Using Benefit Offsets to Reduce Work Comp Costs

Reducing costs in your workers’ compensation program includes understanding the concept of offsets against workers’ compensation benefits.  This is something that often does not occur.  When it does, however, the result is program paying benefits that otherwise should not be paid.  A review of your workers’ compensation program to identify and implement applicable offsets can result in immediate savings to your program.

 

 

Understanding the Concept of Benefit Offsets

 

The ability to offset workers’ compensation benefits against collateral sources has its origins in the belief that someone suffering a personal injury should not reap a windfall.  In many jurisdictions, these same offsets are available under a workers’ compensation act for indemnity benefits an employee may be receiving from a government program.  These benefits include:

 

  • Social Security Disability (SSDI) benefits;
  • Social Security Disability (SSDI)Reverse Offsets
  • Prior Injury offsets;
  • Retirement annuities from public employee organizations; and
  • Various pension benefits received from a labor union health and welfare funds.

 

 

Application of the Offset Process

 

Statute or case law often define allowable offsets.  In some jurisdictions, the law explicitly prohibits these offsets.  It is important to understand the law in your state before you seek to reduce the amount being paid in workers’ compensation indemnity benefits.

 

 

Social Security Disability Benefit Offsets

 

A seriously injured employee can collect both workers’ compensation benefits and Social Security Disability benefits (SSD) if the Social Security Disability requirements are met. To prevent employees from collecting excessive workers’ compensation benefits and SSD benefits, state laws define the maximum benefit wage the employee can receive. In most states, the amount of Social Security Disability is offset by the workers’ compensation indemnity paid.

 

Example: An injured employee is collecting permanent partial disability (PPD) at the rate of $300 per week, or $1,300 per month (four and one-third weeks). The employee applies for Social Security Disability (SSD) and is approved. Based on prior earnings, the employee is eligible to collect $1,500 per month from the Social Security Administration (SSA).

 

With the workers’ compensation offset, SSA pays the employee $200 per month ($1,500 SSD minus $1,300 PPD). When the employee’s PPD is exhausted, the SSD will revert back to $1,500/month.

 

 

Social Security Reverse Offsets

 

A few states have a reverse offset, allowing the workers’ compensation carrier to take a credit for the amount paid in SSD benefits. Be sure your adjuster knows if the state allows a reverse offset for workers’ compensation indemnity benefits paid to an employee who is also collecting SSD.

 

In the previous example, with a reverse offset, the carrier would pay no PPD, as the SSD is greater than the PPD.

 

Example – A reverse offset: An employee collects $1,300 a month in PPD and is approved for $1,000 per month in SSD. The employee is paid $300 per month ($1,300 minus $1,000) by the workers’ compensation carrier. When PPD is exhausted, the employee then collects a $1,000 in SSD per month.

 

 

Prior Injury Offsets

 

Another deduction sometimes overlooked is the pre-existing permanent partial disability rating the employee has from a prior injury, often at a different employer.

 

Example: The employee suffered a back injury fifteen years ago while working for another company. The back claim was settled with the prior workers’ compensation carrier, based on a 10% permanency rating.

 

A year ago, the same worker suffers a back injury while working for your company. The treating physician and the IME doctor both give the employee a 25% permanency rating, which includes the pre-existing condition.

 

Most states allow you to deduct the prior permanency. This allows the adjuster to settle the claim for the value of a 15% rating (25% minus the prior 10% rating).

 

 

Other Factors to Consider

 

There are various issues to consider when applying an offset against applicable benefits.  It is important to consider the rules and requirements when seeking to take advantage of this compensation structure.  Important considerations include:

 

  • Offsets are often only allowed to be taken for the actual amounts an employee or their dependents receive and not the amounts they may be entitled to receive. This situation is common when an employee voluntarily decides to receive a reduced collateral benefit.

 

  • Employers and insurers can often offset the amount the employee was receiving prior to the work injury. The rationale for this is rooted in the understanding an employee’s earning capacity changes following an injury.  This change in income impacts their collateral benefits.

 

  • Benefits can be recategorized in order to achieve the offset threshold amount. This often occurs when temporary total disability benefits are recategorized to permanent total disability benefits.  Most jurisdictions that allow this find it permissible to do this on a retroactive basis.

 

Conclusions

 

It is common for workers’ compensation programs to overlook collateral source offsets.  This is a costly error that can easily be corrected and result in immediate savings to many programs.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2017 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

The Art – 7 Considerations When Using a Structured Settlement

They say the only certainties in life are death and taxes; but annuities can also be included on the short list. Among investments, annuities are one of the few that are virtually guaranteed.

 

That fact bodes well for injured workers concerned about their immediate and long-term financial needs. Well-designed structured settlements that are funded through annuities are tax-free, guaranteed, and incur no risk.

 

Workers’ compensation stakeholders who utilize them can ensure injured workers and their families are fully protected. The key is to find partners who have a deep understanding of these financial vehicles and the insight to identify the true needs of those affected.

 

 

When & Why Structured Settlement

 

Structured settlements are available to injured workers to settle their claims. They are an alternative to taking a set amount of cash in one lump sum.

 

While structured settlements have been around for decades, there are many misconceptions.  They may not be appropriate for every injured worker, they are certainly worth considering on every settlement case.

