSP, NASP and NAMSAP deserve special recognition for their 2010 strategic educational discussions featuring industry leaders, commentators and critics who offered alternative perspectives for improving and growing the structured settlement and special needs settlement planning markets.
• By comparison, NSSTA remains reluctant to openly discuss strategic industry issues or to include alternative perspectives in their educational programs. More positively, NSSTA representatives and members increasingly attend and speak at non-NSSTA structured settlement and special needs settlement planning conferences.
• NAELA's educational conferences are noteworthy because they regularly feature sections or entire programs titled "unprograms". NAELA's unprograms are moderated group discussions about specific topics. NAELA's 2010 Special Needs Summit included six separate one hour unprograms with a concluding unprogram wrap-up session. One example of a 2010 NAELA unprogram was titled "Collaboration Opportunities for Special Needs Attorneys and Financial Planners".

Industry leaders

• NSSTA promoted Eric Vaughn, who previously served as NSSTA's lobbyist, to replace Joseph Ricci as NSSTA's new Executive Director effective July 1, 2010. Peter Arnold, previously NSSTA's Marketing Director, was similarly promoted to serve as NSSTA's Associate Executive Director. NSSTA's Board of Directors elected Michael Kelly as its 2010 President and Dan Finn as its President-elect. NSSTA honored Congressman Peter Stark during its Annual Meeting as its 2010 Legislator of the Year. NSSTA also gave special recognition to Karen Meyers and Joseph Bornstein for their contributions to NSSTA's CSSC and NSSTAPAC programs respectively..
• SSP elected Jason Lazarus as its President for 2010-11 and Charles Schell as Vice President. SSP honored Richard Risk with the designation of "life member" for his contributions to SSP and the settlement planning industry. Joseph Tombs continues as Director of SSP's RSP certification program.
• NASP named Matthew Bracy as its new President succeeding Robin Shapiro. Earl Nesbitt continues as NASP's Executive Director.
• NAMSAP elected Michael Westcott as its President.
• NAELA honored Dick Traum as the first recipient of NAELA's Special Needs Leadership Award. Traum is the founder and CEO of Achilles International, a non-profit organization providing community support for athletes with disabilities with members in more than 70 countries.
• Amy Palmiero-Winters, ultra-marathoner and lower-leg amputee, was named during 2010 as the winner of the 2009 James E. Sullivan Award given annually to the top amateur athlete in the United States.

Industry commentators

• For the past several years, Robert Wood has been the preeminent tax commentator and author for the structured settlement and settlement planning industries. Wood's publications appear on the Wood & Porter website.
• During 2010, Jeremy Babener emerged as an important new structured settlement tax commentator and author specializing in public policy and proposing an expanded structured settlement tax subsidy. In addition to authoring several structured settlement articles for tax and legal journals, Babener participated as a featured speaker at both the SSP and NASP 2010 Annual Meetings and authored two blog posts for S2KM during 2010. Babener discussed his structured settlement writing (accessible on S2KM's structured settlement public policy wiki and Babener's Tax Structuring website) in this 2010 S2KM interview.
• Additional authors who wrote and published 2010 legal articles about structured settlement and special needs settlement planning issues included: Daniel Hindert, Matt Garretson, Sylvius von Saucken, Peter Wayne, Mark Popolizio, Gregg Polsky and Brant Hellwig.
• Both the Legal Broadcast Network and Ringler Radio continued to produce and distribute podcasts featuring structured settlement commentators during 2010.
• An increasing number of structured settlement and special needs settlement planning professionals published blogs during 2010 joining industry blogging pioneers such as John Darer, Mark Wahlstrom, Matthew Bracy and Jack Meligan.
• Incisive Media published two new updates (Release 47 and Release 48) for "Structured Settlements and Periodic Payment Judgments" during 2010.

Legislation

• Both the Patient Protection and Affordable Care Act (Health Care Reform) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) redesign the legal environment in which the structured settlement and personal injury settlement planning markets operate.
• Among the anticipated strategic consequences of health care reform:
  • An estimated 16 million more Medicaid participants - and therefore:
  • More special needs trusts;
  • More special needs attorneys;
  • More structured settlement annuities payable to trustees.
• Dodd-Frank re-writes federal banking law and creates a new Bureau of Consumer Financial Protection. A key question, as yet unanswered, is whether the sale and/or purchase of structured settlement annuities constitutes a "financial product or service" under Dodd-Frank requiring regulatory supervision by the Bureau.

Regulations

• The United States Department of Treasury held a public hearing on February 23, 2010 focused on proposed new regulations for Internal Revenue Code section 104(a)(2). The proposed regulations, if enacted, would:
  • Eliminate the requirement that damages be based on “tort or tort type rights” in order to qualify for the section 104(a)(2) tax exclusion, and
  • Incorporate 1996 legislation requiring that personal injuries and sickness damages be “physical” in order to qualify for the section 104(a)(2) tax exclusion.
  • A subsequent S2KM interview featured John McCullough and Richard Risk, two of the structured settlement industry members who spoke at the hearing.
• The Centers for Medicare and Medicaid Services (CMS) continued to issue administrative guidance during 2010 for enforcement of the Medicare Secondary Payer (MSP) Act of 1980 and the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) reporting requirements for insurers. Featured discussions during the NAMSAP 2010 Annual meeting highlighted:
  • The increasing importance and complexity of the MSP statute for all personal injury stakeholders;
  • The need for these personal injury stakeholders (and their professional associations) to cooperate politically and educationally;
  • The challenges of integrating structured settlements, including rated ages, with Medicare set-aside arrangements (MSAs) in the context of health care reform, CMS MSA regulations and related judicial rulings;
  • The evolving business models, claim management strategies and professional skill sets which are now emerging to address these challenges.

Case law

• The Spencer v. Hartford class action lawsuit which settled in 2010 represents one of the most important legal developments in the history of the structured settlement industry.
• Hartford's gross settlement payment of $72.5 million represents 4.5% of total premium dollars Hartford used to purchase structured settlement annuities for class members from January 1, 1997 to June 7, 2010.
• Among the plaintiffs allegations:
  • Hartford and its attorneys, brokers and agents violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and committed common law fraud in structuring its settlements.
  • Hartford's structured settlements were priced so Hartford retained 15% of the value of the structured settlements.
  • Hartford and its attorneys, brokers and agents misrepresented structured settlements including explicit or implicit reference to:
    • The "cost" of the annuity or structured settlement or portion of the settlement being structured; and/or
    • The "value" of the annuity or structured settlement or portion of the settlement being structured.
• Hartford, which stopped writing new structured settlement business in 2009, denied the allegations.

Technology

• Despite the accelerating technology advances revolutionizing society generally, the structured settlement and special needs settlement planning industries have been slow to study and incorporate these advances into their educational programs and business models.
• The best industry-sponsored technology education programs during 2010 were offered by Mark Miller during a NAELA webinar and Harry Margolis at the ASNP 2010 Annual Meeting. Both presentations provided introductory overviews of web 2.0 and including recommendations for integrating specific social networking tools into special needs legal practices.
• NSSTA initiated a NSSTA blog during 2010 and offered an educational program about Internet marketing during its 2010 Fall Education program.

