Beyond Structured Settlements

CMS Introduces WCMSA Portal

The Centers for Medicare and Medicaid Services (CMS) has announced the creation of an Internet portal for submission of workers compensation Medicare Set-Aside (WCMSA) proposals.

The new web-based application, which CMS introduced during a town hall meeting on November 29, 2011:

• Enables WCMSA proposals to be submitted electronically for CMS review;
• Accepts submission documents and supplemental information CMS may request;
• Provides online status updates for MSA applications;
• Generates email alerts when approval letters are issued.

According to Nuquest Bridge Pointe, which participated in the testing phase of the WCMSA Portal, "...CMS' intentions are to speed the review time as much as possible and that submissions of WCMSA Proposals via the new WCMSA Portal may assist in this effort."

CMS has also created a 118 page User Manual for its WCMSA Portal (WCMSAP) with 15 chapters including "Troubleshooting" and "Sample WCMSAP Correspondence".

For additional information about the WCMSA Portal (WCMSAP), see this CMS website page and the User Manual.

For information about structured settlements and Medicare set-aside arrangements (MSAs), see the structured settlement wiki and Section 15.03 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

Death and Damages

Jeremy Babener has written a new tax article titled "Death and Damages Can be Taxing" which appears in the April 2011 issue of Trusts & Estates magazine. Written for estate planning professionals, Babener's article addresses both income and estate tax issues involved with lump sum and structured settlements.

Babener's article considers physical and emotional damages resulting from three categories of cases: wrongful death, survivor lawsuits, and pre-death causes of action. In addition to his tax analysis, Babener provides three instructive case examples plus practice tips, a summary table and extensive footnotes.

Babener's article re-affirms, from S2KM's perspective, several important settlement planning lessons:

• The complexity of settlement planning and the importance for many recipients of personal injury and wrongful death settlements to receive timely and related tax advice from tax professionals. Although Babener's audience consists of estate planning professionals who may not always contribute to case-specific pre-settlement planning, they may be called upon post-settlement to address income or estate tax problems created by a poorly planned settlement. Classic "red flag" structured settlement cases include large periodic payouts with long certain periods or large deferred lump sums.
• The importance, when planning settlements, to consider potential future tax changes including estate tax rates and/or the amounts of allowable estate tax exclusions and deductions. Recent estate tax exemptions that shelter extensive sums from any estate tax may not exist when current structured settlement recipients die with still-to-be paid periodic payments.
• The role of allocations in settlement tax planning and tax calculations. As one example, Babener discusses a wrongful death preceded by substantial pain and suffering related to the accident causing the death. Although proceeds from a wrongful death settlement are not subject to estate tax, proceeds related to the pain and suffering will be included in the decedent's estate and will be subject to a potential estate tax. In another example involving co-plaintiffs, Babener suggests naming the more injured party as the primary structured settlement payee and the less-(emotionally) injured plaintiff as contingent structured settlement beneficiary.
• The potential estate planning problems created by structured settlements including valuation of any periodic payments remaining when the primary payee dies and the potential lack of liquidity to pay estate taxes. Babener highlights a current judicial controversy potentially applicable to structured settlements related to Treasury regulations issued in 1995. These regulations provide that a "restricted beneficial interest subject to any contingency, power or other restriction" will be valued for estate tax purposes based on all facts and circumstances rather than by Treasury tables. Whether structured settlement payments are considered to be "restricted beneficial interests" (due to non-assignability clauses) becomes financially significant in calculating estate tax liability. Babener also points out the potential value or need for commutations or factoring transactions to pay estate taxes resulting from structured settlements.
• The risks for claimants and their attorneys in relying on non-tax professionals for settlement planning tax advice. This caveat was highlighted in Adrian v. Mesirow Financial Structured Settlements, a 2010 judicial decision (not mentioned in Babener's article) where a claimant alleged she was mislead by a defense broker about the favorable tax consequences of a structured settlement. In holding that the defense owed no duty to the claimant, the court found that the broker's education, certifications and years of experience related only to her work in life insurance and structured settlements and did not and should not suggest any expertise or special knowledge of tax law.

For additional tax and structured settlement articles by Jeremy Babener, see his Tax Structuring website and S2KM's structured settlement public policy wiki.

For additional information about the taxation of structured settlements, see Chapter 2 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

S2P2J Release 49

Publisher American Lawyer Media (ALM) has announced May 1, 2011 as the distribution date for Release 49 of "Structured Settlements and Periodic Payment Judgments" (S2P2J). 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.

