by John Darer® CLU ChFC MSSC RSP CLTC
Origins of The Periodic Payment Settlement Act of 1982
The Periodic Payment Settlement Act of 1982, also known as Public Law 97-143 or P.L. 97-143 codified all of the prior revenue rulings related to periodic payments to injured parties This public law allowed defendants and/or their insurers (via a "qualified assignment") to assign their obligations to make future periodic payments, to a third party, without retaining a future obligation to the injured party.
The third parties, known as qualified assignment companies, are generally special purpose companies formed to hold these obligations and related to certain of the Top Structured Settlement Companies | Top Structured Settlement Companies 2023 (4structures.com)
This law enables the defendant and/or its insurer to enter into a structured settlement without retaining a long tail future periodic payment obligation to the injured party because that obligation under the settlement agreement has been assigned to a third party.
How did Claimants and Plaintiffs benefit from PL 97-143?
Claimants and plaintiffs benefited as well because, as a result of P.L. 97-143, there was an option where they no longer had to fear the defendant or insurer going bust while holding the obligation to make periodic payments long into the future.
The tax benefits of a structured settlement were, are, and are likely to continue to be good public policy as the Act and subsequent legislation indicates.
For example, a later amendment to IRC 130 created the option for plaintiffs to be a secured creditor as part of the structured settlement process in lieu of general creditor status.
Periodically, some plaintiff advocates have tried to suggest that the qualified assignment only benefits defendants and/or insurers. They are misinformed.
The qualified assignment, created Periodic Payment Settlement Act of 1982 remains an integral part of how structured settlements work
Fellow blogger and structured settlement industry "cartographer" Patrick Hindert, now with Independent Life Insurance Company (updated), told me he was the only person to testify on the subject before the House Ways and Means Committee in 1982.
Last updated November 9, 2023