Colonial pays cash for structured settlements!

Current through Act 2002-39

§ 4001. Short title

This act shall be known and may be cited as the Structured Settlement Protection Act.

§ 4002. Definitions

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Annuity issuer." An insurer, or subsidiary or affiliate thereof, that has issued an insurance contract used to fund periodic payments under a structured settlement.

"Applicable law." The laws of the United States, the laws of this Commonwealth and the laws of any other jurisdiction under whose laws a structured settlement agreement was approved by a court or responsible administrative authority.

"Best interests." The standard applicable to transfers of structured settlement payment rights based on judicial findings regarding the payee and his dependents, as required by section 3(a)(3), unless if at the time the payee and the transferee enter into the transfer agreement a different standard is contained in the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) or in a United States Treasury regulation adopted pursuant thereto, then such different standard.

"Dependents." Include a payee's spouse and minor children and all other family members and other persons for whom the payee is legally obligated to provide support, including alimony.

"Discounted present value." The fair present value of future payments, as determined by discounting such payments to the present using the most recently published applicable Federal rate for determining the present value of an annuity, as issued by the United States Internal Revenue Service.

"Favorable tax determination." With respect to a proposed transfer of structured settlement payment rights, any of the following authorities that is binding on the parties to such transfer and on the parties to the structured settlement agreement and any qualified assignment agreement and that definitively establishes that the Federal income tax treatment of the structured settlement for the parties to the structured settlement agreement and any qualified assignment agreement, other than the payee, will not be affected by such transfer:

(1) a provision of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.) or United States Treasury regulation;

(2) a published ruling by the United States Internal Revenue Service;

(3) a private letter ruling by the United States Internal Revenue Service with respect to such transfer; or

(4) other controlling legal authority that is binding on the United States Internal Revenue Service.

"Payee." A person domiciled in this Commonwealth who is receiving tax-free payments under a structured settlement and proposes to make a transfer of payment rights thereunder.

"Periodic payments." Payments made pursuant to a structured settlement agreement, including scheduled future lump sum payments.

"Qualified assignment agreement." An agreement providing for a qualified assignment within the meaning of section 130 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).

"Settled claim." The original personal injury or sickness claim or workers' compensation claim resolved by a structured settlement.

"Structured settlement." An arrangement for periodic payment of damages established by settlement, judgment or decree in resolution of a settled claim.

"Structured settlement agreement." The agreement, judgment, decree, stipulation or release embodying the terms of a structured settlement, including the rights of the payee to receive periodic payments.

"Structured settlement obligor." With respect to any structured settlement, the party that has the continuing obligation to provide periodic payments to the payee under a structured settlement agreement or a qualified assignment agreement.

"Structured settlement payment rights." Rights to receive periodic payments under a structured settlement, whether from the settlement obligor or the annuity issuer, where the payee is domiciled in this Commonwealth.

"Terms of the structured settlement." Include, with respect to any structured settlement, the terms of the structured settlement agreement, the annuity contract, any qualified assignment agreement and any order, decree or approval of any court or responsible administrative authority authorizing or approving such structured settlement.

"Transfer." Any direct or indirect sale, assignment, pledge, hypothecation or other form of alienation, redirection or encumbrance made by a payee for consideration, provided, however, that this shall not apply to a blanket security agreement used to secure a loan originating from a Federal or State chartered lending institution. Any transfer made or agreed to under this act shall beconsidered to be a consumer transaction.

"Transfer agreement." The agreement providing for transfer of structured settlement payment rights from a payee to a transferee.

"Transferee." The party acquiring or proposing to acquire structured settlement payment rights through a transfer.

§ 4003. Conditions to transfers of structured settlement payment rights

(a) Petition.--No transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment to any transferee of structured settlement payment rights unless the payee has filed a petition requesting such transfer and the petition has been granted by final order or decree of a court of competent jurisdiction based on such court's express written findings that:

(1) The transfer complies with the requirements of this act and will not contravene other applicable Federal or State statutes or regulations or any applicable law limiting the transfer of workers' compensation claims.

(2) Not less than ten days prior to the date on which the payee first incurred any obligation with respect to the transfer, the transferee has provided to the payee a disclosure statement setting forth all of the following:

(i) The amounts and due dates of the structured settlement payments to be transferred.

(ii) The aggregate amount of such payments.

(iii) The discounted present value of such payments, together with the discount rate or rates used in determining such discounted present value.

(iv) The gross amount payable to the payee in exchange for such payments .

(v) An itemized listing of all brokers' commissions, service charges, application or processing fees, closing costs, filing or administrative charges, legal fees, notary fees and other commissions, fees, costs, expenses and charges payable by the payee or deductible from the gross amount otherwise payable to the payee.

(vi) The net amount payable to the payee after deduction of all commissions, fees, costs, expenses and charges described in subparagraph (v) .

(vii) The quotient, expressed as a percentage, obtained by dividing the net payment amount by the discounted present value of the payments.

(viii) The amount of any penalty and the aggregate amount of any liquidated damages, inclusive of penalties, payable by the payee in the event of any breach of the transfer agreement by the payee.

(3) The payee has established that the transfer is in the best interests of the payee or his dependents.

(4) The payee has received or expressly waived in a separate written acknowledgment signed by the payee, independent legal advice regarding the implications of the transfer, including consideration of the tax ramifications of the transfer.

(5) If the transfer would contravene the terms of the structured settlement:

(i) the transfer has been expressly approved in writing by:

(A) the payee, the structured settlement obligor and the annuity issuer, provided, however, that such approval may not be unreasonably withheld and further provided that the structured settlement obligor and the annuity issuer shall be required to consent to the transfer if the transferee has agreed to indemnify the structured settlement obligor and annuity issuer from all liabilities arising from the factoring transaction and compliance or noncompliance with this act and further provided that if at the time the payee and the transferee propose to enter into the transfer agreement a favorable tax result is in effect, then the approval of the annuity issuer and the structured settlement obligor shall not be required; and

(B) any court or responsible administrative authority that previously approved the structured settlement; and

(ii) signed originals of all approvals required under subparagraph (i) have been filed with the court from which the authorization of the transfer is being sought and originals or copies have been furnished to the payee, the structured settlement obligor and the annuity issuer.

(6) The payee has given written notice of the transferee's name, address and taxpayer identification number to the annuity issuer and the structured settlement obligor and has filed a copy of such notice with the court.

(b) Notice.--Prior to entering into any agreement to make a transfer under this act, the payee shall be provided with a written notice on a separate sheet that contains the following, in bold print and at least 12-point type:

IMPORTANT NOTICE: You are strongly urged to consult with an attorney who can advise you of the potential tax consequences of this transaction.

(c) Bonds.--If the indemnity in subsection (a)(5)(i)(A) is offered, the court shall require that the transferee obtain a surety bond or an irrevocable standby letter of credit to secure the indemnity obligation. In considering the necessity and amount of any bond, the court shall consider the size of the underlying transaction and the potential liabilities of the structured settlement obligor and annuity issuer.