S2P2J Release 49 Highlights

• Expanded guidance on Medicare reimbursement procedures including:
  • A new section on how the Medicare Secondary Payer rules affect plaintiffs, defendants, plaintiffs’ attorneys and insurers; and
  • How each such case participant can comply with increasing government efforts to recoup prior payments from settlements.
• How allocations in settlement agreements affect a claimant's tax treatment.
• Structured settlement tax decisions in recent cases including:
  • No-fault;
  • Emotional distress; and
  • Wrongful incarceration.
• How the Gramm-Leach-Bliley Act privacy rules impact the structured settlement process.
• Discoverability of claimant Social Security numbers
• Impact of structured settlement tax and timing issues on potential legal liability for;
  • Defense and plaintiff attorneys; and
  • Structured settlement consultants.
• How inadequate beneficiary designations create subsequent legal disputes.
• Whether an arbitration award can be converted to a periodic payment judgment.
• Qualifying annuitists as expert witnesses.
• Impact of anti-assignment provisions in:
  • Workers compensation cases; and
  • U.S. government as defendant cases.
• Recent secondary market judicial decisions:
  • Rejecting transfers of structured settlement payment rights for failure to meet the "best interest" test; and
  • Approving the sale of payment rights in a payee’s bankruptcy.
• How structured settlement payment rights are treated in bankruptcy, child support, marital asset and minor cases.
• New structured settlement and periodic payment developments in Ireland, Canada, New Zealand and the United Kingdom.

For highlights from past releases of "Structured Settlements and Periodic Payment Judgments", see S2KM's structured settlement wiki.

Executive Life of New York - 2

A New York State Supreme Court Judge has ordered the Superintendent of the New York State Insurance Department to present the Court with a proposed order and plan of liquidation for Executive Life Insurance Company of New York (ELNY) on or before July 1, 2011 which establishes a briefing schedule and provides for notice to all ELNY creditors, after the Superintendent confers with the Life Insurance Company Guaranty Corporation of New York (Guaranty Corporation) and other interested parties.

The "Order to Show Cause" was issued by Nassau County New York State Supreme Court Judge John M. Galasso on December 17, 2010 - more than three years after then New York Governor Eliot Spitzer announced an "agreement in principle" to resolve the financial problems of Executive Life of New York (ELNY).

The December 17, 2010 "Order to Show Cause" also ordered that:

• If the New York Insurance Superintendent, as ELNY's Rehabilitator, is unable to present a proposed plan to the Court on or before July 1, 2011, then the Superintendent must submit papers in support of an application for an order of liquidation on or before August 1, 2011 and must provide notice of papers, plus a copy of the December 17, 2010 Order, to the Guaranty Corporation and all persons as directed by the Court;
• Any answering papers must be filed and served upon the Superintendent by November 11, 2011, and any reply papers must be filed and served by the Superintendent by December 16, 2011;
• The Guaranty Corporation and other parties wishing to be heard must appear before the Court on January 4, 2012, at 9:30 a.m. to show cause why the Court should not grant an order of liquidation for ELNY;
• The Order of Rehabilitation for ELNY entered on April 23, 1991 and the December 16, 1992 Order approving the Plan of Rehabilitation for ELNY continue in force and effect, including the provisions providing for payments to structured settlement and other annuitants; and
• The Superintendent must serve a copy of the Order to Show Cause upon the Guaranty Corporation within five (5) days following the signing of the December 17, 2010 Order.

ELNY has been in rehabilitation since 1991. The most recent audited financial statements were published July 28, 2010 and indicate that ELNY had total admitted assets of $984,021,594 compared with total liabilities of $2,516,254,541 as of December 31, 2009.

For S2KM's complete and continuing coverage of Executive Life of New York, see S2KM's structured settlement wiki.

Business Standards and Practices - 4

In a decision filed January 26, 2011 (Ceron v. 321 Henderson Receivables), a California Court of Appeals has unanimously affirmed one portion of a California Superior Court judgment sustaining demurrers by J.G. Wentworth and its affiliates (J.G. Wentworth) to purported class action legal challenges against prior court approved structured settlement transfers while simultaneously reversing another portion of the same Superior Court judgment which had denied injunctive relief under California's unfair competition law for alleged continuing violations by J.G. Wentworth of the California Structured Settlement Protection Act.

Plaintiff Raul Ceron alleged in his complaint that J.G. Wentworth violated the California Structured Settlement Protection Act by deducting up to $1500 from every transfer purchase to off-set independent legal and/or financial advice received by plaintiff and other structured settlement payment right transfer payees as required under the California statute.