 

One reason injured workers may opt for a lump sum over a steady income stream is the belief they can get a better rate of return and end up with more money on their own. Unfortunately, there are ample studies showing that just isn’t true. The longer time goes on, the more people who have chosen a lump sum say they have less money than expected and not enough for living expenses. Along with the tax-free status is the time value of money. In the end, it adds up to being able to meet financial obligations long term with money paid out through a structured settlement.

 

Having the income stream from a structured settlement funded through an annuity — as most are — assures there are no associated taxes, which makes a significant difference compared to normal investments. To get the same net rate of return from a typical investment compared to a tax-free annuity would often require putting the money in a high-risk vehicle with a steady, high interest rate, something that is very difficult and rare.

 

One survey of 1,000 people presented them with a hypothetical scenario and asked whether they would prefer a lump sum payment or a structured settlement. The majority chose a single payment and cited financial independence, paying off a large loan, and flexibility as their reasons.

 

The fact is, changes in laws and regulations since the 1970s have made structured settlements very flexible, along with guaranteed elements. Structured settlements today come in all sorts of shapes and sizes, depending on a person’s needs. For example, many people, take a sizable amount of cash up front to pay medical bills and/or debts, then have the rest paid out in certain increments at over time. While the bases of structured settlements are the same, it’s important to understand current and future needs to get the right formula.

 

 

The Art – 7 Considerations When Using a Structured Settlement

 

Structured settlements need to be constructed differently for each injured worker, depending on his needs. There is no ‘cookie-cutter’ settlement. Each requires a basic life care plan with future needs and expenses included.

 

One or more annuities may be included in a structured settlement. These should be purchased from high-rated insurance companies to ensure financial strength.

 

Among the factors that may be included in are the following:

 

  1. Immediate expenses. Many structured settlements include upfront cash to cover such things as medical expenses, ongoing debts/loans, and attorneys’ fees.
  2. Monthly payouts. A typical structured settlement would also include a set amount per month for a specified number of years, and include a cost-of-living adjustment. For example, the amount could cover mortgage and other associated payments for 20 years.
  3. College education. If the injured worker has children, money would likely be included for college education. In addition to a monthly expenditure, a structured settlement could include, for example, an annual payment of $15,000 for a certain four-year period.
  4. Retirement funding. Some structured settlements also include a lump sum payment at the anticipated retirement year to supplement Social Security. Alternatively, a monthly amount on top of that previously established could kick in with retirement, to help pay for travel and purchases for grandchildren.
  5. Non-life contingent payments. Structured settlements can also allow for designated beneficiaries to continue receiving the future payments tax-free in the event of the injured worker’s premature death.
  6. Public Benefits. Even a small settlement can disqualify an injured worker from public benefit programs like Supplemental Security Income and Medicaid. A special needs trust funded with a structured settlement can help maintain eligibility and protect the employee’s long-term security.
  7. MSA. Medicare’s interests must be considered when someone settles past, present or future medical expenses to avoid jeopardizing these benefits or expose the injured worker to fines or penalties. In some cases, a Medicare Set-aside may be needed.

 

Summary

 

Injured workers and payers looking to close claims may find the best value for all sides through a structured settlement rather than a lump sum payment. When an experienced structured settlement expert is involved and the employee’s current and future needs are included, all stakeholders can see a win-win.

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2017 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

7 Ways Structured Settlements Are Advantageous — Regardless of Interest Rates

Interest rates continue to be at historically low levels. Even with recent hikes by the Federal Reserve, other factors playing into the equation are holding down rates. While that’s great for those buying property, it raises questions for injured workers setting up or dependent on a pre-established income stream — such as a structured settlement. The good news is, it really doesn’t matter.

 

Structured settlements are not investments like other products and, therefore, are not subject to the whims of Wall Street. They are guaranteed due to their underlying financial instrument – typically an annuity from a life insurance company. The structured annuity is guaranteed regardless of what happens in the market. As long as a highly rated insurance company is involved, there are strict regulations to ensure sufficient reserves are set aside for every annuity the company issues.

 

A deeper understanding of structured settlements sheds more light on how they work and why the interest rate environment is really not a factor.

 

 

What is a Structured Settlement

 

First created in Canada, structured settlements came into this country in the 1970s exclusively for injured workers. Initially they were used on large, catastrophic injury cases; although now as many as half of structured settlements are often less than $50,000. Federal and state governments have passed myriad laws and changes to the tax codes over the years to make structured settlements more attractive.

 

Instead of taking the money received from a workers’ compensation settlement or personal injury lawsuit in one lump sum, some or all the money is put into a structured settlement for future needs and goals. A set amount of the money is distributed at preset intervals — monthly, quarterly, annually or whatever is agreed upon by all parties. It can be doled out over a finite period of time or for the person’s entire lifetime. The settlement may even include a portion for beneficiaries upon the injured worker’s death.

 

A typical structured settlement includes upfront cash for immediate needs, such as attorney fees or medical expenses. The remainder is then put into one or more annuities issued by a life insurance company, which makes the periodic payments to the injured worker.

 

 

Advantages

 

Structured settlements include many inherent features that make them more appealing than lump sum settlements. Research continually shows that a majority of people who receive a single sum of money end up spending most or all of it too soon.

