Structured Settlements 4Real®Blog 2026

Structured settlements expert John Darer reviews the latest structured settlements and settlement planning information and news, and provides expert opinion and highly regarded commentary. that is spicy, Informative, irreverent and effective for over 20 years.

by John Darer® CLU ChFC MSSC RSP CLTC

A structured settlement factoring transaction with the qualified assignment company, in which the annuitant receives a stream of payments in lieu of a lump sum seems like a viable alternative to traditional structured settlement factoring where the annuitant is in hardship situation and cannot wait for a future lump sum payment.

Restructuring

Is Restructuring a Lump Sum from a Structured Settlement for a Series of Payments a Viable Alternative to Waiting for a Lump Sum in a Hardship?

 

In an excerpt from a case submitted by Symetra, a restructured settlement, that resulted in a favorable IRS Private Letter Ruling in 2009, "as a result of the factoring agreement, Claimant has received an initial lump sum payment of $u on date 4, and has and will receive b subsequent payments of $t, beginning on date 5 and ending on date 6 for her right to receive $z on date7, thereby closing the transaction as to that portion of Corporation X's periodic payment obligation  (emphasis added).  Note that a structured settlement factoring transaction such as this requires a court order.
 
Consequently, according to the PLR, "if the Agreement was not readily salable, and the Claimant uses the cash method of accounting, Claimant's receipt of Corporation X's payment of $u on date 4 and subsequent payments of $t beginning on date 5 and ending on date 6 results in income of the same character as would have been received absent the factoring agreement. Cf. §1.83-7(a)".
 
Why would an annuity issuer or qualified assignment company be interested in "restructuring", in limited circumstances,  using "factored payments"  (not recycled structured settlements!) as defined in the PLR?
 
1. Avoid subjecting an annuitant to a servicing agreement. 

One currently writing structured annuity issuer responded to my inquiry about servicing, with respect to one of its own annuitants, by stating that  "If a client wants to factor a portion of his/her payments, the entire payment is sent to the factoring company and the factoring company takes over the payments involved. If there is a portion to be sent to the claimant after the factoring company takes out their portion, the factoring company will forward a check to the claimant".

On December 12, 2013, the LA Times carried this story about the Consumer Financial Protection Bureau stepping into regulate service of student loans after complaints of shoddy service by payment servicing companies. It's a good read to understand what servicing is. in the story, it appeared that banks acting as payment servicers are regulated but non-banks are not.

By restructuring from within, the obligor remains either a regulated insurance company, an upstream holding company of a regulated insurance company, or an entity that is guaranteed by a regulated life insurance company.  If an annuitant has a New York Life Insurance Company structured settlement for example, the assignment company is New York Life Insurance and Annuity Corporation, a regulated insurance company, which on December 31, 2013, according to its filed annual statement had over $120 billion in assets.

In 2014 the IRS published PLR-143928-13, as part of its blessing the tax status of an index linked structured settlement payment adjustment for Pacific Life Insurance Company, the IRS approved a Hardship Conversion.  Any structured settlement annuitant with receiving payments from a structured settlement annuity issued by Pacific Life Insurance Company or Pacific Life and Annuity Company claimant can request a present value lump sum commutation payout of their annuity by submitting a Notice of Hardship Conversion request to the Pacific Life and Annuity Services,Inc., which will review and consider it on a case by case basis.

2. Branding is retained by the insurance company and not transferred to the servicing company.
 
Each time a check is sent is face time for the insurance company brand. Chances are that the annuitant "bought" the brand when agreeing to the structured settlement.
 
3.  Murphy's law insurance
 
 
Anything bad that happens at the hands of the servicing company or factoring company over a long stretch of time may otherwise be attributed to the insurance company.
 
4. One more way of providing added value to its own customers and augmenting goodwill.

 

 
 
 
 
 
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