Structured Settlements History

Structured Settlements | Over 100 years of creation

history of structured settlements
1918 g.
Income Act 1918, Cap. 18, § 213 (b) (6), 40 Stat. 1057, 1066 (1919)
tax-exempt losses for “personal injury or illness” f
from taxation, apparently because Congress considered it “questionable” whether such damage was “income” within thethen

the meaning of the sixteenth amendment and, therefore, whether they can be constitutionally taxed.

1922 g.
Damage from various non-physical injuries (for example, attachment alienation, defamation,

etc.) were also considered tax exempt

Unlawful Death Tax Ordinance, 1928
The IRS rules that the remuneration paid by the US / German Mixed Claims Commission to the surviving spouse of a passenger in Lusitania is tax exempt as the remuneration is intended to “recover [the decedent’s wife] to practically the same financial and economic situation that she had before the death of her husband.

The Great Depression
Investors began to look to annuities as a safe haven from volatile markets.

1954 Section 104 of the IRS Code
establishes that cash settlements in personal injury cases are tax-exempt.

1960 Ordinance on Income 60 to 31
Situations 1-3, 1960-1 CB 174, considers that a simple promise to pay, not represented by bills of exchange or secured in any way, does not constitute an income in the sense of cash receipts and payments.
Serious birth defects resulting from the use of the thalidomide drug resulted in more claims than manufacturers could afford to pay. Recurring payments from the fund were used to provide compensation for thalidomide victims more than was possible at the time with a lump sum payment in cash.

1965 g. Knuckles vs. Revenue Commissioner 349 F.2d 610The decision to exclude the settlement amount should be based on the settlement reason, which is determined by the wording of the original complaint.

1975 year V Medical Injury Compensation Reform Act (MICRA)

approved by the California Legislature in September 1975. According to MICRA, non-economic damage is limited to $ 250,000. Non-economic damage includes claims for pain and suffering, loss of consortium, both of which allow financial reimbursement for loss of limbs, loss of vision or hearing, ability to walk, and all other damages that are not directly related to economic loss. Lawyers’ fees are paid on a declining sliding scale. The statute of limitations has been shortened and doctors are allowed to pay remuneration over time. [see California Codes: Business & Professions Code Section 6146, Civil Code Sections 3333.1 and 3333.2, and Code of Civil Procedure Section 667.7. ]

Memorandum of the General Counsel 1978, 37687, 25 September 1978
Recurring payments are entirely excluded if the emergency company has agreed to make fixed recurring payments to the Claimant for more than twenty years or the life of the Claimant, provided that the Claimant does not have an actual or constructive economic benefit in the form of a present value of damages.

Private letter 1978, Resolution No. 7905017. October 31, 1978

Recurring payments are completely excluded if:
The insurance company agreed to make fixed periodic payments to the Claimant for more than twenty years or the life of the Claimant.
• The unhappy company purchased the annuity from its affiliate to provide a source of funds to fulfill the obligation.
• The insurance company is the owner of the annuity and has all ownership rights,
including the right to change the Beneficiary
• The unhappy company instructed the affiliate to make payments directly to the Claimant
• The Claimant has no right to the discounted present value of recurring payments or to control the investment of this amount.
• Any payments to Claimant’s property are also excluded from

1979 year
Private letter, Bylaw 7933078, May 21, 1979
Recurring payments are completely excluded if:
• The unhappy company agreed to make periodic payments to the Claimant within a specified time limit.
• The emergency company is not required to set aside certain assets to meet any part of its obligations.
• The Claimant may not expedite any payment or increase or decrease the amount of any payment.
• The rights of the plaintiff in relation to the injured company do not exceed the rights of its general
• Payments are not assignable, transferable, substituted or encumbered.
• The unhappy company is required to make a final payment of a specified amount to the Claimant’s estate in lieu of an obligation to make further payments if the Claimant is to die before a specified date.
• The insurance company also agreed to reimburse the Claimant for future medical expenses that do not exceed a certain the amount, and any such reimbursement must be set off against actual future medical expenses.

