by John Darer CLU ChFC CSSC RSP
The new website of John Bat's Plaintiff Settlement Solutions Incorporated ("PSSI", pronounced "Pissy") is NOT one of "life's moments that takes our breath away". As Will Smith might have paraphrased back in the day, time to start "gettin' pissy with it"
PSSI: An annuity is an investment vehicle in which the plaintiff allows all or part of the award or settlement to be placed with an insurance company
Reality: An annuity is a contract between the annuity owner and an insurance company. In return for premium payment or consideration, the insurance company agrees to provide a regular stream of income and/or a lump sum payout, or a combination, at some future time. With respect to structured settlements an annuity is one of two permissible types of "qualified funding assets", as defined in IRC 130(d).
PSSI: In return, the insurance company guarantees inflation adjusted periodic payments for life or period certain.
Reality: There is currently no annuity structured settlement that provides guaranteed inflation adjusted periodic payments for life or period certain. The best one can do with an annuity funded structured settlement at this time is a fixed COLA. United States Treasury Bond structured settlements however, funded with Treasury Inflation Protected Securities (TIPS) not issued by insurance companies DO guarantee inflation adjusted periodic payments for period certain. There are also other ways to address inflation risk.
PSSI: Due to the difficulty of self-managing a cash settlement, 92% of all claimants exhaust their funds completely within the first five years.
Reality: NYU Law professor Lily Batchelder's star pupil, Jeremy Babener, ought stand up and give "Batty Boy" the business! I've written about this before, how can Bat get a now proven flawed statistic wrong?
PSSI: Internal Revenue Service Code Sections 104a2 and 130 provide for periodic payments (i.e., a structured settlement), in personal physical injury and workers' compensation cases,to be income tax free to the plaintiff. This means the amount of the award or settlement is tax free, but more importantly, so are all future periodic payments and lump sums.
Reality: The periodic payments represent payment for damages.
- IRC104(a)(2) NOT 104a2 provides an exclusion to the taxpayer for damages that are for physical injury or physical sickness. PSSI incorrectly ties workers compensation cases to the inaccurate 104a2.
- IRC 104(a)(1) provides a similar tax exclusion to IRC 104(a)(2) for workers compensation cases.
- IRC 130 is a tax exclusion that only comes into play if there is a qualified assignment. IRC 130 provides a tax exclusion to the qualified assignment company, NOT the plaintiff, which typically owns the annuity and receives the income generated by the annuity, prior to making payment to the plaintiff/payment recipient. Such exclusion is desirable because non natural entities do not otherwise enjoy the same tax benefits from annuities as individuals. To wit, IRC 130(a) expressly states
"(a) In general
Any amount received for agreeing to a qualified assignment shall not
be included in gross income to the extent that such amount does not
exceed the aggregate cost of any qualified funding assets".
PSSI: When given an option, most clients prefer to have all their needs for financial services met by one financial professional who understands their situation, as well as their goals and aspirations. In order to meet this client need Plaintiff Settlement Solutions delivers trust services through Registered Representatives and Registered Investment Adviser Representatives.
Comment: To meet the need that most clients prefer to have all their needs met by one financial professional they deliver trust services through Registered Representatives and Investment Adviser Representatives? Does Bat, who this author understands is a member of the Society of Settlement Planners , have 468B on the brain? If that was the case the operative phrase is "One OR more" not "One equals More". At the very least there's a better way to articulate this!
PSSI: Structured settlements exclusively for Plaintiff'sComment: Plaintiff's what? Or is that a typo?
PSSI: Sometimes, at moments that are inopportune for us--for example, when we need the income-- stocks may stumble.Comment:
PSSI: PSSI is seeking marketing representatives (i.e. "Persons with prior marketing experience at CLE conferences and conducting educational lunch's at law firms." AND "What the key consideration for the injured claimant should be is how do I make enough money with my settlement funds to keep pace or exceed the ravages of inflation's with the least of amount of risk?"
- Must have been a huge sale on apostrophes in Denver that day
- "Ravages" means to bring heavy destruction on or devastate or to pillage , sack. Does PSSI actually want to EXCEED or add to the ravages? Or do they simply want to keep pace or exceed the RATE of inflation?
And finally a biggie, NO DISCLOSURE OF BROKER DEALER. So I looked up John S. Bat's name on the FINRA Broker Check and the name of the investment firm therein (Multi-Financial Securities Corporation) at the time of this posting, appears nowhere on the PSSI website despite it stating that it (PSSI) "offers a broad range of investment options" such as variable annuities, fund of funds, stocks and corporate bonds etc. See requirements of FINRA Rule 2210
It is the ongoing opinion of this author that those who dispense financial advice should maintain the highest level of financial literacy. Such financial literacy should be demonstrated by an ability to properly articulate the essential knowledge of one's business to members of the public.