Structured settlement suits discussed in Thinkadvisor article

Earlier this month, one of the leading online publications covering financial planning, investments and life insurance/annuity issues did an exhaustive review of many of the issues facing the structured settlement profession. Written by long time industry expert Senior Editor Warren S. Hirsch, the article looks into several key issues and quotes Settlement Channel commentator and structured settlement industry expert, Mark Wahlstrom, President of Wahlstrom & Associates. 

Photo Credit: Think Stock and ThinkAdvisor

Photo Credit: Think Stock and ThinkAdvisor

The article, Titled "Suit puts structured settlements in spot light" initially focuses on the recent lawsuit filed against casualty giant AIG, alleging among other things that commission's were not disclosed properly and that certain members of the structured settlement profession had worked in unison with AIG to with hold information from plaintiffs about their choices in annuity companies, design of the program and compensation agreements for defense brokers. 

However, the article takes a deeper dive into the issue that is starting to really raise it's head in the structured settlement profession, that being whether the Fiduciary Standard that is being increasingly forced upon other annuity product sales, such as Fixed Index Annuities, will begin to be applied to structured settlement transactions as well. 

Wahlstrom commented that he feels it is inevitable that the structured settlement profession would be brought into the new world of open disclosure of commissions, business relationships and clear conflict of interest avoidance when a structured settlement is being proposed to a client. Regardless of the outcome of the litigation in the AIG class action, the momentum, in his opinion, has swung in the direction of disclosure and a fiduciary standard. This of course would upset the long standing fixed commission of 4% that is paid on all structured settlements, as well as other sales support provided by life and annuity markets to the agents working to place annuity contracts that fund structured settlements. 

Clearly change is coming to structured settlements and no matter how hard the industry pushes back, a new standard is going to be imposed at some point by outside forces looking to bring the sale of structured settlements on an equal footing with the sale of other financial products.  Check out the full article at the link above and share your thoughts with us here. 

 

Elder Law Attorney Julian Gray Discusses Medicare Set-Aside Agreements in Liability Cases

Lawyers who handle workers’ compensation cases are probably familiar with Medicare set-aside (MSA) agreements. However, the use of set-asides is expanding to involve liability cases as well. In this report, elder law attorney Julian Gray of Julian Gray Associates discusses the use of set-aside agreements and how the use of set-asides is expanding. [Note: this 2015 Legal Broadcast Network report also discusses Medicare set-asides in liability cases.]

Gray explains that the use of Medicare set-asides is a response to the Medicare secondary payer act of 1980. The act was aimed at workers’ compensation claims where Medicare would at some point become a person’s primary health insurer. The idea was to shift costs from Medicare to other payment sources. Initially, at least, things were fairly clear cut. Workers’ compensation cases were the ones where set-aside agreements would be required.

Julian Gray

Julian Gray

Now, says Gray, Medicare is suggesting that it will look past the workers’ compensation field to other areas. Cases involving motor vehicle accidents and medical malpractice are probably the likeliest targets for Medicare, Gray says. The Centers for Medicare & Medicaid Services (CMS) are looking at liability cases, and insurance companies who will be paying for substantial verdicts or settlements “are getting a little nervous” about the possibility of monetary penalties and possible liability of people involved in a case, including counsel on both sides. The possibility that Medicare would deny coverage for future care is also in the background. The result is that parties are now beginning to think of what Medicare’s interest would be in the future. Gray says that no one presently knows what new rules from CMS might look like when they are issued, probably later in 2017. As a result, people involved in liability settlements are looking at the rules in workers’ compensation cases as a guide.

The big questions to be answered are how much money should be set aside and how to fund the account. Gray explains that there are resources available to plaintiffs’ attorneys whose expertise is in determining future medical costs. These experts can analyze the injuries in a particular case with an eye to future care that will be required, including medication costs, and suggest an amount of money that might be required given a particular plaintiff’s life expectancy. These numbers provide a basis for deciding how much set-aside funding will be needed.