Public policy

• Both SSP and NASP featured specific discussions and presentations about structured settlement public policy during their 2010 Annual Meetings. The discussions included industry commentators representing diverse viewpoints and priorities.
• Jeremy Babener followed his 2009 paper debunking industry myths concerning "structured settlement dissipation studies" with several 2010 articles and papers addressing structured settlement public policy issues. Babener's public policy writing is featured on S2KM's structured settlement public policy wiki.
• Release 47 of "Structured Settlements and Periodic Payment Judgments" re-examined several structured settlement public policy issues related to single claimant 468B funds, structured settlement factoring transactions, dissipation by personal injury victims, the Deficit Reduction Act of 2005, special needs trusts and Medicare set-aside arrangements.
• In a 2010 Boston College Law Review article, professors Gregg Polsky and Brant Hellwig challenged the application of any structured settlement tax benefit for deferring attorney fees or payments to non-physically injured tort plaintiffs under general common law tax principles.

Business standards and practices

• The Spencer v. Hartford case raises many issues about structured settlement business standards and practices which require greater education and analysis if the primary market expects to improve and grow. For example;
  • Is the primary structured settlement market capable of self-regulation?
  • Why shouldn't key elements of the state structured settlement protection statutes (judicial approval; best interest test; compensation disclosure) be applied to primary market transactions?
  • As an additional requirement, or as an alternative, why haven't plaintiff attorneys and plaintiff consultants insisted upon a claimant's written informed consent before entering into a structured settlement?
  • Why haven't the SSP's Standards of Professional Conduct received more public discussion and analysis within the structured settlement industry?
• "Cash now" advertising represents one of the most highly criticized secondary market business practices. Although this practice continues to exist, NASP took an important educational step during its 2010 Annual Meeting by highlighting this issue and inviting secondary market critics to participate in the discussion.

Business models

• While other segments of, and products within, the special needs settlement planning market have expanded and improved in recent years, the structured settlement primary market in general has stagnated and retrenched.
• During 2010, however, representatives of the primary structured settlement market increasingly recognized their interdependency, and interacted, with other settlement planning professionals and professional associations such as special needs attorneys, life care planners, Medicare set-aside professionals and secondary structured settlement market participants.
• Future industry improvement and growth will require even greater appreciation and identification of shared interests as well as expanded implementation of shared political strategies, educational programs and business models.

Prior S2KM annual reports about the structured settlement industry and reports about industry association conferences are available on S2KM's structured settlement wiki.

SSP and NSSTA 2010 Annual Meetings - 9

The Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) should be congratulated - especially immediate past-Presidents Joseph Tombs and Daniel Durbin - for excellent 2010 annual meetings.

S2KM's complete coverage of the SSP and NSSTA 2010 annual meetings is available on S2KM's structured settlement wiki.

Continuing post-meeting S2KM commentary:

• Both the SSP and NSSTA 2010 meetings occurred in Washington, D.C. at nearby hotels during the same week - May 2-7.
• Attendance at both the SSP and NSSTA meetings was good (not great) - despite the economic downturn in structured settlements.
• Approximately 10 persons attended portions of both the SSP and NSSTA meetings.
• The scheduling conflicts between SSP and NSSTA occurred primarily on the morning of May 4 - which created difficult choices for persons attending both conferences.
• Unless otherwise indicated, S2KM's comments are limited to educational programs Patrick Hindert, S2KM's Managing Director, personally attended.
• For pre-program educational listings (topics and speakers) for both the SSP and NSSTA meetings, see this prior S2KM blog post.
• S2KM opted to attend NSSTA meetings on May 4 and missed valuable SSP presentations including two Medicare set-aside arrangement (MSA) panels organized by Jason Lazarus, SSP's new President for 2010-2011.
• Both SSP and NSSTA prioritized MSAs in 2010 with four MSA educational programs - three by SSP.
• Douglas Brand, a featured SSP speaker about MSAs, has also served as the key NSSTA Director in developing NSSTA's government benefits committee and educational program.
• Joseph Tombs, SSP's 2009-2010 President, and Director of SSP's settlement planning certification program, continued SSP's educational series about "Minors Settlements" initiated by Texas attorney Phillip McCrury during the SSP 2009 annual meeting.
• As positive hallmarks of their SSP and NSSTA presidencies, both Tombs and Durbin successfully played to their personal and association strengths. For Tombs, learning, improvement, and industry growth. For Durbin, public policy, lobbying, protect and preserve during industry transition.
• As SSP President, Joseph Tombs continued and elevated SSP's excellent educational programs, including the Registered Settlement Planner Program,which Tombs developed and manages in partnership with SSP and Texas Tech University.
• Jason Lazarus, a respected knowledge leader within multiple settlement consulting communities, succeeds Tombs as SSP's President.
• SSP's educational and political strategies continue to espouse "improve and grow" - for both the structured settlement and settlement planning industries.
• Daniel Durbin led NSSTA's leadership transition from Joseph Ricci to Eric Vaughn and Peter Arnold. During this transition, NSSTA sharpened and expanded its political focus and delivered on its promise to "protect and preserve" IRC sections 130 and 104(a)(2).
• Michael Kelly succeeds Durbin as NSSTA's 2010-11 President and will be joined on the NSSTA Board of Directors by five newly (re) - elected Directors - Joseph Barnet; Len Blonder; Randy Dyer; James Ebel; and John Machir.
• Karen Meyers continues her industry role as director of NSSTA's Certified Structured Settlement Consultant (CSSC) program in partnership with the University of Notre Dame.
• Among retiring NSSTA Directors, S2KM's Managing Director Patrick Hindert, a NSSTA member, has interacted primarily with former NSSTA Directors Joseph Shannon and Douglas Brand.
• Both Shannon and Brand (and all retiring NSSTA Directors) deserve industry thanks:
  
  • Shannon served as liaison between NSSTA's Board of Directors and NSSTA's legal committee.
  • Brand served as liaison between NSSTA's Board of Directors and NSSTA's government benefit committee.
• The SSP and NSSTA 2010 annual meetings highlighted the need for new Internet-based structured settlement educational strategies and resources.
• The combined SSP and NSSTA structured settlement learning experience was overwhelming. Incredibly rich structured settlement knowledge was crammed into less than 5 days without any announced (to date) knowledge capture and/or post-conference knowledge distribution.
• Except for NSSTA references to the new NSSTA website, neither SSP nor NSSTA offered any Internet educational ideas or discussions at their 2010 annual meetings.

Post-conference leadership questions:

• How will SSP's and NSSTA's new leaders respond to industry changes, challenges and opportunities?
• Who are the young (under age 40) structured settlement industry leaders?
• When and how will SSP and NSSTA transition their educational strategies to embrace the Internet?
• What shared interests exist between SSP and NSSTA to improve and grow the structured settlement industry?

Voices at the 104(a)(2) Treasury Hearing

By Jeremy Babener, S2KM Contributing Author

Yesterday, February 23, 2010, the Treasury conducted a hearing on proposed regulations to section 104 of the Tax Code. This article summarizes the hearing, as relevant to parties in the structured settlement industry.