Plaintiff's complaint further alleged:

• In making the structured settlement transfers, J.G. Wentworth engaged in an illegal scheme of directing individuals towards specific attorneys;
• J.G. Wentworth required plaintiff and other individual transfer payees to pay up to $1,500 for the purported independent professional advice whereas the California protection act requires the factoring companies to pay the cost;
• J.G. Wentworth concealed the facts it made attorney referrals and that individual transfer payees paid up to $1,500 for the referrals in violation of the California protection act.
• This scheme violated section 10134, subdivision (f)(3) of the California protection act;
• Section 10134, subdivision (f) sets forth requirements for an independent adviser: "Independent professional advice' means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser meeting all of the following requirements:
  • "(1) The adviser is engaged by a claimant or payee to render advice concerning the legal, tax, or financial implications of a structured settlement or a transfer of structured settlement payment rights.
  • "(2) The adviser's compensation for rendering independent professional advice is not affected by occurrence or lack of occurrence of a settlement or transfer.
  • "(3) A particular adviser is not referred to the payee by the transferee or its agent, except that the transferee may refer the payee to a lawyer referral service or agency operated by a state or local bar association."
• Plaintiff and other potential class members were damaged because J.G. Wentworth paid plaintiffs' attorneys, who were unlawfully referred, out of plaintiffs' proceeds;
• J.G. Wentworth continues to violate the California protection act by asserting plaintiffs' costs for independent legal and financial advice may be collected from transfer payees.

The plaintiff's complaint contained claims for: declaratory relief; unjust enrichment; conversion; unfair business practices in violation of the California Business and Professions Code; injunctive relief; and an accounting. The complaint requested damages and equitable relief including: declarations that J.G. Wentworth's conduct violated the California protection act and the prior court orders approving the transfers were void; determinations that J.G. Wentworth's conduct constituted an unfair business practice; restitution; disgorgement; an accounting; and an injunction against future unlawful, unfair or fraudulent acts. The plaintiff argued his 2004 and 2007 court orders approving transfers were subject to collateral legal attack because J.G. Wentworth obtained the court orders through extrinsic fraud

In response, J.G. Wentworth:

• Demurred to the complaint generally and sought judicial notice of plaintiff's prior written transfer declarations noting inconsistencies between plaintiff's allegations and exhibits attached to his complaint;
• Argued the demurrer should be sustained without leave to amend as to multiple causes of action because Superior Court Judges had approved plaintiff's transfers under the California protection act;
• Pointed out that some of the exhibits attached to the complaint showed that plaintiff was given notices and disclosures about his right to seek independent counsel for his prior transfers and that plaintiff also was advised J.G Wentworth:
  • Would pay up to $1,500 for an attorney to provide legal advice concerning the transfer petition; and
  • Could not make referrals to any specific adviser.
• Asserted plaintiff's unjust enrichment claim had no merit because:
  • Plaintiff did not allege that he paid any attorney fees in connection with the petitions;
  • Plaintiff had confused the duty to notify the payee of the right to seek independent professional advice before entering into the purchase agreement (section 10136, subdivision (b)) with the obligation to pay fees of up to $1,500 in connection with the petition proceedings. (section 10139.5, subdivision (e).);
  • An exhibit to the complaint showed that plaintiff engaged his attorney in connection with the purchase agreement, not the petition proceeding;
  • J.G. Wentworth had no obligation to pay any fees for independent professional advice regarding the purchase agreement.
• Argued plaintiff's unfair competition claim had no merit because plaintiff did not allege he had suffered any injury from the improper referral;
• Asserted some of plaintiff's claims were time barred and the class allegations should be stricken.

California Superior Court Judge Anthony J. Mohr had dismissed the plaintiff's complaint, sustained without leave to amend J.G. Wentworth's demurrer to a purported class action and additionally ruled:

• The transfers of structured settlement payment rights were not subject to collateral attack because they had been approved as fair and consistent with the California protection act in prior final court orders;
• The approval petitions had been litigated to decision where potential class members had received hearings;
• He could not set aside decisions of other judges in the absence of extrinsic fraud;
• To the extent that plaintiff alleged fraud in the complaint, it was only intrinsic fraud which did not provide a basis for relief;
• Factoring companies were not fiduciaries subject to a greater standard of care;
• Plaintiff filed a timely notice of appeal from the order dismissing the complaint.

