by John Darer® CLU ChFC MSSC RSP CLTC
A qualified assignment is an assignment of an obligation to make future periodic payments which satisfies the requirements of Internal Revenue Code §130. The periodic payments must represent damages payable by the defendant, its liability insurer, or a QSF and excludable under §104(a)(1) or §104(a)(2).
In a structured settlement agreement the original obligor (the defendant, insurance carrier for the defendant, or the trustee of a qualified settlement fund, assigns its obligation to make the future periodic payments called for in the settlement agreement to a "qualified assignee". Generally a qualified assignment company is a special purpose company, which does little more than hold an annuity as a qualified funding asset to back up the obligations it assumes from Defendants, Insurers or qualified settlement fund trustees. A qualified assignment company may actually be an insurance company itself. The qualified assignment company is usually related to the life insurance company issuing the structured settlement annuity. The qualified assignment company typically purchases an annuity from the related life insurance company as a qualified funding asset pursuant to IRC §130(d). A qualified assignment requires the plaintiff's consent.
We've noticed that some in our industry state incorrectly (for example, see below) that the qualified assignment is "to a financially secure insurance company", or "an assignment to the life company".
"From the plaintiff’s perspective, an assignment to a financially secure insurance company gives them the assurance that future payments will be made as promised. For many plaintiffs, this assignment to the life company alleviates the stress of future contact with the defendant, their insurer, or any party responsible for the injury".
Of the companies offering structured settlements only the qualified assignee of New York Life (New York Life Insurance and Annuity Corporation) is a life insurance company. That being said many annuity issuers provide a wraparound guarantee of periodic payment obligation assumed by the affiliated qualified assignment company.