qualified assignment and release agreement

26 U.S. Code § 130 - Certain personal injury liability assignments

Any amount received for agreeing to a qualified assignment shall not be included in gross income to the extent that such amount does not exceed the aggregate cost of any qualified funding assets .

A prior section 130 was renumbered section 140 of this title .

1997—Subsec. (c). Pub. L. 105–34, § 962(a)(1) , inserted “, or as compensation under any workmen’s compensation act,” after “(whether by suit or agreement)” in introductory provisions.

Subsec. (c)(1). Pub. L. 105–34, § 962(a)(2) , inserted “or the workmen’s compensation claim,” after “agreement,”.

Subsec. (c)(2)(D). Pub. L. 105–34, § 962(a)(3) , substituted “paragraph (1) or (2) of section 104(a)” for “section 104(a)(2)”.

1988—Subsec. (c). Pub. L. 100–647 , in par. (2), redesignated subpars. (D) and (E) as (C) and (D), respectively, struck out former subpar. (C) which provided that the assignee does not provide to the recipient of such payments rights against the assignee which are greater than those of a general creditor, and as concluding provisions, inserted at end “The determination for purposes of this chapter of when the recipient is treated as having received any payment with respect to which there has been a qualified assignment shall be made without regard to any provision of such assignment which grants the recipient rights as a creditor greater than those of a general creditor.”

1986—Subsec. (c). Pub. L. 99–514 inserted “(in a case involving physical injury or physical sickness)”.

Pub. L. 105–34, title IX, § 962(b) , Aug. 5, 1997 , 111 Stat. 892 , provided that:

Pub. L. 100–647, title VI, § 6079(b)(2) , Nov. 10, 1988 , 102 Stat. 3710 , provided that:

Pub. L. 99–514, title X, § 1002(b) , Oct. 22, 1986 , 100 Stat. 2388 , provided that:

Pub. L. 97–473, title I, § 101(c) , Jan. 14, 1983 , 96 Stat. 2606 , provided that:

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After a settlement is reached and reduced to writing in a settlement agreement, the defendant can “assign” its obligation to pay any future payments to the plaintiff. This assignment is made to an entity called an assignment company to meet its obligations.

During the assignment process, the defendant must transfer the applicable settlement monies to the assignment company, after which both parties must sign a Uniform Qualified Assignment contract.

Understanding Qualified Assignments

An assignment is considered a “qualified assignment” if the settlement proceeds are excluded from income taxes under IRC §104a(2). To be excluded, the proceeds must be for compensatory damages from a case involving physical injury or illness.

IRC§130(c) states that payments can be made in the form of future periodic payments as long as:

• Cash flows are fixed and determinable
• Cash flows cannot be accelerated, deferred, increased, or decreased

Upon assignment of the obligation from the defendant to the assignment company, the defendant is released from further liability and administrative duties.

The Benefits of Qualified Assignments

From the plaintiff’s perspective, an assignment to a financially secure insurance company gives them the assurance that future payments will be made as promised . For many plaintiffs, this assignment to the life company alleviates the stress of future contact with the defendant, their insurer, or any party responsible for the injury.

From the defendant and/or their insurer, an assignment relieves the defendant of further compensation and responsibility. The defendant and/or their insurer are able to write just one check to the assignment company for the defendant’s liability, take the corresponding tax deduction, and transfer administrative duties and payment responsibilities to a third party (the life company and their assignee).

Learn more by contacting ROBINYOUNG & COMPANY.

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Call a settlement expert now, structured settlements with inclusive qualified assignments.

The purpose of a qualified assignment, the standard practice since the Periodic Payment Settlement Act of 1982, signed into law by President Reagan in January 1983, is to shift obligations to make future periodic payments from the Defendant, or his/her/its Insurer, to the qualified assignment company.  See 26 U.S. Code § 130 - Certain personal injury liability assignments

Why is a Qualified Assignment Even Necessary or Desired?

While they are generally willing to facilitate a structure, given that the total payout on a structured settlement will exceed the structured settlement funding amount, few Defendants or Insurers want to retain the contingent future periodic payment liability on their books. Neither would a qualified settlement fund trustee. A qualified assignment enables the Defendant or Insurer, or QSF trustee, to get a novation, with the qualified assignment company substituted as the obligor of the future periodic payments.  See flow chart at the bottom of the post.  Steps 2 and 3 show how a qualified assignment fits into the process of establishing a structured settlement.

A qualified assignment is battle tested. See Yerkes v. Cessna Aircraft Co., Civil Action No. 14-cv-05925 (D.N.J. Jun. 25, 2015).  In short, Yerkes entered into a structured settlement was established in the 1980s as part of the settlement of an air crash case when Yerkes was a teenager. The periodic payment obligation was assigned by way of a qualified assignment to junk bond fueled First Executive Corporation. Then the structured settlement annuity was funded with junk bond fueled Executive Life Insurance Company of New York (ELNY) that was liquidated in 2013. As a result, some annuitants, including Yerkes, suffering shortfalls. Yerkes' attempt at recovering from the Defendant he had released in the 1980s and its London Market insurers failed.  Yerkes has an action against his personal injury lawyers pending at the time of posting.