In its review of the Superior Court decision, the California Appellate Court:

• Noted that California amended its structured settlement protection act in 2009 including section 10136, subdivision (b) which addresses "independent legal and financial advice". Unlike the pre-2009 statute, Current section 10136, subdivision (b) provides that factoring companies must pay the costs for independent professional advice. Because the plaintiff's attorney referral and structured settlement transfers occurred in 2007, the California Appellate Court applied the pre-2009 version of section 10136, subdivision (b) in deciding this case.
• Ruled that Judge Mohr correctly sustained J.G. Wentworth's demurrers to the claims which sought to set aside the prior court approvals stating: "... once a transfer of structured settlement payments has occurred through the detailed court approval process, it cannot be collaterally attacked as void by any party as a violation of statute, absent direct and affirmative evidence of fraud."
• Disagreed with the plaintiff that the court approvals can be collaterally attacked in this case because J.G. Wentworth fraudulently misrepresented the facts in the petition process. According the Appellate Court,
  • Extrinsic fraud (showing that a party has been deprived of a fair opportunity to present a claim or defense in court) provides a basis for relief but intrinsic fraud (when the party has been given notice of the action and has had an opportunity to present his case and to protect himself from any mistake or fraud of his adversary but has unreasonably neglected to do so) does not;
  • Plaintiff's only claims of fraud in this case were intrinsic - i.e. that J.G. Wentworth misrepresented it had complied with the California structured settlement protection act during the court approval process;
  • The plaintiff did not allege he was denied a fair hearing or prevented from presenting any evidence as a result of his legal representation;
  • Although there may be an exception to the extrinsic versus intrinsic fraud rule in some cases where the party concealing material evidence has a fiduciary relationship with the other litigant. the complaint did not allege sufficient facts to show J.G. Wentworth had a fiduciary relationship with the plaintiff or any possible class members;
  • The complaint did not allege that:
    • The lawyers provided to plaintiff or other class members gave incorrect advice; or
    • The plaintiff was improperly advised about the propriety of entering into the transfers; or
    • The plaintiff sought leave to amend to set forth such allegations.
• Dismissed the plaintiff's unjust enrichment claim for past court approved transfers for similar reasons - i.e. the transfers had been adjudicated to be fair, reasonable and lawful through the court approval process and may not subsequently be collaterally attacked.

The California Appellate Court, however, did reverse the Superior Court dismissal related to one cause of action ruling that the plaintiff's complaint sufficiently alleged a claim for injunctive relief against unfair business practices.

• The Appellate Court noted section 10139.4 of the California structured settlement protection act provides that a violation of the act is an unfair business practice within the meaning of the California Business and Professions Code section 17200.
• The complaint alleged that, since March 2002 and continuing to the present time, J.G. Wentworth engaged in conduct which violates the act and sought injunctive relief against the alleged continued violations.
• In reversing the Superior Court on this one cause of action, the Appellate Court did not address the statute of limitations and class certification issues or express any opinion concerning the plaintiff's standing to pursue post-2009 claims for payments made by J.G. Wentworth to alleged unlawfully referred attorneys.

For additional information about transfers of structured settlement payment rights and the California structured settlement protection act see S2KM's structured settlement wiki and Chapter 16 of "Structured Settlements and Periodic Payment Judgments". For S2KM's continuing coverage of structured settlement business standards and practices, see S2KM's structured settlement wiki.

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.

NSSTA and NASP 2010 Educational Conferences - 4

The National Association of Settlement Purchasers (NASP) just raised the standard for structured settlement strategic discussion and analysis during its 2010 educational conference in Las Vegas.

Previous standards: the 2008 Structured Settlement Thought Leadership Conference and NASP's 2009 Annual Meeting.

NASP 2010 strategic anlaysis participants: Earl Nesbitt (NASP Executive Director and moderator); Peter Vodola (Co-Chairman of the NSSTA Legal Committee); Matthew Bracy (President of NASP); Craig Lessner (General Counsel of Peachtree); John Darer and Patrick Hindert (NSSTA members and industry bloggers); Richard Risk (SSP member); and Jeremy Babener and Tim Morbach (industry analysts).

