I. Introduction – Completing the Series
“The Social Security Act is among the most intricate ever drafted by Congress; its Byzantine construction … makes the Act ‘almost unintelligible to the uninitiated.’” — Judge Henry Friendly, Schweiker v. Gray Panthers
That observation captures the challenge still facing policymakers and structured settlement professionals. For decades, structured settlements have operated within Social Security programs that were never written with them in mind, leaving their interaction with SSI and Medicaid benefits to informal guidance, staff correspondence, uneven state application, and practical workarounds, none of which provides lasting clarity or consistency.
Our six-part series has traced how recent developments have reshaped this landscape:
- Articles 1 and 2 examined system-wide shifts, including the One Big Beautiful Bill Act (OBBB), which transfers greater discretion to the states, and the Social Security Administration’s 2025 reforms reshaping SSI and SSDI eligibility.
- Articles 3 and 4 documented the evolution of structured settlements within this environment, from a tax-centered claims-resolution tool into a cornerstone of claimant-centered settlement planning, reliant on interpretive sources such as the POMS, the 2006 Veillon letters, and CMS’s 2006 memorandum.
- Article 5 identified five gaps that continue to shape how structured settlements interact with SSI and Medicaid: the absence of a statutory income exclusion for structured settlements; the cascading effect of SSI income rules into Medicaid; the lack of structured settlement-specific regulatory authority; inconsistent treatment of payments into SNTs, pooled trusts, and ABLE accounts; and uncertainty over how the DRA’s annuity provisions, §§ 1917(c)(1)(F) and (G), apply to assignment-owned annuities.
This final article proposes two targeted federal steps to close those gaps. The first is statutory: Congress should amend the SSI income definition to exclude structured settlement payments directed into special needs trusts, pooled trusts, and ABLE accounts. The second is administrative: CMS should issue updated guidance confirming that § 1917(c)(1)(F)’s disclosure and remainder-beneficiary rules apply to structured settlements, while § 1917(c)(1)(G)’s substantive restrictions do not. Different remedies are required because of the distinct frameworks of the SSI and Medicaid statutes.
Note: The Affordable Care Act created additional eligibility categories based on household income (MAGI). Because structured settlements most often intersect with the aged, blind, and disabled populations, our focus here is on those traditional Medicaid categories.
II. Proposal #1 – Add an SSI Income Exclusion for Structured Settlement Payments
A. The Alternatives Considered
The settlement planning industry faces several possible approaches for addressing how qualified assignment–funded structured settlement payments should be treated under SSI’s income rules. Our task is to evaluate which approach best balances claimant protection, fiscal integrity, and political feasibility, and then to press Congress to act.
B. Broad Exclusion
One possibility would be to seek an exclusion for all structured settlement payments qualifying under IRC §130, regardless of a claimant’s disability status or whether payments are routed into a benefit-protection vehicle. This option has the appeal of simplicity but carries serious problems.
Many structured settlement recipients are not disabled and would never otherwise qualify for SSI or Medicaid. Extending favorable treatment to this wider population would blur the line between a broad tax policy (IRC §§130; 104(a)(1) and (2)) and narrowly targeted welfare programs. It would raise budgetary and equity concerns and, critically, there is no statutory precedent in SSI or Medicaid law for giving qualified assignments or structured settlements such sweeping effect.
In addition, a broad exclusion shares the same structural flaws as the “middle ground” alternative discussed next. It provides no ongoing resource protection, no Medicaid payback mechanism, no fiduciary oversight, and no safe-harbor distribution rules. These omissions would be even more problematic if extended to the entire population of structured settlement recipients.
C. Middle Ground (QA-Only Exclusion for Disabled Individuals)
A second approach, described here as a “middle ground,” would be for the industry to advocate an exclusion for qualified assignment–funded structured settlement payments made to disabled individuals, without requiring the use of a special needs trust, pooled trust, or ABLE account.
This approach has philosophical appeal, because qualified assignment-funded structured settlements themselves are designed to remove ownership and control of income from the claimant, addressing concepts such as constructive receipt and economic benefit. It also has practical appeal, since it would reduce administrative burdens by allowing payments to flow directly to beneficiaries without the added costs of establishing and managing another vehicle.
