by John Darer CLU ChFC MSSC CeFT RSP CLTC
When a structured settlement is factored to raise cash for a Payee, no annuity policy changes hands. As set forth in Subparagraph (A) of paragraph 3 of
subsection (c) of 26 U.S.C. 5891 The term “structured settlement factoring transaction" means a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration. It's a very basic fundamental. However it has not stopped structured settlement secondary and tertiary market actors from making misleading statements.
"With zero regulatory oversight, the factoring industry (or secondary market industry) flourished by ripping off annuitants and paying pennies on the dollar for what is considered to be a very valuable investment asset. The annuity policies that changed hands were the guaranteed annuity policies from major insurers like New York Life, Metropolitan, Prudential, MassMutual, John Hancock and others. " John Bair Milestone Consulting and Director of factoring originator CrowFly, LLC March 5, 2018.
In a structured settlement exchange, no annuity policy changes hands, just the rights to payments. The individual receiving structured settlement payments representing his or her damages is no more the owner of an annuity contract than the investor.
The terms Secondary Market Annuity, Secondary Market Annuities, SMA and SMIA are 4 of the biggest lies to investors in the unregulated structured settlement tertiary market. With continuing commentary, some actors in the tertiary market remain militant in their use of the deceitful terms, while some have backed off a little by admitting the usage was simply engineered for marketing purposes.