1979 year
Income Ordinance 79-220… The IRS publishes Revenue Ruling guidelines that serve to ensure that recurring payments are tax-free in the event of personal injury and structured settlements. It should be noted that the order states that “the recipient may exclude the full amount of payments from gross income under IRC §104 (s) (2) of the IRS Code, and not just the discounted present value.” Payments made to the inheritance after the death of the recipient are also completely excluded. “

1980 g. Private letter ruling 8020095, February 25, 1980 Periodic payments are completely excluded if:
• Defendant agreed to make fixed periodic payments to Plaintiff
• The defendant reserved the right to purchase an annuity to provide a source of funds to fulfill the obligation, and reserved the right to transfer its rights and obligations.
• The Defendants terminated their obligations to the Plaintiff by transferring their rights and obligations to the Assignee and paying the Assignee the amount Y
• The Assignee was required to use the entire amount Y to purchase an annuity sufficient for periodic payments to the Claimant and was required to instruct the issuer of the annuity to make payments directly to the Claimant
• Neither the Claimant nor the Claimant’s Assets have the right to accelerate, increase or decrease the amount of any payment.

Medicare Secondary Payer (MSP) Act 1980… Prior to MSP, Medicare paid medical benefits to its recipients without considering whether the recipient had other sources of payment for medical needs. The MSP Act of 1980 aimed to lower Medicare costs by requiring some insurers to including liability, car, damages and workers compensation
Insurers must first pay for Medicare recipients for reported injuries, with Medicare only liable as a “secondary payer”.

Private letter 1982, Bylaw 8307015, November 10, 1982

Recurring payments are completely excluded if:
• The defendant agreed to make fixed periodic payments in favor of
• The defendant was given the right to assign and enforce its obligations.
• In accordance with the agreement of admission entered into by the parties, the defendant ceased to fulfill its obligations to the Assignee.
• The Agreement of Admission gives the Assignee the right, but not the obligation, to acquire the annuity for funding
• The Assignee has instructed the issuer of the annuity to make payments directly to the Claimants, and these instructions cannot be withdrawn or changed without the written consent of the Claimants.
• Neither the Respondent nor the Claimants have ownership or other rights to the annuity.
• Plaintiffs will only have recourse against the Assignee in the event of default under the Settlement Agreement or Agreement of Admission.
• Plaintiffs will not actually receive funds until the annuity payments are made and are not presently entitled to receive payments.

1982 g. The California Supreme Court ruled that the California Medical Compensation Reform Act (MICRA) is constitutional.

1983 year
Periodic Settlement of Payments Act 1982
(Also known as PL 97-473). Codified various tax regulations into law and created IRS Section 130, which allowed a qualified assignment of obligations to a third party (substitution of debtors).

1983 year
Private letter 8333035… IRS response to private party that there is no tax on disclosed annuity benefits.

Private Letter 1985, Decree PLR ​​8527050, 9 April 1985
  • Damage resulting from this act of wrongful dismissal, age discrimination, and violations of the State’s Civil Rights Act for Persons with Disabilities were covered by personal injury and are not included in gross income. They also do not constitute salary for FICA, FUTA or income tax withholding purposes.
  • The portion that was paid for attorney’s fees, expenses and interest is included in gross income, but is not wages for FICA, FUTA, or withholding purposes.
  • TThe portion payable in annual payments for loss of wages and interest will be included in the gross income for the tax year received.
  • Only lost wages, not interest on them, will constitute wages for FICA, FUTA, withholding purposes
1985 year
Section 50-A of the New York State Periodic Order Payments Act (CPLR 5031-5039)
The Civil Practice Act and Regulations effective July 1, 1985, requires, based on a number of calculations, that future damages for medical, dental and orthopedic malpractice judgments in excess of $ 250,000 must be paid in a structured judgment.

1985 year
Founding of the National Structured Settlement Trade Association (NSSTA). represents licensed consultants, attorneys, insurance companies and other professionals who work with accident survivors and their dependents.

Child Injury Vaccination Act 1986 includes a recurring payment clause as part of a flawless alternative to the traditional tort system for compensating people affected by certain vaccines.

1986 Burford v. United States
642 F. Supp. 635 (ND Ala 1986) All wrongful death damages, including punitive damages, are excluded in accordance with 104 (a) (2).