 

Among the additional benefits of structured settlements are:

 

  1. Guarantees.  The payments to the injured worker from interest-earning annuities are backed by insurance companies, which are highly regulated.
  2. Tax Free.  The injured worker receives a 100 percent lifetime exclusion from income, dividend and capital gains taxes.
  3. No Fees.  Structured settlements do not include management fees.
  4. No risk. Because of their structures and guarantees, the injured worker receives the money as scheduled — regardless of current interest rates. Also, they are not managed as other investment products are, so are not in danger of ending due to poor investment results.
  5. Eligibility. Benefits from federal and private health care plans are protected.
  6. Customization. Working with an experienced, reputable company with appropriate knowledge and financial tools means the settlement can be designed to fit the specific needs and desires of the injured worker involved.
  7. Higher returns. One of the biggest advantages of structured settlements stems from their status as tax free. That translates to returns that are higher than those seen in low- to moderate-risk investments. To match or get a better return than what an underlying annuity provides would require taking on higher risk and more uncertainty.

 

For example, in order for an injured party to earn the 6 percent return rate of the structured settlement, he would have to earn an additional 3.23 percent on the cash investment at the 35 percent tax bracket (9.23 percent less 6.0 percent), an additional 2.33 percent at the 28 percent bracket and 2.0 percent more in the 25 percent income tax bracket. In addition to the added interest, the self-investor would have to subtract any local and state taxes, as well as the related brokerage or investment fees.

 

 

Conclusion

 

Getting long term workers’ compensation claims off the books and ensuring the injured worker’s needs are taken care of can be done relatively easily through a structured settlement. Those with the appropriate expertise in developing them create a win-win for all parties involved in the settlement.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2017 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

How To Settle Tough Workers’ Comp Cases Without Unintended Consequences

How to Settle Tough Workers' Comp Cases Without Unintended ConsequencesA structured settlement can be a great way to ensure an injured worker is able to care for himself and his family for life. But it’s important to make sure all the right parties involved and are working as a team. Otherwise, there could be adversarial relationships and unintended consequences down the road.

 

While most people believe they would be best able to control their money by taking a lump sum, there are vast amounts of research to the contrary. Many people who do so end up with little to no money within just a few years. A structured settlement provides the injured worker with a steady, predictable tax-free income to handle all of life’s obstacles – when it is set up correctly.

 

 

Types of Issues

 

The injured worker’s future medical and living expenses are obvious needs. But, setting up a lifetime income stream entails identifying and thinking through all of a person’s financial needs over his lifetime. Examples of just a few of the issues that might need to be addressed include:

 

  • Medicare compliance.
  • Lien satisfaction.
  • Public benefits.
  • College education.
  • Home ownership.
  • Business setup.

 

A properly developed structured settlement must take into account the needs of the particular individual, since each person is different. Focusing on those, rather than just a dollar amount, yields the best outcome for all.

 

As an example, an injured worker who is a quadriplegic might need money for medical treatment and pharmaceuticals, home modifications, a vehicle retrofitted to handle his needs, money for his child’s eventual college education, and funds to establish his own business so he can be a productive member of society.

 

An injured worker incapable of caring for her own children might need money for caregivers for them, as well as someone to help care for herself. Additional funds might be needed for the children’s college educations.

 

It’s imperative to determine what is most important to the injured worker.

 

 

People Involved

 

The settlement could include a combination of strategies. For example, there may be liquid cash to handle immediate financial obligations such as medical expenses or liens resulting from the injury, a trust to protect certain benefits, and a tax-free annuity to cover future financial needs.

 

A properly setup structured settlement can solve complex problems if the key people are involved in the process. The first step is to identify the injured worker’s needs and goals; then consult with all relevant parties.

 

Some of the key players in a structured settlement could be:

 

  • Structured settlement broker. You want a reputable person and organization with experience and a solid track record of producing successful structured settlements.
  • Injured worker. The injured worker should not be an afterthought in the process, but should be actively engaged to avoid disputes later on.
  • Family members. Depending on the injured worker’s situation, it might be beneficial to include a spouse, sibling(s), parent(s) children, and/or relatives.
  • Medical personnel. The treating physician and possibly additional medical experts should be consulted to ensure all the injured worker’s medical issues are addressed.
  • DME specialist. Wheelchairs, ramps, and special equipment for the home and/or vehicle should be considered both for the immediate future and the long term.
  • Lawyers involved in the claim should all be included in the structured settlement discussions to iron out any challenges that might arise. Additionally, there may be a need for additional attorneys, perhaps to set up a special-needs trust.
  • Benefits experts. If the injured worker is receiving Medicare, Medicaid or some other public benefit, experts should be consulted to ensure those benefits are protected. Also, the injured worker may have questions; for example, he might want to know how much Medicare would provide for special equipment, such as wheelchairs or home modifications.
  • Tax/financial experts. These experts may be needed to answer questions about future issues that might arise, such as the tax consequences involved in setting up a home business.

