It was late one March evening and a taxicab going over 115 miles per hour smashes into the back of a police car. Instantly setting that car on fire, and the officer was trapped inside. Hello, my name is Michael Stack, I’m the CEO of AMAXX.

Burning Shield – Jason Schechterle

This past week I spent several days at the annual meeting of the settlement planning organization Ringler, he’s one of the partners on my website here at Reduce Your Worker’s Comp. Now it was a great couple of days spent networking and learning and sharing ideas, but one of the highlights of that conference or of that meeting was the keynote presentation given by Jason Schechterle, who was the officer who was inside of that car hit by the taxicab. Now Jason experienced severe burns on his face, his neck, his head, and over 40% of his body. He underwent over 50 surgeries to recover from that event. His message was powerful in his keynote presentation, and the book that he wrote called the Burning Shield. I recommend checking it out.

Accountability In This Life

Jason’s message had a lot to do with taking an honest look at our circumstances, and taking accountability for where we stood and what happened. There were so many powerful lessons and inspiring keynotes that he gave throughout the course of that presentation. The one that struck me the most went like this, he said good or bad, we have an accountability in this life. Why me is not a question is not a question we can ask. He said good or bad, we have an accountability in this life. Why me is not a question we can ask. Good or bad, we have an accountability in this life. Why me is not a question we can ask. That lesson and that sentiment is so applicable to so many areas of our life. Today we’re gonna talk about how that applies to your work comp program.

You Are Likely Looking At the Problem

What I see so often, particularly from employers, is that we want to blame everyone else. It’s the adjuster, they have too high of caseload. It’s that stinking doctor, he’ll never release my employee to work or that case manager’s not getting it together. Or my attorney, he’s a real pain in the butt or she’s a pain in the butt. Or that investigator, if that investigator would just have done their job we wouldn’t be in this mess that we’re in right now. It’s such a common sentiment that we feel in our work comp programs, and generally within our own lives. Per Jason’s lesson, we need to think about how that applies to our lives, and how that applies to our work comp programs as well. Because when you wake up in the morning and you’re looking in the mirror, you need to realize that you’re likely looking at the problem.

Again my name is Michael Stack, I’m the CEO of AMAXX. Remember your work today in worker’s compensation can have a dramatic impact on your company’s bottom line. But it will have a dramatic impact on someone’s life. So be great.

Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a 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: https://blog.reduceyourworkerscomp.com/

©2019 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.

Injured workers who settle their claims are increasingly looking to settlement experts to help smooth the process. One of the key players in the equation is the structured settlement broker; the person who helps bring the case to resolution.

But there are many companies and individuals under the umbrella of ‘structured settlement broker,’ and they do not all function alike. It’s important to understand what they do — and what they can do — to ensure the settlement is truly a win-win for all parties, especially the injured worker.

Broker vs. Consultant

Planning a settlement is much more involved and complex than many may think. It requires more than just getting the money to the injured worker. There are many administrative and governmental issues that may need attention. Also, the injured worker may have needs beyond those of the immediate future must be taken into account. This takes a well-thought-out strategy.

The role of a structured settlement broker is evolving. The idea of setting up a transaction, signing the paperwork and then ending the relationship is over. The best companies to handle claims settlements are those that act as consultants to injured workers, understanding their needs and bringing in the best people to handle them.

Each settlement must be customized to fit a specific injured worker. Among the issues that may require involvement by experts are:

1. Lien resolution.
2. Financial planning.
3. Tax consequences.
4. Government benefit programs.
5. Legal issues.
6. Retirement planning.
7. Insurance concerns.
8. Future college education for children or grandchildren.

The consultant should know various settlement tools that can address these issues. For example, a consultant that works with insurance planners can provide comparative information on insurance products, such as disability or long-term care insurance. Having the benefit of an expert in Medicare Set-Asides available can ensure compliance and reporting issues are addressed, so future benefits are not put at risk.

These experts can be brought into the process early on, so the settlement is set up appropriately. Rather than just running quotes, the structured settlement consultant should act as the general contractor in identifying, bringing and managing the best experts to the table.

The consultant’s services should also be completely fee transparent, and come at no cost to the injured worker.

Examples of Issues and Players

Many circumstances may be overlooked in the settlement process. Working with an experienced structured settlement consultant can reveal and address those, such as:

• Attorney Fee Deferrals. There are many ways to structure attorneys’ fees to allow money to be used in the future. Money deferred can be used for supplemental retirement funds, protection against inflation with cost of living adjustments, and potential avoidance of the Alternative Minimum Tax, for example.

• Calculating realistic future medical costs. A top-notch structured settlement consultant should be able to show comparisons of the current costs of medications and procedures relevant to the injured worker with discounted costs offered through the consultants’ networks.

• Trust funds. Trusts can be a great benefit to manage and protect assets, regardless of the person’s wealth level. Proper planning requires establishing a trustee, identifying beneficiaries, and determining how the assets should be held, invested and distributed. A qualified structured settlement consultant should be able to provide unbundled, transparent and competitive administrative and investment advisory pricing that will ultimately save money for the injured worker.

Collaborative Process

A successful structured settlement begins with a positive relationship between the injured worker and the consultant. A typical injured worker who is thinking of settling his claim is likely unaware of many issues he will face in the years ahead for which he is not prepared. By working closely and getting to know the injured worker the consultant can proactively identify concerns that may arise over the person’s lifetime.