Section 50-B of the New York State Periodic Payment of Judgments Act 1986 (CPLR 5041-5049)
The Civil Practice Law and Regulations entered into force on August 1, 1986 and requires, based on a series of calculations, other types of future damages in the form of personal injury, property damage and misconduct in relation to death in excess of US $ 250,000 must be paid in the form of a structured judgment.

Tax Reform Act 1986, 1986… Allows the assignment of only physical injury under Section 130. In addition, the Act amended Section 72 (u) to further define the conditions under which non-individual pension holders and non-individual employee pension benefits will be be taxed on interest earned in any tax year

1988 Technical and Other Income Act of 1988.
(TAMRA) removed the wording from section 130 of the IRS Code that read: “The assignee does not grant the recipient of such payments any rights that exceed those of a regular creditor.”

Private letter 1991, Resolution No. 9125017
The IRS issues PLR to the private party regarding the taxation of annuity payments if it includes secured creditor status and a guarantee.

1991 year
Liquidation of a structured settlement In re Monarch Capital
(See MONARCH CAPITAL CORPORATION Debtor No. 91-41379-JFQ (D. Massachusetts, August 12, 1991), 175 structured settlement annuities were defended despite filing for bankruptcy by the transferee, Monarch Capital, a non-insurance organization.

Private letter 1992, Bylaw 9253045 The IRS issued PLR on a case-by-case basis where the claimant perfected a security interest in an annuity contract by filing a notice in its own state and with the executing company and owned an annuity issued by Integrity Life. The IRS ruled that this would not result in him being taxed on the present value of the annuity contract in the year in which he received it.

1992 26 USC § 468B details the tax treatment of money coming in and out of Trust Settlement Funds and Qualified Settlement Funds.

Taxation Procedure 1993 93-34
allows physically injured persons receiving massive civil claims payments paid to a special settlement fund IRC § 468B (d) (2) or a qualified settlement fund under §1.468B-1 to enter structured settlements, allowing the settlement fund to be treated as a “party in a claim or agreement “transfers its obligations of periodic payments to a third party

1993 Omnibus Harmonization Act 1993 (OBRA ’93) created a Safe Harbor of three alternative types of Special Needs Trusts (self-governing; pooled; third party) to allow people with disabilities to receive assets without being disqualified from Medicaid

1994 Childs v. Commissioner, 103 TC 634 (1994)
principled decision regarding structured attorney fees. The 11th US Circuit Court of Appeals ruled 89 F.3d 856 (11th Circuit 1996) that settlement documents controlled the timing of income and that constructive receipt doctrine did not apply.

1995 Commissioner v. SchleierThe U.S. Supreme Court ruled that the amount received in the settlement of a non-payment and forecasted damages claim under the Age Discrimination in Employment Act is not excluded under §104 (a) (2). In setting the standard of exclusivity, Judge John Paul Stevens wrote for the opinion for the Court, stating in part that the taxpayer must demonstrate that the main reason for the claim resulting in recovery is:“Based on tort or tort rights”; and secondly, the taxpayer must prove that the damage was sustained “in connection with bodily injury or illness.”

1996 Small Business Job Protection Act 1996
abolished the exclusion of damages from gross income for damages received for punitive damages and compensations for non-physical damage, which were in force for 74 years!

1996 year Weil village a leads to a greater willingness on the part of life insurers issuing structured settlement annuities to appoint plaintiff-oriented consultants and to allow a split of fees between the defense and the plaintiff’s consultants when placement of annuities. See Weil Ins. AGENCY AGAINST MANUFACTURERS LIFE INS., 815 F. Supp. 1320 (ND Cal. 1993)

Balanced Budget Act 1997 1997
amended IRC §130 (c) to permit qualified allocation of workers’ compensation claims filed after August 5, 1997.

1997 BARCO Assignments, Ltd. Boston-based life insurance company Liberty, which at the time was a subsidiary of Liberty Mutual Insurance Company, enters the BARCO assignment program using an offshore assignment company based in Barbados to avoid double taxation by accepting unqualified recurring obligations assignments. Liberty Mutual was one of the leading developers of workers’ compensation insurance at the time and had significant commitments until August 5, 1997 that could not otherwise have been assigned. While the national SAFECO Safeco program allowed for a limited assignment of taxable damages, the creation of BARCO opened up a broader market for unqualified concessions.