However, this alternative leaves several important gaps. Under SSI rules, income that is not spent by the end of the month becomes a resource on the first day of the following month. Given the strict $2,000 resource cap, even modest retained payments could quickly disqualify a claimant. Vehicles like SNTs and ABLE accounts solve this problem by sheltering retained funds, but a QA-only exclusion would not.
In addition, this approach eliminates Medicaid payback requirements, sidestepping a policy balance Congress has carefully established. It lacks fiduciary oversight and reporting, exposing beneficiaries to risks of misuse. And it offers no safe-harbor rules for distributions, unlike SNTs’ “sole benefit” standard or ABLE’s “qualified disability expense” framework.
Without these rules, beneficiaries would be exposed to unpredictable outcomes and uneven state practices. In short, while the middle ground may seem simpler, it would require Congress to create an entirely new framework of guardrails, a far more complex and less defensible path than aligning structured settlements with vehicles already recognized in law.
D. Targeted Exclusion (Recommended)
The most promising alternative, and the one the settlement planning profession should pursue, is a narrowly targeted exclusion for qualified assignment–funded structured settlement payments that are directed into SNTs, pooled trusts, or ABLE accounts. This approach focuses reform squarely within SSI’s intended populations, the aged, blind, and disabled individuals with limited means, the situations where structured settlements and SSI or Medicaid eligibility most often intersect. It also builds on vehicles that Congress has already endorsed for benefit protection, integrating structured settlements into such mechanisms rather than bypassing them altogether.
Because Congress historically resists sweeping income exclusions, this narrower proposal is far more achievable as a clarification of existing law rather than a broad new entitlement. Furthermore, because SSA and CMS already regulate these vehicles, the change can be implemented using existing administrative frameworks without creating new oversight burdens. For these reasons, this targeted exclusion offers the highest probability of buy-in, practicality, and achievability relative to the other alternatives.
E. Do Nothing (Status Quo)
A final option is for the industry to accept the status quo and refrain from seeking legislation. Practitioners would continue to rely on SNTs and pooled trusts to protect eligibility, and many in the field assume these vehicles will remain viable.
Yet in today’s environment, this option is increasingly unstable. Structured settlements are not expressly recognized in SSI’s statute or regulations; the profession instead relies on informal guidance such as the Veillon letters, POMS analogies, and uneven state practices. With Loper Bright limiting judicial deference, agencies and courts are less likely to uphold interpretations that lack statutory grounding. At the same time, OBBB has expanded state discretion at precisely the moment when states are under severe budgetary pressure. Together, these dynamics increase the likelihood that states will challenge structured settlement arrangements that lack clear legal authority.
Doing nothing therefore preserves familiar tools but leaves claimants and practitioners exposed to growing uncertainty and inconsistent administration.
F. Conclusion
Of these four approaches, only the targeted exclusion strikes the right balance. It protects vulnerable claimants without extending relief beyond Congress’s intended populations, preserves fiscal integrity, and can be implemented using existing administrative frameworks. Most importantly, it provides the clear statutory authority that is missing today, giving the settlement planning profession a solid foundation from which to expand the use of structured settlements in cases involving public benefits.
III. Proposal #2 – Clarify the Application of § 1917(c)(1)(F) vs. (G) to Structured Settlement Annuities
A. The Issue and Why It Matters
The Deficit Reduction Act of 2005 (DRA) amended Medicaid law to curb the use of retail annuities by applicants attempting to shelter assets. Congress did so through two provisions: § 1917(c)(1)(F), requiring disclosure of annuities and naming the state as a remainder beneficiary, and § 1917(c)(1)(G), imposing substantive restrictions on annuities “purchased by or on behalf of” an applicant or spouse.
Structured settlement annuities, however, are purchased and owned by assignment companies, not by claimants. Because the statute never mentioned structured settlements, some state Medicaid agencies have incorrectly applied § 1917(c)(1)(G)’s substantive restrictions to them. The result can be inconsistent outcomes, delayed eligibility determinations, and growing uncertainty in cases where claimants most need stable benefits and income.