 

 

Conclusion

 

Structured settlements offer peace of mind for injured workers seeking a long-term income stream. They are tax free, customized, and carry no risk, as they are not subject to the whims of Wall Street.  By working closely with the injured worker and assembling all the appropriate parties, a structured settlement can be a win-win for all involved.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2017 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

Surveys Results: People Often Regret Choice of Lump Sum Settlement

There is significant opportunity to increase the level of satisfaction and security in workers’ compensation settlement cases.  According to a pair of studies, it’s just a matter of better education regarding the use of Structured Settlements.

 

A study three years ago echoed the findings of a survey six years before; when people are informed about the benefits of structured settlements, the majority will at least consider the option. The reports also show that the people who are most influential to individuals faced with an injury award — attorneys — are either unaware of, or just don’t tell their clients about alternatives to lump sum payments. The surveys also found that many people who choose lump sum payments become increasingly sorry about that choice as the years go by.

 

 

Many Not Aware Of Structured Settlements

 

People often speculate about how they would take the millions they would get if they won a state lottery. Often the response is they would take the cash upfront instead of getting an income stream via an annuity.

 

The situation is similar for an injured person who is offered money to finalize a workers’ compensation or other type of claim. While a judge may mandate a structured settlement in rare cases, the injured person typically has a choice between a lump sum payment minus taxes, or a stream of tax-free payments paid out over the long term to pay their future medical expenses and basic living needs.

 

Structured settlements became legal as a way of compensating injured individuals in 1982. But the surveys show many people have little or no idea they exist or how they work.

 

 

Survey 1: 73% Choose Structured Settlement When Informed of Benefits

 

The first survey, sponsored by American General Life Structured Settlements was conducted in the Fall of 2007 and included more than 1,000 Americans, most of whom had not received or been connected to anyone with a major injury claim. They were given two scenarios and asked to choose a payout option.

 

  • Scenario I: A 35 year old married worker with three kids is paralyzed from the waist down following an auto accident and is ultimately awarded $750,000. The respondents were given no information about structured settlements vs. lump sum payments, but were asked how they would take the money.

 

Sixty-five percent said they would take the lump sum payment while the other 35 percent opted for the structured settlement. Nearly half of the lump sum respondents did so because they believed they could make their own financial decisions. Another big reason was to pay off major debts, along with the flexibility of not being locked into an annuity.

 

  • Scenario II: The 22-year-old widow of a husband killed in a construction accident is offered $2.5 million. But in this scenario, the respondents were given descriptions of structured settlements vs. lump sum payments.

 

The vast majority — 73 percent chose the structured settlement. Their main reason was that it provided a regimented stream of income for monthly expenses.

 

Interestingly, both groups cited two of the same reasons for their decisions: “guaranteed financial independence,” and “to avoid living on public assistance.”

 

 

More Than 50% Said Never Informed of Option

 

About 20 percent of the respondents to the survey either had been injured or had a family member who was. Most of them — 86 percent — had chosen a lump sum. More than half of them did not know what a structured settlement was, and said their attorneys had not informed them of the option.

 

Sadly, the majority of those who had taken lump sums said the money was gone. That mirrors the findings of a survey conducted in 2013, in which people who took lump sums found they had less money than expected as time went by.

 

 

Survey 2: Wished Had Taken At Least Some In A Structured Settlement

 

The second study involved 400 injured workers who had received settlements of at least $100,000 within the prior 10 years. It was produced by Prudential Global Strategic Research in conjunction with Prudential Structured Settlements. The sponsors wanted to know why someone would choose either payout option.

 

 

Lump Sum Chosen for Perceived Financial Independence & Pay Large Debts

 

The main reasons injured workers said they took a structured settlement were the tax advantages and a guaranteed rate of return, according to the Prudential study. Of those who said they were “very familiar” with the structured settlement option, 75 percent said they had considered it.

 

Those who opted for lump sums had done so largely because they hadn’t been informed about structured settlements. About 20 percent said the insurer had not offered a structure settlement as an option.

 

 

Financial Independence & Pay Off Debts Goal Most Likely To Regret Decision

 

Those who took the lump sums also said they did so to have financial independence and to pay of large debts. However, they were the most likely to regret their decision later and many said they wished they had taken at least some of it in a structured settlement.

 

The survey asked recipients of lump sum payments about their expectations regarding the money they had, within the first year of receiving the payment, 1 – 3 years after, 3 – 5 years after, and 5 – 10 years after getting the cash.

 

Within the first year, 35 percent said they had “much more than I expected,” and 5 percent said they had “must less than I expected.” But the figures were nearly reversed later. Among those who had received lump sums 5 – 10 year prior, just 6 percent said they had “much more than I expected,” while 25 percent had “much less than expected.”

 

 

Conclusion

 

Despite the belief by many that they can best manage a large sum of money, the reality is often different. Some spend money much more quickly than they envision; others make poor investment choices; while others discover that paying off large debts does not always result in financial independence.

 

Structured settlements are a compelling option for injured workers and others who want financial security throughout their lives. However, the lack of awareness and misconceptions lead too many people to choose lump sum payments, only to regret the decision later. It behooves all advisers of injured workers including attorneys, claims handlers, employers, and the population in general to understand the different payout choices and opt for the one that offers the best benefit.