1997 year
Favorable IRS decision on the death penalty for structured settlements.
Led to the introduction of the Advance Financing Exchange Notice by Allstate Life Insurance Company and Allstate Life Insurance Company of New York. The IRS concluded in PLR 9812027 (issued December 18, 1997) that both the softened lump sum and any remaining non-softened structured payments) will continue to receive income tax exemption under IRC 104 (a) ( 2). The key factors in the ruling were:
  • Provided in the original structured settlement documents and annuity financing;
  • Caused by events beyond the control of the payee (for example, death);
  • The recipient of the payment does not have the ability to influence the possibility of replacing the payment; and
  • The switching is done to the beneficiaries of the recipient, not to the recipient.
1999 year
Variable structured PLR settlement
issued by MetLife. IRS Private Letter 199943002 was posted on October 29, 1999.
recurring indemnity payments, calculated according to an objective formula based on the Standard & Poor’s 500 stock index and / or a portfolio of mutual funds designed to achieve long-term capital growth and moderate current income, are “fixed and determined as the amount and timing of payment “According to § 130 (c) (2) (A)

1999 Tax treatment of proceeds from structured settlement of factoring in favor of the seller.
In private letter No. 119273-97, the IRS concluded that the lump sum received from the sale of rights to structured settlement payments retained the same tax regime that was in place prior to structured settlement factoring.

Victims of Terrorism Tax Credit Act 2001 (VTTRA)
transmitted. Included in the Structured Settlement Protection Act (SSPA), which establishes IRC 5891. IRC 5891 levies an excise tax of 40% on purchaser rights to structured settlement payments from sellers for inappropriate structured settlement transfers. IRC 5891 is the only place in the Internal Revenue Code that defines structured settlement.

2001 CMS issues Patel Memorandum
is the first in a series of CMS Policy Memorandums on Medicare Withholding Workers Compensation (WCMSA), including structured settlements.

2002 year
The Society of Settlement Designers was founded.

2003 Sixth Circuit Rules on the Constitutionality of the Tax Regime for Personal Injury in Employment
United States Court of Appeals, Sixth Circuit.
Johnny Paul Young, Appellant v. United States of America, Appellant. No. 01-6362. Resolved: April 28, 2003
Under the Constitution, under the Sixth Circuit Court of Appeals, taxation of non-physical injury and non-taxation of damage caused by physical injury is constitutional. The taxpayer unsuccessfully argued that the difference in tax regime violated the law on equal protection.

2003 AEGON leaves the structured settlement market
announcing the discontinuation of structured settlement annuities on July 9, 2003

Professional title RSP 2008… The Settlement Planner Registry, in conjunction with Texas Tech, announces the professional status of Registered Settlement Planner.
2008 Unqualified Employment Tax Rule
Private IRS Letter PLR 200836019 Regarding the Use of Unqualified Structured Settlement in the Context of Employment (i.e. Taxable Damage), Affirmative Decision Regarding Unqualified Structured Settlement.

ELNY Liquidation… New York City’s executive life insurance company liquidated on August 8, 2013, 22 years after it began rehab.

Professional designation MSSC… First NSSTA Master Structured Settlement Consultant Certification Course at the University of Notre Dame in September 2014

Introducing ILAPA… Pacific Life Receives Favorable Private Letter from IRS 201435006 regarding the Index of Related Annuity Payments Adjustment (ILAPA). Payments are adjusted annually based on annual changes to the S&P 500 with a 5 percent cap and are not subject to income tax, provided that the reimbursement amounts are excluded in accordance with IRC 104 (a) (2). PLR Pacific LIfe also includes the ability to replace those in need

2015 Exclusion from illegal imprisonment… Congress added a new tax exemption under §139F of the Internal Revenue Code as part of the Americans’ Tax Hike Protection Act 2015 (PATH). Under this new exemption, the unlawfully imprisoned person does not include in income any civil damages, restitution or other monetary benefit received in connection with his or her imprisonment for a covered offense for which he was convicted.