As written previously, the proposed regulations would, in essence:

• Eliminate the requirement that damages be based on “tort or tort type rights” in order to qualify for the section 104(a)(2) tax exclusion, and
• Incorporate 1996 legislation requiring that personal injuries and sickness damages be “physical” in order to qualify for the section 104(a)(2) exclusion.

The Treasury received several written submissions from the structured settlement community, including letters from:

• Joseph Ricci, Executive Director, National Structured Settlements Trade Association (NSSTA)
• John Stanton, Counsel, NSSTA
• John McCulloch, Vice-President, Integrated Financial Settlements
• Dick Risk, Attorney, Risk Law Firm
• David Higgins, Attorney, Higgins Settlement Law
• Jack Meligan, President, Settlement Professionals Inc.

McCulloch, Stanton, Risk, and Meligan spoke at the Treasury hearing. As in their written submissions, the speakers focused on two questions. First, when do personal injury damages constitute “physical” injury damages, such that they may be excluded from plaintiffs’ taxable income? Second, can settlement monies be directed into qualified settlement funds (QSFs) in single-claimant cases without triggering economic benefit? If so, the structured settlement tax subsidy would be available to settlements involving single-claimant QSFs.

Of the five speakers (including one from the Consumers for Civil Justice who spoke briefly), only McCulloch focused on the “physical” issue, while the other three argued single-claimant QSFs.

John McCulloch:
McCulloch argued that the damages received by victims of prolonged sexual abuse or false imprisonment should always be deemed “physical,” whether or not evidence is available to demonstrate physical injury. This would, he argued, appropriately expand the “observable bodily harm” understanding of “physical” from private letter ruling in 2000. His arguments, which mirrored those in his written submission, were previously reviewed here.

Treasury Panel Response:
The panel queried McCulloch on both substantive and procedural grounds. McCulloch was asked whether his rule would define sexual abuse and wrongful imprisonment as “physical,” or establish an irrebuttable presumption that such damages are “physical.” Very likely, the question was asked with a 2008 private letter ruling in mind, which presumed physicality where the injury took place long ago. McCulloch suggested that neither sexual abuse nor wrongful imprisonment cases should be considered non-physical.

It is noteworthy that two of the panel members stressed the non-precedential nature of private letter rulings. While private letter rulings are certainly non-precedential, the panel seemed to imply that the “observable bodily harm” language from the 2000 private letter ruling is simply irrelevant for future interpretations of “physical.”

The panel also asked McCulloch a procedural question, one repeated in the single-claimant QSF discussion: Even if Treasury agrees, could it change the proposed regulations without being forced to conduct another notice and comment hearing?

Dick Risk and Jack Meligan:
Dick Risk and Jack Meligan both recommended that the Treasury issue regulations explicitly holding the economic benefit doctrine not to be triggered in the context of single-claimant QSFs. Each argued that such regulations are necessary as a result of the power imbalance in plaintiff-defendant negotiations.

Treasury Panel Response:
It became immediately apparent that the panel believed regulations concerning the single-claimant QSF issue could not be added to the proposed regulations without necessitating a new notice and comment period. It seemed implicit in the panel’s comments that the appropriate time to request regulations on the QSF issue would be the next time that taxpayers are asked for proposed issues. When asked why the issue had been removed after several years on the IRS Priority Guidance Plan, those on the panel declined to respond.

One member of the panel was particularly interested in the need for single-claimant QSF guidance based on the alleged power imbalance in plaintiff-defendant negotiations. Why, Risk was asked, is guidance necessary to establish a balance if single-claimant QSFs are already occurring? Moreover, how, since most plaintiffs have representation with knowledge of structured settlements, is there still an imbalance? Risk and Meligan both suggested that this imbalance is inherent in personal injury settlement negotiations, unless the defendant can be removed from the scene and replaced with a QSF.

John Stanton:
Stanton briefly repeated the procedural point of those on the panel that the current hearing was the wrong time and place for the single-claimant QSF issue to be discussed. He also urged that since current tax law of structured settlements has served all parties well, the Treasury should not make changes on the QSF front. The Treasury had no comments or questions for Stanton.

Series Note:
This article is the third in a series on the February 23, 2010 Treasury hearing on proposed regulations concerning section 104.

• Part 1: Treasury Hearing on IRC 104 Regulations
• Part 2: A Common Cause at the Treasury Regulation Hearing

S2KM Footnote:

• Jeremy Babener and S2KM Limited have agreed to feature occasional articles written by Babener on S2KM's blog. Except for articles including Jeremy Babener's byline or interviews featuring Babener, he does not contribute to or endorse S2KM opinions or writing.
• Babener's articles also appear on S2KM's structured settlement public policy wiki.
• Babener is a third year law student at NYU School of Law, and has written extensively about structured settlements (articles available at TaxStructuring.Com).

Treasury Hearing Commentary

S2KM will publish and update links to online commentary about the February 23, 2010 Treasury hearing for IRC section 104(a)(2) regulations on S2KM's blog "Beyond Structured Settlements" and S2KM's public wikis:

• structured settlement wiki
• structured settlement public policy wiki - featuring Robert Wood, Joseph Dehner and Jeremy Babener

S2KM

• Jeremy Babener: "Treasury Hearing on IRC 104 Regulations"
• Jeremy Babener: "A Common Cause at the Treasury Regulation Hearing"
• Jeremy Babener: "Voices at the 104(a)(2) Treasury Hearing"
• "Speaker Comments at the Treasury Hearing"
• "Treasury Hearing Commentary"
• "Legislation to Expand the Structured Settlement Industry"

The Settlement Channel - Mark Wahlstrom

• Robert Wood: "IRC Section 104 Regulations Clarified by IRS"
• Jack Meligan: "Treasury Regulations hearing next week on IRC section 104(a)(2)"

Structured Settlement 4Real - John Darer

• "IRS Hearings on IRC 104(a)(2) Tax Exclusion"
• "Jack Meligan 468B Rant on LBN"
• "Do Meligan and Babener Actions Now Reveal a Level of Panic Over Single Claimant 468B"
• "Settlement Planners Rebuffed ..."

A Common Cause at the Treasury Regulation Hearing

Written by Jeremy Babener, S2KM Contributing Author

As written previously, the Treasury will be holding a hearing on its proposed regulations for section 104(a)(2) on February 23, 2010. The proposed regulations, set forth in a nutshell:

• Eliminate the requirement that damages be based on “tort or tort type rights” in order to qualify for the section 104(a)(2) tax exclusion, and
• Incorporate 1996 legislation requiring that personal injuries and sickness damages be “physical” in order to qualify for the section 104(a)(2) tax exclusion.

Ordinarily, industry spokespersons attending would be expected to comment on “what is on the table.” However, the ongoing debate of the single-claimant qualified settlement fund issue has become of central concern for many in this industry. Richard Risk, structured settlement attorney and founder of the Society of Settlement Planners (SSP), and Jack Meligan, settlement planner and founding President of SSP, posit that the Treasury should issue regulations in favor of single-claimant qualified settlement funds. Joseph Ricci, Executive Director of the National Structured Settlements Trade Association (NSSTA), and John Stanton, counsel for NSSTA at Hogan & Hartson, argue otherwise. However, this debate focuses on hypothetical regulations that the Treasury has not proposed.