 

 

Author Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2017 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

Leverage Emotional Intelligence For Successful Claim Settlements

 “Today is a new day, the first day of the rest of your life.” Each of us has certainly heard this statement proclaimed sometime throughout our lives – in the classroom, office, on an athletic field or even possibly during a therapy session. For injured parties, facing the realities of today and the uncertainties of tomorrow are often more painful than the physical injuries themselves.

 

As professionals, this is a simple yet important concept to understand as it drives the value that comes with the use of emotional intelligence when posturing settlements.

 

 

Emotional Intelligence In Settlement Process

 

Emotional intelligence is an ability to recognize, understand, manage and influence one’s emotions and the emotions of others. In practical terms, it is a combination of these abilities along with the use of intuition and street smarts. Regardless of how one chooses to define the concept, incorporating the use of emotional intelligence is important given its value in the settlement process.

 

With all of the priority business demands inherent to managing claims, litigation and settling claims, even if one had the time to fully appreciate the value of applying emotional intelligence, how would one use this to generate better results? Most of us are too busy to even pause for a moment and think about this question. So, please, allow me a minute to offer a few simple thoughts.

 

Unlike most service providers who deliver products and services for the betterment of injured parties, structured settlement consultants are uniquely positioned. Oftentimes, structured settlement consultants are very engaged in the litigation process and meet the injured parties. These opportunities open the door for the use of emotional intelligence which is advantageous to all.

 

 

Settlement to Address Immediate and Future Needs

 

From an injured party perspective, structured settlement professionals address immediate and future needs and provide viable options to bridge the gap to settlement. As objective settlement advisors, they use emotional intelligence to customize creative settlement proposals designed to address the financial needs and uncertainties of tomorrow.

 

From a claims and litigation management perspective, both defense and plaintiff, structured settlement professionals maximize the benefits and value that comes with the settlement dollars paid and assist with achieving desired outcomes. The efforts of structured settlement professionals offer benefits to all parties involved in the settlement process.

 

 

“Color in the Quotes”

 

So, next time you engage a structured settlement consultant, look not at the color of the quotes but rather the “color in the quotes” – in part the product of their use of emotional intelligence.

 

“Engage a structured settlement professional, today.”

 

 

Author: Duke T. Wolpert, Ringler.  Duke is a Broker and Settlement Consultant (CSSC) who owns and operates Ringler Associates of Pennsylvania Inc.  After joining Ringler in 2012, Duke served as Sr. Vice President of National Marketing and was responsible for new business development, national account management, national marketing and corporate partnerships – as member executive management team of the organization. Contact: https://ringlerassociates.com/consultants/duke-wolpert/

 

5 Structured Settlement Scenarios You May Not Be Utilizing

A structured settlement creates a ‘win’ for all parties to a workers’ compensation settlement; the employer, the payer, the injured worker, and the attorneys. So when is the right time to use a structured settlement?  Conventional wisdom is that structured settlements should be used as a financial tool when the settlement value reaches an arbitrary number such as $100,000.  This business-as-usual approach has made countless workers’ compensation programs engage in practices that only drive up the cost of doing business and have a negative impact on their bottom line.  Now is the time to reconsider your approach as to the right time to use and consider a structured settlement.

 

 

What is a Structured Settlement?

 

A structured settlement is a valuable piece of a comprehensive claim settlement strategy.  The claimant will receive the full value of their settlement over a period of time via a combination of a one-time lump sum payment paid at the time of settlement, plus annual annuity amounts.  Structured settlements come in various forms and can include the following payment mythologies that meet a desired end.

 

  • Deferred Lump-sum Payments, which include larger than the regular periodic payments via a schedule paid at pre-determined dates;
  • Flexible Settlement Plan, which allow flexibility for claimants requiring various special needs; and
  • Period Certain Annuity, which typically include larger periodic payments that end at a date or age certain.

 

 

5 Structured Settlement Scenarios

 

 

1. Realizing Cost Savings in Low Dollar MSAs

 

Consider the scenario with a forty-six year old employee who is currently a Medicare beneficiary.  He sustains a low back injury, disputes arise in the claim, and litigation occurs.  The matter is ultimately resolved with an MSA allocation of $38,893.

 

Using a structured settlement in this case allows the insurance carrier to realize substantial savings.

 

 

Benefit Cost Guaranteed Yield Expected Yield
 

Cash to Set Up MSA

 

$2,357

 

$2,357

 

$2,357

 

Annual Payment to Replenish MSA Account*

$22,357 $0.00 $36,529
 

TOTAL

 

$24,714

 

$2,357

 

$38,893

 

* Settlement Based on CMS Approval Male, Date of Birth 9/19/1969 Rated Age: 50. $1,141.00 per year beginning 1 year from approvals, payable for 32 years, only if living

 

**Example provided by Ringler

 

 

Proposed Total MSA Amount:

 

$38,893.00
Cost of Seed & Annuity Payments:

 

$24,714.00
Savings Realized using Structured Settlement $14,179.00

 

Using a structured settlement relies on an annuity mechanism that guarantees a rate of return on the money invested via a life insurance program.  In this case, the workers’ compensation insurance carrier does not pay the full allocation amount.  Instead, they pay only $24,714 to fund the full MSA, resulting in savings of $14,179.