The consultant and injured worker should work together as a team to find the optimal solutions. Bringing in the consultant as early as possible in the process allows him to become better acquainted with the injured worker and uncover his short- and long-term needs.

Once the settlement is reached, the consultant should ensure there will be someone to continue acting as a support and guide. They should have relationships with professional administrators who work with the injured worker throughout his life, guiding him through the many regulatory and medical mazes he will face.

Summary

The expectation for a structured settlement broker is a company that brings value beyond just the transaction itself. It should be a consultant that oversees the entire process, with the injured worker and his needs at its core.

Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a 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: https://blog.reduceyourworkerscomp.com/

©2018 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.

Legacy claims that have been sitting on the books for months, years or even decades can add up to major headaches and expenditures for workers’ compensation payers. Despite all attempts to close them, the injured worker involved just doesn’t seem to be interested in settling the claim.

The good news is, there are organizations solely committed to bringing even some of the most difficult cases to settlement and creating a true win-win for all stakeholders involved – including the injured worker.

Structured settlements are an alternative to lump sum settlements, which often fail to take care of the injured workers’ needs long term. Structured settlements can be set up to deliver varying amounts of money over the injured worker’s lifetime which can address all his current and future needs, such as:

• Medical expenses
• Living costs
• Children’s education
• Special needs trusts
• Establishing a business
• Home modifications

Working with an experienced, highly professional structured settlement consultant can be a lifesaver, for the injured worker, his family, employer and the payer.

Why Claims Don’t Settle

Structured settlement consultants specialize in settling claims. Typically the most difficult challenge in settling claims is addressing the injured workers’ concerns:

• Concerned there will be no money
• Not wanting to deal with Medicare compliance issues
• Worried about losing support to navigate the medical system
• Uneasy about the red tape involved in paying medical bills
• Afraid of change

The emotional concerns of injured workers with legacy claims are just as, or even more important than the practical concerns, such as running out of money too soon. While injured workers may abhor dealing with the workers’ compensation system, they find some comfort in knowing they will get a consistent flow of money and that they have someone, the claims adjuster, who helps steer them in the right direction.

Part of the problem with trying to close these claims is that the injured worker has not had anyone fully explain the options available in settling. The claims adjuster may ask every few months whether the injured worker is interested in settling, but that person is not in the best position to develop a settlement plan. This process requires someone getting involved with the injured worker; understanding his particular needs, his family situation, and what he wants for the future. Engaging with an injured worker this way can reveal his true needs and concerns, which can lay the groundwork for a settlement.

Why a Structured Settlement Consultant

Structured settlement consultants don’t get paid unless and until the claim settles. Therefore, they work with all parties involved, rather than promoting one side or entity over another. For claims to settle, everyone involved must agree it is a win-win arrangement.

Your consultant knows that the easiest way to achieve a solution is by ensuring that all needs are addressed. Working under the premise that there is no one-size-fits-all, or cookie-cutter approach to settlements, the consultant creates a customized plan that takes into account any and all issues that may arise over a person’s lifetime. Using the flexibility of a structure allows for addressing these issues, but a good consultant will present a variety of solutions, sometimes even going beyond the structured settlement.

For example, the settlement might involve a large initial payout for the injured worker to pay off medical bills, attorney fees, liens, and other bills. It might then have an ongoing stream of specified monthly payments, and it might include a larger stream of payments designated for a certain time period if, for example, a child will reach college age and needs money for education.

Engaging a Structured Settlement Consultant

Often, a settlement consultant can help by finding a block of claims with high reserves that seem to be going nowhere. Providing the name of the case, the adjuster, the claims liaison, attorneys, employer, TPA and a brief synopsis to the structured settlement consultant starts the ball rolling. With permission, the consultant can reach out to the various parties, gather information and report back as to which claims make sense for settling, as well as which cases do not and why.

The best and most efficient time to engage a settlement consultant is as early as possible, rather than waiting until the 11th hour when the claim has been open for 22 years. As new cases come up, they too can be earmarked for possible settling.

Best Claims for Settling

Despite all the advantages of structured settlements, not all claims are ripe for them. Identifying these cases can be difficult to manage, thus it’s important to choose a consultant who understands both structured settlements as well as other settlement options, and which are most preferable for the case at hand.

Ultimately, choosing a company that employs objective Settlement Planners over Structured Settlement Brokers can be the best route. Settlement Planners are trained to offer a variety of solutions, rather than a single approach. However, whether you choose a Settlement Planner or a Structured Settlement Broker, these consultants are trained to think outside the box and are much more likely to bring legacy claims to settlement.

Conclusion

Structured settlement consultants are a great vehicle for getting long-term workers’ compensation claims off the books. By giving them minimal information on claims, they do the legwork and determine whether a claim is likely to be settled. They then go about getting a settlement agreement that meets the needs of all stakeholders.

Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a 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: https://blog.reduceyourworkerscomp.com/

©2018 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.

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.

Author 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: https://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.

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.

Author 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: https://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.

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.

Author 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: https://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.

A 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.

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: https://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.

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: https://blog.reduceyourworkerscomp.com/

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