by Structured Settlement Watchdog
In "What’s in the name? An oxymoron and a dangerous deception", Chronovo Settlement Consultants recklessly published a spooky blog by its Managing
Director**, Christy Rivera (nee Carone) on Halloween, that reads like someone having been "jilted" at the settlement altar, whose authority is undermined by a critical missing piece of essential knowledge.
"Jumped The Shark"
Says Christy Rivera, the intent punctuated by an image of a shark shaped shadow moving through a school of fish, "Some settlement planners believe they’ve found a way for injured plaintiffs to receive the tax-free status of a structured settlement while also participating in market-based investments. Settlement planners are now encouraging personal injury victims and their attorneys to invest in new, market-based financial products loosely referred to as “market-based structured settlements.” However, since these products lack all the critical features of a structured settlement, the misnomer is dangerously misleading". Source: Chronovo website October 31, 2019.
According to the footer to the article it says that Ms. Rivera brings 20+ years of experience to her position as Chronovo Managing Director. My math says that Rivera has been in the settlement business since at least 1999.
An IRS Private Letter Ruling 199943002 was published on October 29, 1999. For those paying attention, the actual question raised in the submission for what became IRS Private Letter Ruling 199943002 was:
Whether periodic payments of damages that are calculated pursuant to an objective formula based on the performance of the Standard & Poor’s 500 Stock Index and/or a mutual fund portfolio designed to achieve long-term growth of capital and moderate current income are "fixed and determinable as to amount and time of payment" under § 130(c)(2)(A)
The settlement agreement will require the defendant to make periodic payments both of a specified dollar amount (specified payments) and of a variable amount (variable payments) due on specific payment dates. The amounts of the variable payments will be calculated pursuant to an objective formula based on the performance of the Standard & Poor’s 500 Stock Index and/or a mutual fund portfolio designed to achieve long-term growth of capital and moderate current income. Under the objective formula the variable payments will increase if the net investment return of the portfolio is greater than the period equivalent of an assumed annual investment rate of percent and assumed annual equivalent expense charges of percent; will decrease if the net investment return is less than the period equivalent of percent; and will remain the same if the net investment return just equals the period equivalent of percent.
MetLife offered a variable structured settlement product called Settlement Plus for a period of time starting in 2000. A firm that Rivera was formerly associated also offered market based structured settlements at the time of association.
According to Sean Coleman, President and CEO of Structures, LLC
Settlements Plus™ is the next evolution of structured settlements, created as a valuable tool to augment a fixed annuity-based structured settlement when discretionary dollars are available. It offers attractive options for large-dollar settlements while providing the defendant/insurer with a full release and elimination of contingent liability. A market-based solution is not the right fit for every plaintiff, but for those with discretionary settlement dollars, it can help provide a solid solution for resolving a claim. (emphasis added)
IRC Section 130(c)(2)(A) requires payments be “fixed and determinable as to the amount and time of payment”.• Internal Revenue Service refined definition in a series of private letter rulings. PLR 199943002 (variable annuities) and 201435006 (fixed annuity with index-linked adjustment rider).• Fixed obligations must be set forth in the terms of the settlement agreement; and determinable payments that can be calculated based on an objective formula.
Units: Settlement dollars are allocated as $10 units and the unit value at the time payments are due is determined by the underlying investment. At the time of the settlement the plaintiff decides how many units are to be paid and when. Payment options include quarterly, semi-annually, annually and/or lump sums. Example: $250,000 ÷ $10 = 25,000 units
Rivera's post defies Chronovo's marketing message which emphatically states "The “new time” in structured settlements has become its primetime standard.
If you label yourself a structured settlement consultant you owe it to your clients to be familiar with the "primetime line-up" and to stay current. The financial services industry of which the structured settlement and settlement planning industry is a component is dynamic.
**Update: Chronovo has removed the troll post by Christy Rivera, who apparently has left Chronovo for another structured settlement brokerage firm. 4/15/2020