 

 

2. Alleviate Injured Worker’s Future Medical Challenges

 

Convincing the injured worker to settle can be a challenge. However, keeping the case open can often be much more problematic due to future medical issues. The insurance carrier’s Utilization Review guidelines must constantly oversee the medical care.  This often results in significant frustration from system friction, red tape, and denials of treatments and medications.

 

A structured settlement for future medical costs, working in partnership with a professional administrator, can give the injured worker the freedom to manage their medical treatment how they wish. The professional administrator sets up a dedicated bank account and gives the injured worker a unique card to use at his pharmacy and doctor’s office. The injured worker never touches the bill, receives discounts from bulk pricing, has freedom of choice, as well as security and peace of mind that his future medical issues will be handled appropriately and timely.

 

 

3. Bridge The Gap In Settlement Negotiations

 

Settlement negotiations often stall due to a difference in opinion on the value of the claim.  A common example is where the claims professional evaluates the settlement at $300,000, while the employee’s attorney, demands $400,000 to settle the claim. The claims professional and the employee’s attorney may be able to bridge the gap with a structured settlement.

 

A structured settlement bridges the gap with the injured employee receiving $400,000 while the insurer pays $300,000 (slightly more or slightly less) to be invested with a life insurance company in an annuity. This is possible with a structured settlement as the amount of the settlement is paid out over time with periodic payments. The injured employee and the employee’s attorney will receive the $400,000 over the time span set in the structured settlement (either the employee’s life time or a specific number of years).

 

 

4. Peace of Mind for Permanent Partial or Permanent Total Disability

 

Anytime an injured worker experiences a permanent partial or permanent total disability it creates an immeasurable impact on their life and that of their family.  In addition to ongoing medical expenses, the loss of the income raises questions about immediate needs, such as modified vehicle replacement and home modifications. There can also be additional concerns about long-term expenses such as college funding for children.  Structured settlements can be used to pay for these and other bills, providing a comfortable lifestyle for the family following a workplace injury.

 

 

5. Eliminate Contingency-Fee Attorney Income Peaks & Valleys

 

Many attorney’s work on a contingency fee basis resulting in significant peaks and valleys in income based on the outcome of their cases.  An attorney who leverages a structured settlement for their fees can set up a deferred compensation plan guaranteed to cover their annual operating budget, and freeing the attorney to focus on current and new cases.

 

 

Conclusions

 

It is rare that an injured worker — or anyone — has the money management skills and discipline to make a large sum of money last a lifetime, especially when there are medical issues to consider. In fact, research shows most people have depleted the entire lump sum after just 5 years. A structured settlement can give a guaranteed, tax free income stream for life.

 

Now is the time to reconsider your approach in how you are using structured settlements. A structured settlement provides the necessary “win” for all parties and can provide significant savings to every workers’ compensation program.

 

 

Author Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Live Stream WC Training: http://workerscompclub.com/livestreamtraining

 

©2017 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

Ringler Associates Announces New Chief Strategy and Business Development Officer: Melissa Evola Price

melissa RinglerAliso Viejo, California, July 5, 2016 – Ringler Associates Incorporated, the largest company of structured settlement advisors in the United States, is proud to announce that Melissa Evola Price, President of Structured Financial Associates (SFA), will be joining Ringler as Chief Strategy and Business Development Officer effective immediately.

 

Melissa Price, from the Greater Detroit area, has a longstanding reputation as a leader in the profession. She joined SFA in 1999 as a Structured Settlement Consultant/Corporate Marketing Consultant, expanding her role to National Account management, marketing/communications, IT infrastructure, corporate business development planning. Prior to that, she worked for eleven years in the Electronic Commerce (EC) industry, where she specialized in strategic planning, product management and sales management  focusing on emerging product markets. She    has

Life, Health and Accident Insurance licenses in multiple states and is a member of the National Structured Settlement Trade Association (NSSTA). She also holds the Certified Structured Settlement Consultant (CSSC) certification.

 

Ringler President and CEO Geoffrey E. Hunt commented, “We are absolutely delighted to have Melissa join our executive team.  Melissa has long been known as one of the distinguished thought leaders in our industry now dedicated to assuring Ringler reaches new levels of innovation and growth. I could not be more excited to have Melissa as my partner as we write the next chapters of Ringler as the continued leader in settlement advisory. Melissa has the intelligence, energy and creativity to make outstanding contributions to our future.”

 

Upon accepting the position Price says “I have admired Ringler as a company and I am very pleased to be able to become part of the leading firm in our industry. Joining Ringler provides an opportunity to work with Geoff, the leadership team and Ringler board to execute on our strategic plan that delivers the advances so necessary for us to continue advising our clients as well as injured parties and their families for the best possible outcomes.”

 

Hunt also notes that James M. Early, Executive Vice President and National Sales Director at Ringler has decided to retire at the end of the year, notifying the Ringler leadership several months ago.  Early will

 

continue working on the executive team to assist in the transition through 2016 and he will continue in an advisory role as he takes the reins as President of NSSTA in 2017.

 

And Ringler Chairman of the Board, W. Ross Duncan adds that, “Melissa is well respected across our profession and all of us at Ringler look forward to working with her in this important position as we look toward the future. We welcome Melissa, her husband Chris and his son, Harry, to the Ringler family.”

