by John Darer CLU ChFC CSSC RSP CLTC
Questions concerning the tax treatment of indexed linked structure settlement were favorably addressed in IRS Service Private Letter Ruling 201435006 which was published on August 29, 2014. As I reported here on April 16, 2014, the PLR which was requested by Pacific Life and received in April 2014 just prior to the release of its Index Linked Annuity Payment Adjustment Rider.
The IRS ruling's specific findings were:
1. The periodic payments of damages that Claimant will receive are fixed and
determinable as to amount and time of payment within the meaning of
§ 130(c)(2)(A) even though they are calculated pursuant to an objective formula
based on the performance of the S&P 500 Index.
2. The Structured Settlement Indexed Annuity which Assignee will acquire from
either Issuer 1 or Issuer 2 will not fail to qualify as a qualified funding asset under
§ 130(d) solely by reason of annuity’s variable payments.
3. The possibility of a commutation by Claimant pursuant to the Notice of Hardship
Conversion will not affect whether the structured settlement assignment satisfies
the requirements of a qualified assignment under § 130(c).
4. The annuity purchased by Assignee will not fail to be a qualified funding asset
under § 130(d) by reason of the Notice of Hardship Conversion.
Copy of PLR 201435006 Download PLR 201435006 Index Linked Structured Settlement
The Notice of Hardship Conversion is not currently offered by Pacific Life but this appears to be a stage setter for its future introduction in the near future.