2015 John GRIFFITS v. AVIVA LONDON ASSIGNMENT CORPORATION, Aviva Life Insurance Company, CGU International Insurance, PLC, Athene Holding, Ltd., Athene London Assignment Corporation and Athene Annuity and Life Company.
The class action lawsuit was filed on June 27, 2015. Within six weeks from August to October 2014, lead plaintiff John Griffiths and John Darer of LLC discovered that a Capital Service Agreement that was being sold as an internal part of the assignment to Aviva London Assignment Company, which was called “absolute, unconditional and permanent “, Was terminated unilaterally without prior notice. The plaintiffs actually paid an additional $ 500 of the amount allocated to the CMA structure. Griffiths contacted Darer as the watchdog of the structured settlements. Aviva paid $ 1 billion in premiums between 2002 and 2009 while its program was in operation. The sale of its U.S. operations to Athene ended in October 2013. The Griffiths v Aviv class action was eventually settled in 2018. Ultimately, Plaintiffs received a new Capital Maintenance Agreement and a small amount of monetary compensation. John Darer LLC has extensive entry and comments on the claim and settlement that you can read here

2017 Nov.
Ezell v. Lexington Insurance Company et al.
– In a lawsuit filed on January 4, 2017 against a disgruntled former structured settlements broker who became a lawyer as co-CEO, the plaintiffs argued that American International Group and several subsidiaries, including Lexington, made fraudulent statements and committed RICO violations because, among other things, life The insurance company that sold Lexington annuities diverted four percent to pay commissions to brokers who arranged deals with Lexington without disclosing information. All representative plaintiffs were represented in the underlying transactions by a highly qualified legal advisor who regularly hired structured settlement brokers and needed to know how brokers were paid. Ultimately, neither the District Court nor the courts of appeal found the plaintiffs’ arguments convincing.
The case was originally dropped unconditionally in December 2017. In June 2019, the U.S. Court of Appeals for the First Circuit upheld a September 2018 U.S. District Court decision to dismiss the amended complaint in a class action lawsuit with former Assistant U.S. Supreme Court Justice David Souter, who wrote the judgment, without prejudice to the amendment.… John Darer of LLC has conducted extensive a comment
on a poorly substantiated case on the Structured Settlement Watchdog blog.

Oct 2018

Back to $ 6 billion Production in the structured settlement industry exceeded $ 6 billion for the first time in a decade.

Dec 2019 Record production in the structured settlement industry
exceeds $ 6.4 billion, this is the best year ever, despite low interest rates.

Feb 2020
NSSTA hosts its first virtual annual meeting. Industry production declines after two record years of production, industry production declined due to coronavirus impact

Feb 2020 More and more varied product offerings
as The Assura Trust introduces a structured growth settlement strategy that combines a fixed annuity with the Vanguard Fund for both plaintiffs and deferred attorney fees. Structures, LLC offers Fee Structure Plus and Settlements Plus (Closed Architecture), which instead of a managed portfolio offer a limited selection of ETFSs for finding electronic payment obligations.

2021 The American Association of Settlement Consultants (AASC) was formed following the departure of Sage Settlement Consulting from NSSTA. While the new association said it intends to oversee brokers and consultants who do not have insurers on their board of directors, they are welcomed as sponsors. Its first meeting will take place live in Las Vegas in late fall.

Both the NSSTA and the Society of Settlement Planners are successfully conducting virtual annual meetings. While NSSTA and AASC were planning face-to-face educational meetings in October 2021, NSSTA decided to continue working in a virtual format, and AASC postponed its first meeting until February 2022.

New Hampshire becomes the 50th state to enact the Structured Settlements Protection Act. Along with the District of Columbia, there are currently 51 jurisdictions with the Structured Settlements Protection Act.

Life insurance company Wilcac enters the primary structured settlement market. The Wilcac name is owned by Wilton Re and the Continental Assurance Company, which was acquired by Wilton RE from CNA in 2014.

structured settlements history # history of structured settlements

Last updated: August 30, 2021

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