While the single-claimant issue is of much importance, the structured settlement industry should not lose sight of its chance to influence the regulations actually proposed by the Treasury. Most importantly, those at NSSTA, the SSP, and the National Association of Settlement Purchasers (NASP), should consider working with those at the American Association for Justice (AAJ), and the National Employment Lawyers Association (NELA), who all have a common interest at the Treasury hearing: expanding the applicability of the section 104(a)(2) exclusion. Decreased taxation of damages means larger after-tax recoveries for plaintiffs, more sales for life insurance companies, and presumably, more factoring transactions. By uniting, the structured settlement industry, in tandem with AAJ and NELA, will be better able to further all interests involved (other than increasing government revenue).

John McCulloch, Vice President of Integrated Financial Settlements, and David Higgins, attorney at Higgins Settlement Law, have both written to the IRS in this vein. Both have argued for the explicit confirmation of several types of damages as “physical,” and thus tax-exempt. Most of the letters submitted to the Treasury are available at regulations.gov .

Higgins’ Proposal for the “Physical” Requirement
Higgins argues that the IRS’ definition of physical is inadequate: “direct unwanted or uninvited physical contacts resulting in observable bodily harm such as bruises, cuts, swelling, and bleeding.” He recommends a broader definition, including damages for:

1. a doctor’s misdiagnosis resulting in death or serious injury from delayed or missing treatment,
2. child neglect resulting in starvation or illness,
3. rape committed under threat of bodily harm, and
4. other situations where traditional physical injury torts occur without unwanted or uninvited physical contact or observable bodily harm.

McCulloch’s Proposal for the “Physical” Requirement
McCulloch proposes two specific examples for the IRS to include in its regulations. Examples are often found in Treasury regulations, and are used to show how the law and regulations are to be interpreted in varying situations. McCulloch's first example, if accepted, would hold that damages for emotional distress from an extended period of sexual abuse, even without proof of “observable bodily harm,” are received by plaintiff tax-free. His second example would hold that damages for wrongful imprisonment of more than one year, including a portion for resulting emotional distress, are received by plaintiff tax-free.

McCulloch's examples are based in prior IRS decisions, building on them to expand the applicability of section 104(a)(2)’s exclusion.

McCulloch's First Example (Sexual Abuse)
McCulloch notes that his first example (sexual abuse) “loosely tracks the fact pattern and conclusion reached” in a 2008 IRS Chief Counsel Advice Memorandum. There are two key differences. First, the example concerns a law suit filed “[s]ometime after” the original tort. In the 2008 memo, the law suit was not filed for a “substantial time” after the original tort. Second, McCulloch's proposal holds such damages to always constitute physical injury. The 2008 memo, noting that the substantial time lag meant that the taxpayer might have difficulty establishing the extent of his physical injuries, held that it was reasonable for the IRS to presume that the settlement compensated taxpayer for personal physical injuries. The first example thus “loosely tracks” the memo, attempting to expand its applicability, and strengthen its force.

McCulloch's Second Example (Wrongful Imprisonment)
McCulloch suggests that although there have been no observable injuries in his second example (wrongful imprisonment), “the act of physical restraint in a prison cell in this situation is inherently a type of physical injury.” He believes this to be consistent with the Civil Liberties Act of 1988, which provided tax-free compensation to Japanese-Americans wrongfully imprisoned during World War II. He also argues that his example is consistent with the Tax Court’s Stadnyk v. Commissioner decision, which held damages for eight hours of false imprisonment to not constitute a physical injury.

His argument makes two taxpayer-friendly moves from the World War II and Stadnyk cases. First, the World War II decisions were made prior to the 1996 legislation requiring personal injury damages to be “physical” in order for plaintiffs to receive them tax-free. Thus, they may be no more relevant than other pre-1996 cases not requiring injuries to be “physical.” Second, the Stadnyk case, which held the eight-hour wrongful imprisonment damages to be taxable, in no way limited its decision to short-term cases. In fact, the Tax Court provided seemingly timeless language: “Physical restraint and physical detention are not ‘physical injuries’ for purposes of section 104(a)(2)….Nor is the deprivation of personal freedom a physical injury for purposes of section 104(a)(2).” McCulloch’s example and comment would create new law (since the 1996 legislation), expanding the types of damages eligible for the tax exemption.

Further Work Before the Hearing
In cooperating, the relevant associations might consider additional proposals for the IRS based on last month’s decision, Domeny v. Commissioner (T.C. Memo 2010-9). There, the Tax Court held that damages were received tax-free when made by a defendant for the causing of an acute physical illness by a stressful work environment. Proposals and examples consistent with this decision may be well aimed to preserve or expand the tax-exempt status of several types of personal injury damages.

S2KM Footnote:

• Jeremy Babener and S2KM Limited have agreed to feature occasional articles written by Babener on S2KM's blog. Except for articles including Jeremy Babener's byline or interviews featuring Babener, he does not contribute to or endorse S2KM opinions or writing.
• Babener is a third year law student at NYU School of Law, and has written extensively about structured settlements (articles available at TaxStructuring.Com).

Treasury Hearing on IRC 104 Regulations

Written by: Jeremy Babener, S2KM Contributing Author

Introduction

The United States Department of the Treasury will hold a public hearing on February 23, 2010 focused upon proposed regulations for section 104(a)(2) of the Tax Code. This section generally provides for the exclusion of physical injury and physical sickness damages (for lump sums and periodic payments). The proposed regulations would make two primary changes to current regulations. First, they would incorporate into regulations the amendments to section 104(a)(2) made in Small Business Job Protection Act of 1996. Second, they would eliminate the current regulatory requirement that for damages to qualify for the tax exclusion, they must be based upon “tort or tort type rights.” The government’s request for comments has generated several responses, which largely approve of the proposed changes, but disagree on the need for more.

Incorporating the 1996 Act
The proposed regulations reflect two significant legislative amendments to section 104(a)(2), both narrowing the exclusion’s applicability. The first prevents any punitive damages from qualifying for the tax exclusion. Thus, all plaintiffs’ punitive damage recoveries are taxable in the personal injury context. The second requires that the injury or sickness damages recovered derive from “physical” origins. Thus, section 104(a)(2) now excludes damages “on account of personal physical injuries or physical sickness.” Specifically, the regulations note that damages for emotional distress are not excluded unless attributable to physical injury or physical sickness.

Eliminating the “Tort or Tort Type Rights” Requirement
Treasury’s current regulations only allow damages to qualify for the section 104(a)(2) tax exclusion if they are “based on tort or tort type rights.” The requirement was interpreted by the Supreme Court to disallow the exclusion of damages where the relevant law provides only a narrow remedy. Thus, damages awarded pursuant to “no fault” statutes could not be excluded for plaintiffs’ taxable income. The proposed regulations explicitly eliminate this hurdle, allowing the exclusion to apply even where a statute “does not provide for a broad range of remedies” and the injury does not constitute a tort under state or common law.