Strategic Questions: Nesbitt challenged the NASP panel and launched the industry discussion with these strategic structured settlement questions:

• What has caused the decline in the primary structured settlement market?
• What steps has the primary market taken to improve its product and sales?
• Is the structured settlement market transitioning to a settlement planning model?
• If yes, what impact will this transition have for the primary and secondary market?
• What issues and problems does the primary market see with the secondary market:
  • Operating and administering their current portfolio?
  • Originating new business?
  • Administrative costs?
  • Complying with transfer orders?
  • Potential liabilities?
  • Beneficiary issues?
• How can the secondary market help improve and grow the primary market?
• How can the primary market improve the secondary market?
• What are the risks of a continuing adversarial relationship between the primary and secondary markets?
• How does the primary market view the positive secondary market recovery from the 2008 financial market collapse?
• What are the primary market annuity provider concerns with the secondary markets?
• How can the secondary markets help improve and grow the primary market?
• How can the primary market improve the secondary market?
• What are the risks if the relationship between the primary and secondary markets remains adversarial?
• How did the 2008 collapse of the capital markets impact the primary structured settlement market?

This S2KM blog post continues S2KM's reporting and analysis of the NSSTA and NASP 2010 educational conferences.

NSSTA and NASP 2010 Educational Conferences - 3

"Protect and Preserve" or "Improve and Grow".

These polar-opposite imperatives for the structured settlement industry represent S2KM's two strategic lenses for reporting and analyzing simultaneous educational programs this week in Las Vegas sponsored by the National Structured Settlement Trade Association (NSSTA) and the National Association of Settlement Purchasers (NASP).

S2KM's Managing Director, Patrick Hindert, will attend portions of the NSSTA conference (as a NSSTA member and former NSSTA President) and participate in NASP's Friday morning "Industry Analysis" program (as a moderator and speaker). S2KM's continued reporting and commentary about the NSSTA and NASP conferences will appear on this S2KM blog ("Beyond Structured Settlements") as well as S2KM's structured settlement wiki.

NSSTA's strategic mandate is to "protect and preserve".

Question: what exactly does NSSTA want to "protect and preserve"?

The simple answer: Internal Revenue Code sections 104(a) and 130.

More strategically, what NSSTA wants to "protect and preserve" (to the extent possible) are business models and business practices ("good old days") that existed prior to:

• 1986 - Jim Lokey completed the first structured settlement transfer;
• 1991 - Executive Life insolvency;
• 1993 - Congress enacted IRC 468B and introduced qualified settlement funds;
• 1994 - Weil lawsuit settlement permitting structured settlement agents to work directly with claimants and plaintiff attorneys;
• 2001 - Congress adopted IRC 5891 and defined "structured settlement" as well as rules for structured settlement transfers;
• 2010 - Hartford settled the Spencer class action lawsuit (and departed the structured settlement business) following allegations of civil RICO and state fraud violations by Hartford, its agents, brokers and attorneys.

One result of NSSTA's "protect and preserve" mandate has been a "dumbing down" of NSSTA's educational programs - at least from a strategic perspective. Some of NSSTA's technical discussions are excellent. For example, NSSTA's legal committee has re-emerged as a leading structured settlement educational resource. And NSSTA's CSSC certification program continues to receive positive reviews despite low attendance and the lack of a continuing education (CLE) requirement.

NSSTA's primary educational problem is the application of its narrow and political strategic framework ("protect and preserve" as opposed to "improve and grow") for its educational programs. For example, NSSTA never invites knowledge leaders from NASP or SSP (or anyone critical of NSSTA political objectives) to participate in NSSTA's educational programs. For another related example, NSSTA educational programs never provide strategic discussions ("Industry Analysis") with alternative perspectives.

Bottom line: NSSTA's educational programs have fallen behind NASP and SSP who now represent the benchmarks for structured settlement educational excellence. For further S2KM reporting about NSSTA's educational demise, see: S2KM's analysis of NSSTA's 2009 educational program. Unfortunately, NSSTA's announced 2010 educational program looks like "the same old, same old" - at least from S2KM's strategic perspective.

By comparison with NSSTA, NASP will devote three hours of its 2010 educational program this week in Las Vegas specifically to "Structured Settlement Industry Analysis". This portion of the NASP program is subtitled: "How to Improve and Grow the Structured Settlement Industry".

Announced participants for this strategic discussion include industry knowledge experts who are members of NASP, SSP and NSSTA plus Jeremy Babener as an independent writer and analyst. Other participants include: Robin Shapiro, Earl Nesbitt, Matt Bracy, Andrew Savysky, Peter Vodola, Richard Risk, John Darer and Patrick Hindert - and continues prior NASP strategic discussions that featured: Stephen Harris, Jack Meligan and Michael Upchurch among others.

