Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

"JAMS On It" To ELNY Annuity Owners With Buy and Hold Structured Settlements

by John Darer CLU ChFC MSSC RSP CLTC

Aspart of its efforts to assure that all ELNY “shortfall” payees have the opportunity to pursue recoveries from the ELNY Hardship Fund, the Fund’s administrators at JAMS have begun contacting owners of ELNY annuities that fund buy-and-hold settlements. In other words "JAMS on it".

Of course the irony is not lost of a firm founded in 1982 when ELNY was in its pomp,  that inspires a creative nod to this 1984 hip-hop classic by Brooklyn New York's  Newcleus,  that might very well have been spinning on the turntables (no CDs or mp3s back then) of ELNY victims, their families, lawyers , claims adjusters, structured settlement brokers or the "Victrolas" of state regulators of the time, concurrent with placement of ELNY products subject to the Hardship Fund.

Buy and hold structured settlements, which are owned by the Defendant or the Defendant's insurer, were common for personal injury settlements prior to the Periodic Payment Settlement Act of 1982 (effective January 1983) and structured settlements used to fund workers compensation cases prior to August 5, 1997.

JAMS is asking the annuity owners whether they plan to make their payees whole. JAMS wants to know the annuity owners’ intentions because:

(i)    “Shortfall” payees who will be made whole by annuity owners are not eligible for Hardship Fund distributions (which are intended to support payees who have no other source of recovery); and

(ii)    “Shortfall” payees under many buy-and-hold settlements have not applied to the Hardship Fund.  If a payee has chosen not to apply to the Hardship Fund because he or she expects to recover from an annuity owner, JAMS has no reason for concern.  On the other hand, if a payee has not applied to the Hardship Fund and has no assurance of receiving payments from an annuity owner, JAMS may want to follow-up directly with the payee.

 

Executive Life Insurance Company of New York Structured Settlements: ELNY Liquidation Plan

by John Darer CLU ChFC CSSC RSP

The New York Superintendent of Insurance asked the Supreme Court of the State of New York, Nassau County that has had jurisdiction and supervision of ELNY’s rehabilitation over the last 20 years, to approve liquidation of Executive Life of New York under a complex liquidation plan involving a number of Life and Health Insurance Guaranty Associations and a consortium of life insurance companies.

Critical aspects of the treatment of annuity benefits under the ELNY liquidation plan remain to be determined, because it remains subject to final approval by Guaranty Associations and because some proposed protections for ELNY annuity payees remain under discussion. If the individual Guaranty Associations approve the plan, benefits under most ELNY annuities should continue to be paid in full; but some payees could face benefit reductions, and some annuity owners could be obliged to cover resulting shortfalls under buy-and-hold settlements.

Buy and hold structured settlements are where the structured settlement annuity is applied for and owned by the Defendant or its Insurer(s) as opposed to by a qualified assignment company, the method most commonly used today, that became more popular subsequent to the Periodic Payment Settlement Act of 1982 under which Section 130(c) of the Internal Revenue Code was created.

IRC 130(c) is an exception to taxation of annuities owned by non-natural persons. 

This enables a process by which there is a substitution of periodic payment obligors resulting in a novation of a claim.

In some cases, buy and hold structured settlements were used by non-taxed entities such as municipalities, where the issue of non-natural person ownership/ taxation of annuities was not an issue.  There is novation of the perioidc payment liabilty where the Defendant enters into a buy and hold.