Public Comments
The American Association for Justice (formerly the Association of Trial Lawyers of America) and the National Employment Lawyers Association agree with the elimination of the “tort or tort type rights” requirement. However, both argue that damages for emotional distress, even when not resulting from physical injury or physical sickness (i.e. distress resulting from sexual harassment), should be excluded from tax. However, while academic articles have made the same argument, the legislative history from the 1996 Act demonstrates that Congress intended to tax such damages.

Single Claimant 468B

The Treasury also received two submissions relating to the issue of whether single-claimant qualified settlement funds can fund structured settlements without causing plaintiffs to receive income for tax purposes. If they can, plaintiffs could use them without sacrificing the tax benefits of the structured settlement. The issue has been discussed previously on S2KM, and by this author. Most recently, the Treasury removed the issue from its Priority Guidance Plan.

Richard Risk, a structured settlement attorney, commentator and founder of the Society of Settlement Planners (SSP)wrote to the Treasury requesting that the February hearing consider the issue. Risk argued that such regulations are necessary and consistent with judicial precedent. Joseph Ricci , Executive Director of the National Structured Settlements Trade Association (NSSTA) wrote to the Treasury in opposition. Ricci argued that the issue is not relevant to the February hearing, and that such regulations would significantly reduce the use of structured settlements.

The hearing will take place on February 23 at the Internal Revenue Building in D.C. Public submissions are available at regulations.gov.

S2KM footnotes:

• This article was written for informational purposes only, and should not be construed as or replace legal advice.
• Jeremy Babener and S2KM Limited have agreed to feature occasional articles written by Babener on S2KM's blog. Except for articles including Jeremy Babener's byline or interviews featuring Babener, he does not contribute to or endorse S2KM opinions or writing.
• Babener is a third year law student at NYU School of Law who has written extensively about structured settlements. In addition to S2KM's blog, Babener's writing appears on other Internet sites including:
  
  • S2KM's structured settlement public policy wiki, featuring:
    • Commentary by Jeremy Babener, Robert Wood and Joseph Dehner;
    • Treasury's proposed 104(a)(2) regulations and analysis;
    • Treasury's hearing announcement for the proposed regulations; and
    • Public comments about the proposed regulations.
      
  • TaxStructuring.Com. - Jeremy Babener's newly launched tax resource site.

Structured Settlement 2009 Strategic Analysis

S2KM has begun a mid-year 2009 strategic analysis of the structured settlement industry. This analysis includes attending and reporting about 2009 structured settlement professional stakeholder meetings plus continuing conversations with structured settlement industry leaders.

To organize and publish S2KM's findings and analysis, S2KM is developing, and plans to publish and update, a related public wiki titled "Structured Settlements 2009". Here is a preview of this S2KM public wiki home page.

Purposes of S2KM's Structured Settlements 2009 wiki

• Provide S2KM with a dedicated online resource to identify, capture, organize and publish 2009 structured settlement strategic analysis.
• Demonstrate how blogs and wikis can interact to improve strategic analysis and learning.
• Encourage structured settlement knowledge leaders and professional associations to endorse, encourage and participate in strategic industry analysis.
• Help all structured settlement stakeholders to better understand, improve and grow structured settlements.

Table of Contents - includes references to related 2009 conference presentations; subject to continuing wiki updates:

• S2KM primary analytic resources - S2KM blog reporting for:
  • 2009 structured settlement stakeholder meetings - the Table of Contents incorporates and features educational discussions from the following conferences:
    
    • NSSTA 2009 Winter Meeting
    • ASNP 2009 Annual Meeting
    • SSP 2009 Annual Meeting
    • NSSTA 2009 Annual Meeting
  • Structured settlement professional stakeholder association prior year meetings
  • Related topics and knowledge leaders:
    
    • Settlement consulting;
    • Tim Nay Interview.
• S2KM's transitional perspective - structured settlements are undergoing two primary transitions:
  • From claim management to settlement consulting:
    • NSSTA: Settlement Consulting - Joseph DiGangi
    • SSP: Settlement Planning Industry Update - Patrick Hindert.
    • SSP - State of the Art Settlement Planning - Joseph Tombs
    • NSSTA: Looking Forward - Chris Diamantis and Dan Durbin.
  • From historic communication, learning and work processing to Internet-based models:
    • NSSTA:Web 2.0 - Patrick Hindert.
• Public policy - no 2009 stakeholder association discussions.
• Legislation and regulations
  • Existing
    • Federal
      • SSP: Tax Panel - Richard Risk; Sylvius von Saucken; Peter Wayne.
    • State
      • SSP: Judicial Approval of Minors Settlements - Phillip McCrury.
      • NSSTA: Exemptions for Structured Settlement Payments - Craig Ulman.
  • Proposed - no 2009 stakeholder association discussions.
    • Federal
    • State
  • Political strategy
    • NSSTA: Federal Entitlement Programs - Andrew Imparato.
    • NSSTA: Washington Reports - Eric Vaughn.
    • SSP: AAJ Strategy - John Bowman.
    • NSSTA: Federal and State Issues - Len Blonder.
    • NSSTA political speakers:
      • Senator Richard Durbin (D) from Illinois;
      • Senator Charles Grassley (R) from Iowa;
      • Congressman Charles Rangle (D) from New York;
      • Congressman Kendrick Meek (D) from Florida;
      • Congressman James Langevin (D) from Rhode Island;
      • Congressman Joseph Crowley (D) from New York;
      • Congressman Dave Camp (R) from Michigan;
      • Congressman Brian Higgins (D) from New York;
      • Congresswoman Allyson Schwartz (D) from Pennsylvania;
      • Congressman Joseph Courtney (D) from Connecticut;
      • Plus the Chiefs of Staff for four congressmen.
• Case law
  • SSP: Litigation and Legislative Update - Anthony Alfieri.
  • NSSTA: Spencer v. Hartford - Michael Miller.
  • NSSTA: Fresno County Factoring Cases - Illana Hanau.
• Primary and secondary markets
  • NSSTA: Secondary Market Update - Michael Miller and Illana Hanau.
• Government benefits
  • NSSTA: Federal Entitlement Programs - Andrew Imparato.
  • ASNP: Medicare Secondary Payer Compliance - Mark Popolizio.
  • ASNP:Lien Resolution Strategies - William Browning; Mark Popolizio; Sylvius von Saucken.
  • SSP: MMSEA Section 111 - Mark Popolizio.
  • NSSTA: Medicare Panel - Roy Franco; Mark Popolizio; David Korch; Rafael Gonzoles.
  • NSSTA: Medicaid Panel - John McCulloch; Timothy O'Driscoll; Dennis McAndrews
• Structured settlement economics
  • ASNP: Structured Settlement Annuities - Jack Meligan and Michele Whitmore.
  • SSP: Life Insurance Insolvencies - Eric Nordman.
  • NSSTA: Financial Strength Ratings - William Pargeans.
• Structured settlement funding products
  • NSSTA: 468B QSFs - Henry Strong, William Winslow, James Klapps.
  • ASNP: Structured Settlement Annuities - Jack Meligan and Michele Whitmore.
  • ASNP: 468B QSFs - Richard Risk and Jason Lazurus.
  • SSP: Settlement Trusts - Christi Fried.
  • SSP: Settlement Trust Software - David Eichenbaum.
• Transactional analysis
  • ASNP: Anatomy of a SNSP Case - Frank Johns, Kevin Urbatsch, Patrick Hindert.
• Stakeholder associations
  • NSSTA (2), SSP and ASNP 2009 meetings.
• Ethics
  • NSSTA: Business Ethics - Father Oliver Williams.
  • NSSTA: Business Ethics - Mike Jones.
• Standards
  • SSP: Registered Settlement Planner - Joseph Tombs.
• Business models
  • Claim management
    • NSSTA: Plaintiff and Defense Brokers - Ronald Sullivan, James Early, Roger Bernstein, Bruce DeBacher, Michael Goodman.
    • SSP:Structured Settlement Insolvencies - Randy Dyer.
    • SSP: Growing Structured Settlements - Randy Dyer.
    • SSP: In-House Structured Settlement Programs - Kevin Mack.
    • NSSTA: Minnesota Bridge Collapse - Jerry Lothrop.
  • Settlement consulting
    • NSSTA: Settlement Consulting - Joseph DiGangi.
    • ASNP: Integrating SNSP with an Elder law Practice - Tim Nay and Sandy Conley.
    • ASNP: Marketing to the Trial Bar - Frank Johns, Jason Lazurus, Kevin Urbatsch.
    • SSP: State of the Art Settlement Planning - Joseph Tombs.