 

 

About Ringler

Ringler is the largest structured settlement company in the United States with over 120 Consultant in 61 offices since it was established in 1975. The Ringler team consists of over 250 experienced professionals who have earned the trust of all parties involved in the settlement process. Every Ringler Consultant takes an individualized, customer-focused approach to each case, backed by the strength and resources of a national brand to collaborate with injured people, attorneys and insurance professionals providing the best settlement solutions for claimants and their families. Ringler continues to expand its expertise in financial markets with a steadfast mantra of innovation and leadership in the profession.

Structured Settlements Protect Injured Workers & Save Work Comp Costs


Michael Stack:   Hello, Michael Stack here. Principal of Amaxx, founder of COMPClub, and co-author of “Your Ultimate Guide to Mastering Worker’s Comp Costs”. One of the core philosophies that I believe is that a better outcome for your injured worker will lead to lower worker’s compensation costs for your organization. Again, a better outcome for your injured worker will lead to lower worker’s compensation costs for your organization. And structured settlements certainly fall under that criteria and that philosophy. I have a special guest joining me today, the Senior Vice President of National Marketing at Ringler Associates, Duke Wolpert. Duke, thanks for joining me. I’d love for you to share with me what is a structured settlement, a little bit of context there.

 

 

What is a Structured Settlement?

 

Duke Wolpert:   Sure Mike, my pleasure. Thanks for having me today on the program. A structure settlement, essentially, is a cost-effective alternative to a lump sum settlement, a cash settlement. The series of tax-free future periodic payments, established between an insurer or self-insurer, and an injured party, a claimant or plaintiff, as part of either a worker’s compensation settlement, or a personal injury settlement.

 

They’re designed to protect and offer security to injured parties, so that they can meet their financial obligations in the future. Essentially, they bridge the gap to settlement, and any way parties can move closer to settlement by simply a change in the way the settlement is funded certainly is a step in the right direction.

 

Michael Stack: Absolutely. I agree with that, and I think these points you made are very good ones. Alternative to cash, really that lump sum settlement as an alternative to that, this point I think the tax free periodic payments in really a strong benefit to this, and then not to really be understated is that protection and security issue that really those structures offer throughout that settlement process, so thanks for sharing those point, Duke. Now, tell me, really how are these used then in the worker’s compensation space, really to leverage these benefits that you mentioned?

 

 

How Are Structured Settlements Used in Workers’ Compensation?

 

Duke Wolpert:   Yeah, what we’re seeing in the worker’s compensation space is a growing use of structured settlements, when it comes to the funding of Medicare set aside allocations. In addition to the MSA, the Medicare set aside allocation, oftentimes there are non-Medicare allowable expenses that aren’t part of the Medicare set aside allocation cost projection, that need to be quantified, and many times, we actually structure those non-Medicare allowable expenses as well as the MSA’s that we see.

 

On the indemnity side of the cases, we oftentimes are pulled into permanent and total claim scenarios, widow benefits, minors, in catastrophic claims, burns, amputations, traumatic brain injuries, for instance, are certainly cases that we’re asked to get involved in, to customize proposals that assist in meeting the financial needs of the injured parties in the future.

 

On occasion, we see situations involving injured parties with drug dependency, or competency issues, folks that for one reason or another cannot manage their own money, and there is certainly a value, the funding of those settlements with periodic payments and structured settlements.

 

Finally, the use of the structured settlement is growing in conjunction with the growth of Medicaid entitlement and the Medicaid programs in the states. In order to protect entitlements for Medicaid recipients, oftentimes the funding of the settlement has a direct correlation with their eligibility status, so the funding of a settlement would be using periodic payments, a structured settlement, certainly provides some protection to injured parties when it comes to ongoing incontinuity of Medicaid entitlement.

 

Michael Stack:   I think a couple of things that you said there … this competency issue, and we talked about it in regards to drug dependency, but I think we hear these stories so often of the lottery winners who get this huge sum of money, and a couple of years later, the people go bankrupt, and it’s just a very common story, and I think the value here is really in that protection, which we talked about in those benefits initially, and these catastrophic cases that Duke mentioned  … I think very valuable when you really put that in a context of leveraging this for those better outcomes for those injured workers, so let’s talk about that now, Duke. How do we now leverage these tools? How do we leverage this tool then in the context of really creating those better outcomes, both for the injured worker, and then creating those lower worker’s compensation costs?

 

 

How Do Structured Settlements Reduce Workers’ Compensation Costs?

 

Duke Wolpert: Absolutely. When we look at outcomes on the insurance, self-insured side, the primary payer side, oftentimes the use of structured settlements offers a reduction in the pay loss dollars in the claim, the lost dollars associated with a claim file. That oftentimes leads to improved cycle times or closing ratios for claims professionals, and what we find is that it at times avoids unnecessary expenses, especially in cases in litigation, either litigation costs or ancillary expenses related to the litigation, so clearly there’s value from a cost containment and cycle time claim inventory perspective, when it comes to the use of structured settlements.

 

Michael Stack:   I agree. Now, let’s talk about those injured workers, so we’re saving money through the use of these tools in loss dollars and the comparison of using an annuity versus a lump sum payment, and really leveraging the interest that leads to those savings. Now, let’s talk about those injured workers on that perspective and some of those benefits in creating a better outcome for them as well.

