How Structured Settlement Companies Work

While the article "Paralegal Indicted for Forging Signatures of 76 Judges" (Sept. 17) makes a key point about the importance of a regulated process to protect the best interests of injured people, we would like to clarify the role of structured settlement companies.


The article states, "Paris & Chaikin, a personal injury firm, also represents structured settlement companies in the acquisition of structured settlement rights." Let's be clear, a structured settlement company works with plaintiff and defense attorneys to protect injured parties during the initial settlement process by designing a tailored stream of periodic payments paid to an injured party by the defendant.


The periodic payments are primarily funded through the purchase of a fixed and determinable annuity issued directly by highly rated life insurance companies. Structured settlement companies do not purchase the settlement rights to funds a person is owed from an insurance claim settlement.


Paris & Chaikin represents factoring companies that promise annuitants "cash now" and pay them a significantly discounted cash sum in exchange for their payment from personal injury and wrongful death structured settlements, as well as pensions and other annuities.


Unregulated for almost a decade, in the late 1990s factoring was deterred by Structured Settlement Protection Acts (SSPAs) created to protect people from factoring transactions by requiring court approvals for any transfer of a structured settlement transaction.


Then, in 2002, the U.S. government enacted the Internal Revenue Code (IRC Section 5891) to "deter the purchasers of payment rights under structured settlements from taking advantage of recipients who are entitled to receive tax-free settlement payments."


Structured settlement companies offer a proven, regulated way for an injured party to accept compensation in a physical injury case. The use of structured settlements was formally recognized under Periodic Payment Settlement Act of 1982 (Public Law 97-473), and U.S. Congress encourages the use of structured settlements in tort physical injury cases. Structured settlement annuities and all structured settlement brokers are regulated by state insurance commissions and comply with the many sections of the U.S. Tax Code that pertain to structured settlements.


Structured settlements are a long-term solution that provide victims of physical injury and wrongful death lawsuits with financial security and guaranteed tax-free payments. The injured party works with licensed structured settlement brokers/consultants specially appointed by the life insurance companies to develop plans to meet the injured party's unique needs. We at the National Structured Settlements Trade Association (NSSTA) represent nearly 1,200 licensed consultants, attorneys, insurance companies and other professionals who work with accident survivors and their dependents.



Eric Vaughn

The author is executive director of the

National Structured Settlements Trade Association.