NSSTA 2009 Annual Meeting - 1

To borrow a baseball analogy from Len Blonder, the National Structured Settlement Trade Association (NSSTA) "hit a home run" (or rather a series of home runs) during its 2009 Annual Meeting in Washington, D.C. April 28-May 1.

Blonder's comments to NSSTA attendees about "federal and state issues", which occurred near the end of an exceptional NSSTA program, served as a belated key note address for the entire NSSTA program.

Blonder was one of three NSSTA past-Presidents, along with Henry Strong and Chris Diamantis, whom NSSTA, and new NSSTA President Daniel Durbin, honored during its meeting.

Blonder, a two-time NSSTA President who continues to co-chair NSSTA's Legislation and Regulation Committee, spoke passionately about baseball and structured settlements. Blonder traced his involvement in structured settlements to the late 1970s when he helped organize a pre-NSSTA political coalition which formulated, and eventually helped to enact, the original structured settlement tax legislation in 1982.

With support from Blonder and its Legislation and Regulation Committee, NSSTA announced and introduced a new "D.C. two-step" political strategy: move one-step backward before moving two or more steps forward.

NSSTA's backward step:

• Re-focus on "protecting, preserving and promoting" structured settlement laws already enacted in the United States Internal Revenue Code and 47 state structured settlement protection statutes;
• Consolidate and transition NSSTA's administrative, financial and political strengths.

NSSTA's forward steps:

• Continue enhanced education about Medicaid and Medicare as cornerstones for growing the structured settlement market;
• Continue to define NSSTA's Internet strategy and online voice.

NSSTA's strengths were displayed during the 2009 Annual Meeting.

• Joseph Ricci, NSSTA's new Executive Director, summarized improvements in NSSTA governance.
• NSSTA announced:
  
  • New NSSTA voting bylaws;
  • Election of new Directors Betty Gregware and Daniel Finn; plus
  • A new NSSTA Channel on YouTube.
• NSSTA's program featured presentations from:
  • NSSTA lobbyist Eric Vaughn;
  • NSSTA marketing consultant Peter Arnold; and
  • NSSTA General Counsel Hogan & Hartson partner Craig Ulman.
• In addition to his "Washington Report" Vaughn organized an impressive delegation of congressional speakers for NSSTA:
  
  • Senator Richard Durbin (D) from Illinois;
  • Senator Charles Grassley (R) from Iowa;
  • Congressman Charles Rangle (D) from New York;
  • Congressman James Langevin (D) from Rhode Island;
  • Congressman Joseph Crowley (D) from New York;
  • Congressman Dave Camp (R) from Michigan;
  • Congressman Brian Higgins (D) from New York;
  • Congresswoman Allyson Schwartz (D) from Pennsylvania;
  • Congressman Joseph Courtney (D) from Connecticut;
  • Plus the Chiefs of Staff for four congressmen.

Among the political speakers, Senator Durbin, uncle of NSSTA President Daniel Durbin, was the most focused on structured settlement issues. Senator Durbin promised to:

• Support IRC sections 104(a)(2) and 130;
• Address structured settlement secondary market advertising as part of his proposed Financial Product Safety Commission.

Ricci, Vaughn and NSSTAPAC Chairman Brad Cantwell complemented NSSTA congressional presentations with a NSSTAPAC status report.

In addition to the congressional speakers, NSSTA's educational program featured exceptional structured settlement and settlement planning presentations:

• Industry Update and Looking Forward - Transitioning NSSTA Presidents Chris Diamantis and Dan Durbin offered their strategic analyses;
• "All Things Considered" - NSSTA's legal committee has upgraded the quality and scope of its educational contributions:
  
  • Michael Miller summarized Spencer v. Hartford;
  • Ilana Hanau spoke about the Fresno County factoring cases;
  • Craig Ulman re-introduced "Exemption of Structured Settlement Payments" as a sales and marketing enhancement to help grow structured settlements.
• Medicare and Medicaid - NSSTA's government benefits committee sponsored two panel discussions.
  
  • Roy Franco, Mark Popolizio, David Korch and Rafael Gonzalez spoke about Medicare and structured settlements;
  • John McCulloch, Timothy O'Driscoll and Dennis Mc Andrews spoke about Medicaid and structured settlements.

• 35W Bridge Collapse - Jerry Lothrop summarized structured settlement results and lessons learned from the Minnesota August 1, 2007 bridge collapse.
• Financial Strength Ratings - William Pargeans of A.M. Best emphasized strong fixed annuity sales trends despite low interest rates;
• Ethics - Mike Jones continued a revitalized NSSTA priority:
  • Asking the NSSTA audience: "why be ethical?" and
  • Challenging the NSSTA audience to identify and support ethical leaders within the structured settlement industry.

Congratulations to NSSTA for an outstanding 2009 annual meeting in Washington, D.C. Future S2KM blog posts will offer commentary.

For S2KM reports about prior NSSTA meetings, see S2KM's structured settlement wiki.

Settlement Consulting - 3

In prior posts about settlement consulting, S2KM:

• Reviewed Joseph DiGangi's discussion at the NSSTA 2009 Winter Meeting titled: "Comprehensive Settlement Consulting in the 21st Century". See: "Settlement Consulting".
• Continued DiGangi's discussion by asking questions and offering comments about "settlement consulting" definitions and scope. See: "Settlement Consulting - 2".

This S2KM post outlines settlement consulting history - from a structured settlement perspective.