NSSTA and NASP 2010 Educational Conferences - 2

The National Structured Settlement Trade Association ( NSSTA ) and the National Association of Settlement Purchasers ( NASP ) have announced agendas and speakers for their 2010 educational conferences scheduled concurrently and coincidentially next week (November 10-12, 2010) in Las Vegas.

S2KM has published an introductory report for these conferences plus historical reporting about past NSSTA and NASP educational conferences. S2KM's Managing Director, Patrick Hindert, will attend portions of the NSSTA conference (as a member) and participate at the NASP conference (as a moderator and speaker).

S2KM recommends both the NSSTA and NASP educational conferences to all structured settlement stakeholders and offers this preliminary comparative analysis.

Topics

NSSTA and NASP will both address several similar issues:

• Ethics - NSSTA and NASP could enhance their discussions by addressing "business practices" including the "Standards of Professional Conduct" adopted by the Society of Settlement Planners (SSP) on March 7, 2008.
• Legal update - NSSTA's legal committee represents a strategically important structured settlement industry knowledge resource. That said, NASP's structured settlement legal updates are equally diverse and valuable - especially when you include NASP's related "Industry Updates".
• Legislative update - Eric Vaughn is NSSTA's Executive Director, federal lobbyist and legislative guru. NSSTA lobbying weaknesses (especially state lobbying) play to NASP lobbying strengths and suggest collaborative opportunities.
• Marketing - Try a Google search for "structured settlement". Where are NSSTA, SSP and other primary market  participants?

With some important differences:

• NSSTA
  • Medicare/Medicaid - NASP is expected to address these issues as part of NASP's "Industry Analysis".
  • Certification - NASP does not have a certification program.
  • Life care planners - NSSTA, NASP (and SSP) educational programs historically have ignored this important settlement consulting professional community.
  • In force structured settlements - a strange attempt by NSSTA to educate its members about secondary market issues.
  • Wrongful imprisonment - a narrow focus compared with NASP's anticipated tax analysis.
  • Life expectancy - hopefully, NSSTA will link this discussion with related Medicare and Medicaid issues. Whatever happened to the structured settlement industry's life expectancy study initiated by Roger Harbin and Steve Smith?
• NASP
  • Industry analysis - NSSTA's educational programs typically provide limited strategic analysis with only one perspective and no outside critics. NASP features more open discussion of strategic industry issues featuring critics and alternative perspectives.
  • Taxation life cycle - Both NASP and SSP have previously featured Jeremy Babener as a speaker. Why not NSSTA? Babener's NASP presentation promises to be one of the highlights of these two structured settlement educational conferences.
  • Capital markets - NSSTA's educational programs historically lack analysis of the financial markets. NASP's annual panel sets the industry standard.
  • Dodd Frank legislation - a good example of NASP analysis of federal legislation that impacts both the primary and secondary structured settlement markets.

Speakers

NSSTA and NASP speakers both include a mix of association members and non-members. Both associations typically feature judges, attorneys and legislators as speakers. NSSTA's legislative speakers are generally federal while NASP's legislative speakers are generally state.

NSSTA speakers do not include SSP or NASP members. NASP speakers include both NSSTA and SSP members and thereby generate more comprehensive and valuable strategic discussions.

NASP 2010 featured speakers who are members of NSSTA and/or SSP:

• NSSTA
  • Peter Vodola
  • John Darer
  • Patrick Hindert
• SSP
  • Richard Risk

Previous NASP speakers who are members of NSSTA and/or SSP

• NSSTA
  • Stephen Harris
  • Michael Upchurch
  • Patrick Hindert
• SSP
  • Jack Meligan
  • Richard Risk

For more comprehensive S2KM reporting about  NSSTA, NASP and SSP, see S2KM's structured settlement wiki.

Spencer v. Hartford - 11

S2KM continues to monitor and report Spencer v. Hartford structured settlement class action lawsuit and settlement developments.

For complete S2KM reporting, see the structured settlement wiki.

Potential class action settlement recipients are requesting information about this class action lawsuit.

Public information

• Garden City Group is the Spencer v. Hartford class action administrator.
• Garden City Group has created a web page for potential Spencer v. Hartford class action claimants and settlement recipients.
• S2KM's continuing Spencer v. Hartford reporting appears in S2KM's blog ("Beyond Structured Settlements") and S2KM's structured settlement wiki.

Lessons learned? - what, if anything, has the structured settlement industry learned from Spencer v. Hartford?

For continuing S2KM reporting and analysis of the structured settlement industry, see S2KM's new series about the NSSTA and NASP 2010 educational conferences.