B. The 2006 CMS Memo – Context and Limits
Soon after the DRA was enacted, CMS issued a letter to State Medicaid Directors (July 27, 2006). The letter distinguished between annuities purchased by or for applicants and annuities purchased and owned by third parties. This reinforced the prevailing view that qualified-assignment structured settlements are outside § 1917(c)(1)(G)’s substantive limits.
The problem is that CMS never mentioned structured settlements explicitly. In the absence of direct reference, some state agencies continue to conflate structured settlements with retail annuities, importing requirements never intended for them. The 2006 memo thus provides useful precedent but insufficient clarity.
C. How States Can Misapply § 1917(c)(1)(G)
Three substantive restrictions in § 1917(c)(1)(G) are most vulnerable to misapplication:
- Actuarial Soundness – States may challenge lifetime payments for younger or severely injured claimants as “unsound,” even though such designs are standard in structured settlements.
- Equal Payment Rule – Indexed increases, step-ups, or other flexible designs may be deemed inconsistent with the requirement of level payments.
- Anti-Deferral/Balloon Prohibition – Deferred lump sums or irregular payment schedules can be flagged as prohibited “balloon” features.
When applied to structured settlements, these rules undermine arrangements intended to provide reliable, tailored income streams. The consequences are serious: denial or delay of Medicaid eligibility, inconsistent treatment across states, and reduced willingness to use structured settlements in benefit-sensitive cases.
D. Alternatives for the Settlement Planning Industry
The settlement planning industry must determine how best to secure clarity:
- Pursue Statutory Amendment – Congress could amend the DRA to distinguish structured settlements from retail annuities. But opening the statute risks broader changes to Medicaid transfer rules and is unlikely to succeed politically.
- Seek Updated CMS Guidance (Recommended) – The most practical path is for the industry to press CMS to issue updated guidance explicitly stating:
- § 1917(c)(1)(F) applies to structured settlement annuities (disclosure and remainder-beneficiary designation).
- § 1917(c)(1)(G)’s substantive restrictions were intended for retail annuities and do not apply to assignment-owned structured settlements.
- Accept Status Quo – Relying on the 2006 memo and case-by-case advocacy leaves claimants and practitioners vulnerable to inconsistent outcomes and ongoing disputes.
E. Why Guidance Here, Statute There
The contrasting remedies in Proposals #1 and #2 reflect the statutory structure itself. SSI income rules contain a closed list of exclusions; only Congress can add a new one. By contrast, the DRA annuity rules are ambiguous rather than exhaustive. CMS has already interpreted them once, and updated guidance would align practice with congressional intent.
Even after Loper Bright, which limited judicial deference to agency interpretations, CMS guidance grounded in statutory purpose remains persuasive. Clarifying that structured settlements fall under § 1917(c)(1)(F) but not § 1917(c)(1)(G) does not expand agency authority — it restates the purpose Congress intended.
F. Implementation – Documentation and Administrative Elements
To support uniform state administration, CMS guidance should provide:
- Disclosure under (F): Standardized forms confirming the existence of structured settlement annuities and identifying the state as a remainder beneficiary in the proper position.
- Beneficiary Designation under (F): Documentation demonstrating compliance with the statutory remainder-beneficiary requirement.
- Confirmation that (G) does not apply: A CMS model notice directing state agencies not to apply actuarial soundness, equal-payment, or anti-balloon rules to assignment-owned structured settlements.
- Training for Eligibility Workers: CMS should encourage states to incorporate this clarification into training materials so caseworkers apply rules consistently.
G. Conclusion
The DRA’s annuity provisions were written to prevent abuse of retail annuities, not to restrict structured settlements designed to protect injury victims. Yet without explicit federal clarification, states will continue to misapply retail-annuity rules, jeopardizing access to Medicaid and discouraging structured settlement use.
The settlement planning industry should therefore advocate for updated CMS guidance. By reaffirming § 1917(c)(1)(F)’s disclosure and remainder-beneficiary requirements and clarifying that § 1917(c)(1)(G) does not apply to assignment-owned structured settlements, CMS can align practice with congressional intent, reduce administrative burdens, and safeguard claimants who rely on both structured settlements and Medicaid.