S2KM's structured settlement history diagram (developed with graphic artist Keith Burtoft) concludes with the founding of the National Association of Medicare Set-Aside Professionals (NAMSAP) in 2005.

Beginning in 2005, S2KM has continued to monitor structured settlement history by attending and reporting about settlement consulting conferences addressing structured settlements.

For the past three years, S2KM has also published annual reports about structured settlement developments:

• Structured Settlements in 2008;
  
• Structured Settlements in 2007;
• Structured Settlements in 2006.

Using the same categories as S2KM's structured settlement history diagram, here are some of the more recent settlement consulting highlights:

Social Security

• Deficit Reduction Act of 2005 (DRA);
• The Ahlborn Case (2006) - see John Campbell's analysis of the Eighth Circuit's decision which the U.S. Supreme Court unanimously affirmed.
• Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA);
• Additional MSA rules for structured settlements (2008);
• New POMS for Special Needs Trusts (2009) - see David Lillesand's report;

Taxation - see related articles on the Wood & Porter website:

• Banks and Banaitis cases (2005) - attorney fees;
• Murphy case (2007);
• IRS Letter Ruling 200836019 (2008) - Non-qualified 130 assignments and attorney fees.

State Legislation (2005-2008) - see Release 45 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

• Structured settlement protection statutes;
• Uniform Trust Code;
• UCC Article 9 anti-assignment provisions;
• Medicaid annuity rules.

Other Developments

• Academy of Special Needs Planners (ASNP) founded (2007);
• AIG receives $150 billion U.S. Government bailout (2008);
• Joseph Ricci replaces Randy Dyer as NSSTA Executive Director (2008);
• SSP publishes its "Standards of Professional Conduct" (2008) and begins its Registered Settlement Planner (RSP) certification (2008);
• American Association of Nurse Life Care Planners (AANLCP) founded (2008);
• Several annuity providers depart the structured settlement market (2005-2008);
• Structured settlement annuity premium remains level at $6 billion per year (2001-2008);
  
• Structured settlement surveys identify a larger market (2006-2008);
• Settlement consulting bloggers and podcast providers emerge (2004-2009).

For reasons why S2KM views 1982, 2001 and 2008 as strategically important for structured settlements, see "Structured Settlements in 2008 - 1".

Structured Settlements in 2008 - 2

This S2KM blog post, the second of three analyzing structured settlements in 2008, summarizes conferences S2KM attended throughout the year. A prior post evaluated 2008 from an historical structured settlement perspective. A subsequent post will discuss challenges facing the structured settlement industry in 2009. Conferences and associations are listed alphabetically. For more detailed reports about these conferences, check the parenthetical links for related S2KM blog posts. For S2KM's complete historical review of professional associations and conferences, see S2KM's structured settlement wiki.

Academy of Special Needs Planners (ASNP) - The second annual ASNP conference underscored the strategic nexus that exists between special needs planning, settlement planning and structured settlements. ASNP's "extra-curricular" program featured a social service project where 30 ASNP conference attendees assisted Families Helping Families of Southeast Louisiana repair and improve its office headquarters. The ASNP conference confirmed for this author why special needs attorneys and financial planners, as opposed to former life insurance salesmen and claim managers, represent the future of structured settlements and settlement planning. Although several NSSTA and SSP members attended and/or participated as speakers, most of the structured settlement industry missed this valuable conference.

American Association for Persons with Disabilities (AAPD) - Structured settlement leaders from both NSSTA and SSP attended the 2008 AAPD Leadership Gala dinner in Washington, D.C. - in addition to many Congressional and Disability leaders. NSSTA was one of the event sponsors and had earlier featured Andrew J. Imparato, AAPD President and CEO, as a speaker at NSSTA's 2007 Fall Meeting. Imparato, a visionary and inspirational leader, is dedicated to transitioning disabled persons from poverty to economic self-sufficiency. AAPD's strategy includes uniting disabled persons as a political block and business market. AAPD's political priorities include changing the social security statutory definition of "disability" from "unable to work" to address "barriers to work" for disabled persons. Imparato's message for structured settlement professionals: involve yourselves at the local level with independent living centers.

National Academy of Elder Law Attorneys (NAELA) - NAELA's Mission is "is to establish NAELA members as the premier providers of legal advocacy, guidance and services to enhance the lives of seniors and people with disabilities". NAELA's membership consists of 4400 attorneys in the United States, Canada, Australia and the United Kingdom. Most of the members of ASNP and the Special Needs Alliance (SNA) are members of NAELA including many NAELA founders and former Presidents and Directors. S2KM developed a "Web 2.0 for Lawyers" wiki for the NAELA 2008 Symposium which was also featured in a Legal Broadcast Network (LBN) podcast interview by Scott Drake with S2KM's Managing Director, Patrick Hindert. S2KM also published a 2008 blog post analyzing NAELA and NAELA's CELA certification program from a knowledge management and web 2.0 perspective.

National Alliance of Medicare Set-Aside Professionals (NAMSAP) - Founded in 2005, NAMSAP is a non-profit organization devoted to improving Medicare set-aside arrangements (MSAs) and to facilitating compliance with Medicare conditional payment recovery.

• Background - MSAs are administrative and funding mechanisms utilized in certain categories of settlements to protect Medicare's interests as "secondary payer" under the Medicare Secondary Payer (MSP) statute. Although the MSP rules were enacted by Congress in 1980, CMS did not begin to enforce the MSP statute until 2001 based upon a series of CMS policy memoranda for workers compensation cases, several of which address structured settlement issues.
• MMSEA - On December 29, 2007, President George W. Bush signed into law the "Medicare, Medicaid and SCHIP Extension Act of 2007" (MMSEA). Beginning July 1, 2009, MMSEA requires liability insurers (including self-insurers, no-fault insurers and workers compensation insurers) to determine Medicare status for all claimants and report all claims involving a Medicare beneficiary to CMS when those claims are resolved. If the reporting for any claimant is not done in a timely manner, MMSEA authorizes CMS to enforce a civil penalty against liability insurers of $1000 per day per claimant. These information requirements and penalty provisions provide the basis for expanded enforcement by CMS of the MSP statute.
• MARC - One of the featured presenters at the NAMSAP 2008 Annual meeting was Roy Franco, Director of Safeway's Risk Management Strategies and Chairman of the Medicare Advocacy Recovery Coalition (MARC).
  • In discussing the MMSEA requirements for liability cases, Franco said "the issue is not just about reporting" and predicted a "claim freeze" as liability insurers and self-insureds wait for resolution and approval before they pay claims.
  • Franco characterized the MMSEA MSP rules as an attack on traditional best practices for liability claim management. He predicted legal challenges and criticized MMSEA rules.
  • Franco outlined MARC's priorities for MMSEA which include changing the law or, alternatively, obtaining an injunction to stop its July 1, 2009 implementation.
• S2KM reporting - S2KM published seven blog posts in 2008 highlighting recent MSA and MMSEA developments that impact structured settlements including several developments that have occured during 2008.
• S2P2J analysis - S2P2J Release 44 features an extensive update of MSA rules for structured settlements as well as a summary of MMSEA.