 

 

How Do Structured Settlements Lead to a Better Outcome For Injured Workers?

 

Duke Wolpert: Yeah, understanding that the plans that we develop are individually customized, they’re done that way to meet the needs of the injured parties, and every plan is a little different. In conjunction with the structuring and work up for the pricing of the Medicare set aside, there are oftentimes non-Medicare allowable expenses and other needs on the [inaudible 00:06:18] side that we need to address with the injured parties, as well as their own financial needs that will lead to the establishment of the creative design, the structured settlement proposal, and by doing that, it bridges the gap of the settlement. It gets the parties closer to resolving the claim in hand.

 

Michael Stack:   I think that really summarizes it nicely in the sense of really customizing those needs. I think when we talk about objections that injured workers might have, that would be a fear of mine certainly if I was offered a settlement, that I want to make sure that my needs are protected. As you said … I think one of the things you said there was I think was key, was it’s really individual to that individual person. Do they need some money up front to pay for certain things? How much money do they need over time? … And really customizing it to meet those needs, and as we said, at the same time saving those worker’s compensation costs for the payer organizations.

 

Duke, thanks for joining me. I’d love to just ask to share some final thoughts as we wrap up here.

 

 

A Structured Settlement Could Be the Last Check an Injured Party Ever Receives

 

Duke Wolpert: My final thought would be that we need to remember that an injured party who’s been disabled for a period of time, that receives a settlement, may not be going back to work. This could be the last check, the last payment that they receive for the rest of their lifetime, so protecting their financial future certainly is something that we want to be part of, and structured settlements absolutely do just that.

 

Michael Stack:   Yeah, I couldn’t agree more, and I think that point of really thinking that this is a last check that individual can receive is a very powerful point, and really leveraging this tool to create those better outcomes for that individual person, and as we mentioned, at the same time, lowering those worker’s compensation costs for the payer organizations. Thanks again, Duke for joining me today, and remember, your success in worker’s compensation is defined by your integrity, so be great!

 

 

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

 

 

©2016 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

 

Maximize Settlement Value And Solve Complex Problems With Structured Settlements

Structured settlements offer all parties in workers’ compensation cases an opportunity to maximize the settlement value of the case and have creative solutions to solve complex problems.  Before using a structured settlement in your case, it is important to understand key terms and how they work.

 

 

Key Structured Settlement Terminology

 

The use of structured settlements include a complicated vernacular.  Using terms incorrectly can result in delay or having a settlement fall apart.  Consultation with a structured settlement representative is key.

 

  • Annuitant: A person who receives the benefits of an annuity.
  • Annuity: A specified income payable at stated intervals for a fixed or a contingent period, often for the injured employee’s life.
  • Beneficiary: The injured employee who receives the payments from the structured settlement.
  • Deferred Lump-sum Payments: These are payments to the injured employee, which are larger than the regular periodic payments, and are given at pre-determined dates in the future to cover the cost of a college education, car replacement, home remodeling, etc.
  • Flexible Settlement Plan: A structured settlement that takes into consideration the needs of the injured employee, both financially and medically, while also addressing the cost of the structured settlement.   A flexible settlement plan includes the planning necessary to achieve the goals of the injured employee while maintaining control of the cost of the structured settlement for the employer/insurer.
  • Period Certain Annuity: When the injured employee knows that in the future there will be additional income from Social Security, a pension, IRAs, 401Ks, etc., the injured employee may elect to get larger payments from the structured settlement annuity by shortening the time period the annuity will be paid to age 65 or some other cut-off point.
  • Periodic Payments: Settlement payments that the injured employee receives based on an agreed payment schedule, whether it bi-weekly payments, or monthly payments, or quarterly payments or annual payments.
  • Qualified Assignment: A qualified assignment is the transfer from the workers’ compensation insurer to the life insurance company, the obligation to pay the future periodic payments of a structured settlement.  The obligation to pay qualifies for favorable income tax treatment as the obligation arises out of an injury.

 

 

Correctly Using a Structured Settlement

 

The use of structured settlements is made possible by special provisions within the Internal Review Code.  When done properly, they can provide a claimant with a consistent flow of money that is not taxable under the Code.

 

When using a structured settlement, it is important to be aware of the special tax rules that apply.  A structured settlement must be established by:

 

  • An agreement for a party to accept periodic payments for personal damages that are excludable from gross income as set forth in 26 U.S.C. §104 (a) (2); or
  • An agreement for a party to accept periodic payments for applicable workers’ compensation benefits that are not considered income per 26 U.S.C. § 104 (a) (1); and
  • The payments are also those as described in subparagraphs (A) and (B) of Internal Revenue Code Section 130(c) (2), or 26 U.S.C. § 130(c) (2).

 

These periodic payments must also be paid as follows:

 

  • A party to personal injury type lawsuit or workers’ compensation claim; or
  • A party who has assumed liability for the periodic payments under a qualified assignment per 26 U.S.C. § 130.

 

Conclusions

 

Structured settlements remain an important tool in settling workers’ compensation cases.  It is important to understand key terminology and how they work before using one in your settlement.

 

 

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a monthly basis working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

 

 

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

 

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