Inclusive Qualified Assignments

There are three types of Qualified Assignments

• Qualified Assignment (QA)                                         NOT INCLUSIVE
• Qualified Assignment & Release (QAR)                    INCLUSIVE
• Qualified Assignment Release & Pledge (QARP)     INCLUSIVE

All three forms of qualified assignment work in terms of substitution of obligors. In the context of this discussion about qualified assignments, the term "inclusive" refers to forms of qualified assignment that the plaintiff signs and is a party to.    The use of the non-inclusive QA has not been the standard business practice in the structured settlement industry for many years. The requirement of the Plaintiff’s signature on the QAR or QARP means that the Plaintiff or Plaintiff’s representative can proofread and review the document before signing. As such it is an inclusive humanistic business practice that increases the trust in the transaction. At the very least the plaintiff has the opportunity to review the final document before signing.  

Plaintiff and Defense oriented consultants often say "it is all about the plaintiff" in their messaging.  While many settlement consultants regularly use the QAR or QARP, there are some consultants, including plaintiff consultants in conjunction with their staffs, who are surprisingly still using the QA.  And it just may cause a problem one day if there is an error on the document that the plaintiff may have caught had they been given the opportunity to review the document and acknowledge with a signature, such as is required on the QAR and QARP.

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Letitia James

Attorney general james announces agreement requiring ncaa to end transfer eligibility rule, ag james and multistate coalition sued ncaa for preventing college athletes from immediately competing in sports when they transfer schools, ncaa agrees to drop rule, may 30, 2024.

NEW YORK – New York Attorney General Letitia James, the U.S. Department of Justice, and a multistate coalition of 10 attorneys general today announced that the National Collegiate Athletic Association (NCAA) has agreed to permanently end its transfer eligibility rule , which prohibited Division I college athletes from competing for one year if they transferred schools twice. The NCAA’s transfer eligibility rule forced college athletes to either stay in colleges they wanted to leave or miss out on athletic opportunities, limiting their career potential. The settlement  resolves the lawsuit  filed by Attorney General James and the multistate coalition, and requires the NCAA to stop enforcing its transfer eligibility rule.

“The end of the NCAA’s unfair transfer eligibility rule will be a game changer for student athletes who wish to transfer schools and still compete in top-tier sports programs,” said Attorney General James . “This settlement will ensure that student athletes don’t have to choose between their academic goals and their athletic pursuits. I am proud to stand with my colleagues to support college athletes.”

The agreement, which must be approved by U.S. District Judge John Preston Bailey, removes what the coalition views as an illegal restraint on the athletes’ ability to market their labor and control their education. In addition to ensuring athletes’ autonomy, the agreement:

• Prevents retaliation from the NCAA against member institutions and athletes who challenge the rule or support those who do. This includes safeguarding student athletes' rights to compete during legal proceedings without fear of punitive actions from the NCAA. 
• Requires the NCAA to grant an additional year of eligibility to Division I athletes who for any reason were previously deemed ineligible under the transfer eligibility rule since the 2019-20 academic year. 
• Prohibits the NCAA from undermining or circumventing its provisions through future actions, rules, or policies, thereby ensuring college athletes' rights and freedoms. 
• Establishes the court's continuing jurisdiction to enforce its terms and resolve any disputes that may arise.

In December 2023, Attorney General James and a multistate coalition sued the NCAA over its anticompetitive transfer eligibility rule that restricted student athletes’ careers and their ability to choose which university they wanted to attend. An athlete who transferred to the University of Buffalo was initially prohibited from competing on the university’s basketball team because of the NCAA’s transfer eligibility rule. However, Attorney General James and the multistate coalition  secured a temporary restraining order , temporarily blocking the NCAA from enforcing the transfer eligibility rule and allowing the student athlete to compete in the University of Buffalo’s basketball team. Today’s settlement requires the NCAA to completely stop enforcing the rule and prevents the Association from adopting any similar restrictions on college athletes.

Joining Attorney General James and the U.S. Department of Justice in today’s settlement are the attorneys general of Colorado, Illinois, Minnesota, Mississippi, North Carolina, Ohio, Tennessee, Virginia, West Virginia, and the District of Columbia.

Attorney General James has been a national leader on efforts to protect the rights of student and professional athletes and ensure sports regulation authorities are held accountable for illegal policies. Earlier this month, Attorney General James and a multistate coalition  sued the NCAA for preventing student athletes from reviewing NIL compensation offers  before enrolling in a school. In October 2023, Attorney General James and a bipartisan coalition  urged the U.S. Supreme Court to protect baseball minor leagues  throughout the country.

For New York, this matter is being handled by Senior Enforcement Counsel Bryan Bloom, Deputy Bureau Chief Amy McFarlane, and Bureau Chief Elinor Hoffmann, all of the Antitrust Bureau. The Antitrust Bureau is a part of the Division for Economic Justice, which is led by Chief Deputy Attorney General Chris D’Angelo and overseen by First Deputy Attorney General Jennifer Levy. 

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