National Association of Settlement Purchasers (NASP) - At the NASP 2008 Annual Meeting, Patrick Hindert, S2KM's blog author, moderated a panel discussion titled "How to Improve and Grow the Structured Settlement Market". Participants included: Jack Meligan, Michael Upchurch and Matthew Bracy. As settlement planners, both Meligan and Upchurch described their view of the secondary market as a "mixed-bag" of bad and good. The "bad" part of factoring results from non-professional ("cash now") advertisements promoted by many factoring companies.

Not only do plaintiff attorneys dislike "cash now" advertisements, according to Meligan and Upchurch, they are also less likely to recommend structured settlements if they believe their clients will eventually sell their payment rights.

The potential liquidity provided by settlement transfers improves the structured settlement annuity product. Lives change. Unexpected events occur. Even the best personal injury settlement plans need to be reviewed post-settlement and sometimes adjusted. Settlement transfers, which must be reviewed and approved by state judges, are appropriate in some cases.

Bracy emphasized the need for well-educated plaintiffs and plaintiff attorneys - as well as judges. He noted that many primary market participants have ignored the settlement transfer business. Bracy acknowledged that good and bad business practices exist in the secondary market as well as the primary market. According to Bracy, the potential secondary structured settlement represents between 5% and 7% of the total primary market. Most structured settlement cases, according to Bracy, neither require nor qualify for a settlement transfer.

National Settlement Consultants (NSC) - Patrick Hindert, S2KM's Managing Director and blog author, was privileged to speak at the NSC 2008 Annual Meeting and also to attend NSC presentations and social functions. In addition to Michael and William Goodman, NSC founders and principals, the NSC presenters included representatives from ten (10) structured settlement annuity providers as well as several national settlement planning experts. In retrospect, the "not-for-publication" May 2008 NSC presentations by some of the annuity providers now seem especially interesting and important. Among other topics, these presentations addressed investment exposure to real estate mortgages plus one annuity provider's study of settlement transfers by its own structured settlement recipients. Randy Snow's NSC keynote presentation about change and growth was humorous and thought-provoking. Randy subsequently participated in a series of S2KM blog interviews about change and growth in the structured settlement industry. Hindert provided a structured settlement Medicaid update as part of the NSC educational program.

National Structured Settlement Trade Association (NSSTA) - Founded in 1985, NSSTA is the oldest and largest structured settlement professional trade association. NSSTA's members are primarily structured settlement consultants and annuity providers. In addition to providing education and certification, NSSTA historically has served as the legislative and lobbying voice of the primary structured settlement market. NSSTA's committees, especially NSSTA's legal committee, are among the most valuable sources of information about the structured settlement industry.

• Winter Meeting - Prominent educational themes and presentations at the NSSTA 2008 Winter Meeting included: trial attorneys; disabled persons and disability associations; government benefits; structured settlement legal documentation; legislative and regulatory developments; Internet marketing; and professionalism.
• Annual Meeting - Chris Diamantis, NSSTA's 2008 President, introduced Joseph Ricci as NSSTA's new Executive Director, and identified NSSTA's strategic priorities for 2008: factoring; advocacy and marketing; professionalism; and governance and communication. J.P. Steele announced the results of a Structured Settlement Survey Report sponsored by AIG which S2KM summarized in a November 23, 2008 blog post. Eric Vaughn, NSSTA's lobbyist, provided a "Washington Report" analyzing the then-upcoming federal election from a structured settlement perspective. Legal committee co-chairman, Michael Miller, summarized results from 100 factoring cases in which his law firm, Drinker Biddle, had participated since January 2008. Craig Ulman, NSSTA's General Legal Counsel, provided a State Guarantee Funds primer. Bradley Frigon spoke about special needs trusts. Among other topics, two actuarial presentations discussed structured settlement pricing.
• Fall Meeting - Although S2KM participated in four committee meetings at NSSTA's 2008 Fall Meeting, S2KM did not attend NSSTA's educational program because of a scheduling conflict. S2KM's blog coverage of this meeting therefore was limited to editorial commentary.

Society of Settlement Planners (SSP) - Founded in 2001, SSP is a national nonprofit educational and public policy association of professional structured settlement producers and others who assist injured claimants in the settlement process. At its 2008 Annual meeting, the SSP adopted its "Standards of Professional Conduct for Settlement Planners", 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, assisted SSP with this ethics project. Pierce served as a reporter for the latest revision of the American Bar Association's Model Rules of Professional Conduct.

Frank Johns, a leading special needs attorney and settlement planning ethicist, also advised SSP on its Standards of Professional Conduct. Johns' 2008 SSP presentation introduced a proposed Request for Proposal (RFP) for settlement planners.

Risk organized and moderated SSP's tax panel that featured Jody Brewster, Glenn Mackies and Michael Montemurro.

SSP devoted three presentations to government benefits, the highlight being David Lillesand, a national leader among social security and special needs trust attorneys. Based upon his discussions with the Social Security Administration (SSA), Lillesand stated that Nancy Veillon's January 31, 2006 letters to attorneys Roger Bernstein and Jay Sangerman representing NSSTA are "inoperative" - a statement Lillesand repeated during his presentation with SSA executive attorney Ken Brown at the ASNP 2008 Annual Meeting.

SSP's panel discussion about the secondary markets included NASP Executive Earl Nesbitt, Stephen Harris and Rhonda Bentzen. Other SSP educational presentations included a legislation and litigation update, settlement planning case studies, and advice about Internet marketing.

Stetson Special Needs Trust X (SSNTX) - Throughout its 10 year history, the Stetson Conference has been recognized as the leading special needs trust (SNT) knowledge forum in the United States. Most of the speakers are members of either the Academy of Special Needs Planners (ASNP) or the Special Needs Alliance (SNA). For structured settlement professionals, the 2008 Stetson program titled "The Basics of Special Needs Trusts" offered analyses of several important settlement planning topics and included two presentations specifically focusing on structured settlements:

• Texas Attorney Pi-Yi Mayo spoke about the January 31, 2006 Social Security Administration (SSA) letters to attorneys Roger Bernstein and Jay Sangerman as well as the application of the Deficit Reduction Act of 2005 (DRA) to structured settlements used to fund special needs trusts; and
• Leo Govoni provided "An Economic Analysis of Structured Settlements".

Structured Settlement Knowledge Leadership Conference (SSKLC) - Focusing on the "needs and best interests of consumers", the first Structured Settlement Thought Leadership Conference, sponsored by J.G. Wentworth, was designed to bring together knowledge leaders who are "redefining structured settlement roles and processes". The Leadership Conference objective was to provide an educational platform and open forum dedicated to growing and improving the structured settlement market. In addition to four panel discussions and two individual presentations, the Leadership Conference featured a brainstorming session to improve the structured settlement process for plaintiffs based upon the subjects discussed in prior sessions. The panel discussions addressed the economic life cycle of a personal injury claim identified by Adam Scales in his 2002 Wisconsin Law Review article titled "Against Settlement Factoring? The Market in Tort Claims has Arrived". One result of the Leadership Conference was the subsequent 2008 structured settlement survey conducted by J.G. Wentworth.