Funding the Medicare set-aside requires some attention from plaintiffs’ attorneys, Gray says. In worker’s compensation cases, set-asides were typically funded by cash from the settlement or by a structured settlement annuity. However, there are presently no guidelines as to how to fund a liability MSA. Gray suggests that anyone trying to decide how to fund an MSA consider a variety of possibilities beyond the two traditional approaches. It makes sense for the lawyer for an injured party to involve an attorney knowledgeable in the MSA funding field at an early point so as to make sure that all the possible issues that might arise down the line are dealt with before the settlement plan is finalized.

Gray also suggests that people involved in liability cases should consider possible alternatives to Medicare as an insurance source for an injured party. Private insurance can be purchased, including through the Affordable Care Act or its successor, whenever such a law is enacted. Medicaid benefits might also be an option. There are ways to opt out of Medicare, and that is an option that should be kept in mind.

Julian is the founder of Julian Gray Associates in greater Pittsburgh, Pennsylvania.  He is a board member of the Special Needs Alliance (SNA), a national nonprofit committed to assisting individuals with disabilities, their families and the professionals who serve them. He is one of only a few attorneys in all of western Pennsylvania to be Certified as an Elder Law Attorney by the National Elder Law Foundation. He has provided assistance to a variety of clients and their families for over twenty years in the areas of Medicaid planning, veterans' benefits, and related estate planning and tax issues. He is a lifelong resident of Pennsylvania. He received his bachelor's degree from Penn State University and his law degree from Duquesne University School of Law. The Settlement Channel is a featured network of Sequence Media Group.

Posted on April 24, 2017 .

NSSTA President Jim Early of Ringler Associates Discusses the Future of the Structured Settlement Profession

Structured settlements haven’t been around forever. In their present form, they are a relatively new addition to the world of torts. Jim Early, newly-installed president of the National Structured Settlements Trade Association (NSSTA) and Senior Advisor to Ringler Associates, explains the development of structured settlements and discusses what the future may hold in this report.

Early explains that the structured settlement, in its present form, comes from the settlement of Thalidomide cases in Canada. Thalidomide was given to pregnant mothers, and many gave birth to children with serious birth defects. Today, structured settlements are routinely used “to protect injured parties from premature dissipation of settlement funds.”

Jim Early

Jim Early

As to the future, Early says that the primary challenge for NSTTA is to protect the sections of the Internal Revenue Code that apply to structured settlements, especially §§104 and 130. One thing that helps, Early explains, is that the NSSTA has no political enemies on the left or on the right. There is a structured settlement caucus in Congress with members from both sides of the aisle who all see the value of structured settlements. The only real danger Early sees is that sweeping tax reform could sweep up §§104 and 130 for change.

As to a challenge for the future, Early says that NSSTA members “need to become settlement planners rather than annuity brokers.” Now more than ever, there are a host of factors that must be considered in planning the best settlement for an injured victim. For example, a settlement might require a special needs trust. All of the relevant factors need to be considered.

Another challenge for NSSTA members will be to protect injury victims from abuses in factoring (the purchase of a structured settlement payment stream for a lump sum that may be dissipated improvidently). Early points out that there are now structured settlement protection acts in forty-nine states.

The toughest challenge for the NSSTA will be to deal with an aging structured settlement work force. Early says that it is important to attract some younger people into the structured settlement profession.

Early believes that the future is bright for the structured settlement profession. Early is pleased that all participants in the process are now encouraged to have someone participate on their behalf to bring increased professionalism to the process. Also, the emphasis is increasingly on preserving capital and avoiding risk in planning the investments of the settlement proceeds. Structured settlement professionals “bring certainty and security to the process.”

Early says that dealing with his duties with NSSTA is not a challenge because he is now in an advisory capacity with Ringler Associates. He looks forward to working on the challenges ahead.

James M. Early is a Senior Advisor to Ringler Associates, assisting in strategic business partnerships and collaborating with Ringler’s 150-plus Consultants nationwide. He is also the President of the National Structured Settlement Trade Association (NSSTA). He has been with Ringler since January 2002. He has spent more than 40 years in insurance and settlement planning, providing structures in thousands of cases since 1985. The Settlement Channel is a featured network of Sequence Media Group.

Posted on April 7, 2017 .