Historical Developments Structured Settlements Period One: Industry Formation

This is the introduction and part I for a timeline of historical developments that highlight key events for the structured settlement market. 


The United States structured settlement market originated in the mid to late 1970s following its introduction in Canada during the 1960s with the Thalidomide cases. Three IRS private letter rulings provided a tax incentive which was later enacted into the tax code by the Periodic Payment Judgment Act of 1982 which also created IRC Section 130. Various brokers and annuity providers formed the National Structured Settlement Trade Association in 1986. Other legislative developments during this formative period included the Medicare Secondary Payer Act (1980);  the National Childhood Vaccine Injury Act (1986); IRC Section 468B (1986); TAMRA (1988); and drafting/approval of the Uniform Periodic Payment of Judgments Act (1990). The IRS also issued an important PLR concerning cost disclosure (1983).  Industry annuity premium grew from $15 million in 1977 to $3.9 billion in 1990.


  • 1979: Revenue Rulings - Three Revenue Rulings in the late 1970s (including Rev. Rul. 79-220 involving annuities) declared that if a personal injury victim agreed to accept monthly payments over a lifetime or specific number of years (whichever was more), and if the recipient did not have either actual or constructive receipt of the present value of the damages the settlement represented or its current economic benefit, all the periodic payments would be tax-exempt as received.
  • 1980: Medicare Secondary Payer (MSP) Act - Until 1980, Medicare paid medical benefits for its beneficiaries without specific regard to whether the beneficiary had other sources of payment for medical needs. The MSP Act in 1980 was intended to decrease Medicare costs by requiring certain insurers, including liability, automobile, no-fault and workers compensation insurers, to make payment first for services to Medicare beneficiaries regarding claimed injuries, with Medicare responsible only as a “secondary payer.” Subsequent Federal legislation has helped to clarify and further expand the Medicare Secondary Payer Act. This legislation includes both the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) and the SMART ACT of 2012
  • 1982: Periodic Payment Settlement Act of 1982 – this legislation codified the earlier Revenue Rulings into IRC Section 104(a)(1) and (2). and added new IRC Section 130 that addressed the taxability of income for companies that assumed the obligation to provide periodic payment by assignment from the original defendant or its liability insurer. These changes set the basic framework for the predominant method ("qualified assignments") by which structured settlements have been funded ever since.
  • 1983: PLR 83-3035 - The IRS issued PLR 83-3035 which concludes that disclosure of the cost of a structured settlement annuity does not constitute constructive receipt thereby changing an early industry negotiating strategy utilized by many defendants.
  • 1986: National Structured Settlement Trade Association (NSSTA) - Industry representatives incorporated NSSTA. NSSTA currently has more than 1200 members, including organizations that are “structured settlement consulting firms, life insurers or services firms engaged actively . . . in the settlement or funding of personal injury damage actions, or other claims utilizing periodic payments.
  • 1986: National Childhood Vaccine Injury Act  - Congress enacted a periodic payment provision within the National Childhood Vaccine Injury Act, pursuant to which children injured from diphtheria-pertussis-tetanus (DPT) and other vaccinations have rights and limitations on recovery for injuries suffered. The Act expressly provides for the courts to order the purchase of annuities to address this need. 
  • 1986: IRC Section 468B - Enacted in 1986 (with important IRS regulations and revenue procedures added in 1993), IRC Section 468B qualified settlement funds (QSFs) provide an exception to the general rule that defendants (or their liability insurers) must purchase structured settlements.  Generally used in complex cases with multiple claimants, the primary purpose of a QSF is to marshal assets and to determine which claimants and counsel will receive which amounts of settlement dollars.
  • 1988: TAMRA - The Technical and Miscellaneous Revenue Act of 1988 (“TAMRA”) amended IRC 130 (c) thereby removing (to a certain degree) recipients of periodic payments pursuant to qualified assignments received after November 10, 1988 of the risk of current income taxation as the result of economic benefit.
  • 1990: Uniform Periodic Payment of Judgments Act. - the National Conference of Commissioners on Uniform State Laws approved the Uniform Periodic Payment of Judgments Act. 36 states have enacted one or more periodic payment of judgment statutes. Almost all of the state statutes are "discretionary“, requiring the approval of both plaintiff and defendant, and are rarely, if ever, applied by the courts. Among the most important state periodic payment of judgment statutes are three ” mandatory" statutes: California’s medical malpractice statute and New York’s medical malpractice and general liability statutes.