IV. Toward A Coordinated Federal Response
The two reforms outlined in this article are deliberately narrow, but their success depends on how they are pursued. Without coordination, piecemeal fixes risk uneven adoption and greater inconsistency across states. In today’s environment — where OBBB expands state discretion and Loper Bright reduces judicial deference to agency interpretations — the settlement planning industry cannot afford fragmented advocacy. Industry leadership must press for a coordinated federal response that links congressional action on SSI with administrative clarification under Medicaid.
A. The SSI Track (Congress + SSA)
The settlement planning industry should advocate for a targeted amendment to 42 U.S.C. § 1382a(b), adding a new exclusion for structured settlement payments directed to (d)(4)(A) SNTs, (d)(4)(C) pooled trusts, and ABLE accounts. Because SSI defines income through a closed list of exclusions, only Congress can create this statutory anchor. Once enacted, SSA should conform its regulations and POMS so field offices apply the rule uniformly. Most states link Medicaid eligibility for aged, blind, and disabled populations directly to SSI, meaning this amendment would automatically flow through to Medicaid. Even in 209(b) states, SSI serves as the federal baseline, so the reform would exert strong nationwide influence.
B. The Medicaid Track (CMS)
At the same time, the industry should press CMS to issue updated formal guidance distinguishing the DRA’s two annuity provisions. CMS should reaffirm that § 1917(c)(1)(F) applies to structured settlement annuities — requiring disclosure and proper state remainder-beneficiary designation — while confirming that § 1917(c)(1)(G)’s substantive retail-annuity restrictions do not extend to assignment-owned structured settlements. To promote uniform administration, CMS should provide model documentation standards (such as a qualified assignment attestation, proof of third-party ownership, and payment directions) so state agencies can verify compliance efficiently.
C. Synchronize and Safeguard Implementation
For the reforms to succeed, industry advocacy must link the two tracks. CMS guidance should follow promptly after — or be issued alongside — the SSI amendment, with states encouraged to update their eligibility manuals within a defined transition window. During this period, agencies should be urged to defer adverse action when documentation shows non-ownership and direct-to-vehicle routing, applying disclosure and remainder-beneficiary rules under (F) without importing (G)’s retail-annuity standards.
D. Why Coordination Matters
The stakes are significant. Without a coordinated response, states will continue to apply inconsistent rules, leading to eligibility disputes, delayed benefits, and reduced reliance on structured settlements in Medicaid-sensitive cases. With coordination, claimants gain predictable protection, state agencies reduce administrative burdens, and practitioners work within clear national standards. At a time when governors are confronting nearly $1 trillion in Medicaid cuts, conducting twice-yearly eligibility reviews, and stretching limited staff resources, coordinated federal guidance is essential.
V. Conclusion – A Strategic Path Forward
Structured settlements remain one of the most effective ways to provide long-term financial security for claimants who also depend on public benefits. Yet their treatment under SSI and the DRA remains unsettled, leaving claimants, practitioners, and state agencies to rely on indirect and inconsistent authority.
The remedies differ because the statutes differ. SSI’s closed list of income exclusions requires a statutory amendment. Medicaid’s ambiguous DRA annuity provisions, by contrast, can be clarified through updated CMS guidance. Together, these reforms would transform two decades of informal practice into a uniform national standard.
The settlement planning industry must take the lead in pressing for both changes — a statutory SSI exclusion and a structured-settlement-specific CMS memorandum. With federal clarity, structured settlements can reliably safeguard benefit eligibility and fulfill their intended role as stable, long-term financial instruments. Without it, inconsistent state outcomes will multiply, undermining both claimants’ security and the profession’s growth.
By: Patrick Hindert and George Luecke
This article represents the views of the authors. The authors hereof, as well as their employer – Independent Life Insurance Company – do not provide tax, legal, or financial advice. The information contained herein is for general informational and educational purposes only and is not intended to serve as a substitute for personalized advice from qualified professionals
