AB129: Bill Text

LRB-0731/1

PJH:cjs:rs

2015 - 2016 LEGISLATURE

2015 Assembly BILL 129

March 27, 2015 - Introduced by Joint Legislative Council. Referred to Committee on Judiciary.

AB129,1,3 An Act to create subchapter III (title) of chapter 895 [precedes 895.65], 895.65, 895.66, 895.67, 895.68, 895.69 and 895.70 of the statutes; relating to: structured settlement factoring transactions.

Analysis by the Legislative Reference Bureau

This bill is explained in the Notes provided by the Joint Legislative Council in the bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

Joint Legislative Council prefatory note: This bill was prepared for the Joint Legislative Council's Study Committee on the Transfer of Structured Settlement Payments. The bill creates a new subchapter in ch. 895, stats., to govern the transfer of structured settlement payments in Wisconsin. The bill is based on and modifies the Model State Structured Settlement Protection Act, a model law that was developed in 2000 by the National Structured Settlements Trade Association and the National Association of Settlement Purchasers.

Federal law imposes a 40 percent excise tax on transactions to transfer rights to structured settlement payments, unless the transactions are approved by a court or relevant administrative body in the state in which the current recipient of the payments resides. [26 USC 5891.] In response to the federal law, 48 other states have enacted statutes governing judicial review of transfers of structured settlement payments. Many of the other state statutes are based on the model law, although some states have made significant modifications to the model law.

This bill creates all of the following with respect to transfers of structured settlement payments in Wisconsin: definitions of key terms relating to such transfers; requirements for mandatory disclosures that must be made by a proposed purchaser of rights to structured settlement payments; standards governing judicial review of transfers of structured settlement payments; and procedures, legal effects, and general provisions relating to the approval of such transfers.

AB129,1 Section 1. Subchapter III (title) of chapter 895 [precedes 895.65] of the statutes is created to read:

AB129,2,3 chapter 895

AB129,2,5 subchapter iII structured settlement transfers

AB129,2 Section 2. 895.65 of the statutes is created to read:

AB129,2,7 895.65 Definitions. In this subchapter:

AB129,2,9 (1) "Annuity issuer" means an insurer that has issued a contract to fund periodic payments under a structured settlement.

AB129,2,10 (2) "Business day" has the meaning given in s. 421.301 (6).

AB129,2,13 (3)   "Dependents" means a payee's spouse and minor children and all other persons for whom the payee is legally obligated to provide support, maintenance, or alimony.

AB129,2,17 (4) "Discounted present value" means the present value of future payments determined by discounting the payments to the present using the applicable federal rate for determining the present value of an annuity, as most recently issued by the federal Internal Revenue Service.

AB129,2,21 (5) "Gross advance amount" means the sum payable to the payee or for the payee's account as consideration for a transfer of structured settlement payment rights before any reductions for transfer expenses or other deductions to be made from such consideration.

AB129,3,2 (6)   "Independent professional advice" means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser.

AB129,3,8 (7) "Interested parties" means the payee, any beneficiary irrevocably designated under the annuity contract to receive payments following the payee's death, the annuity issuer, the structured settlement obligor, and any other party that has continuing rights or obligations under a structured settlement. If the payee is a trust that names the state as a remainder beneficiary, or the payee is a trustee of such a trust, the secretary of health services is an interested party.

AB129,3,11 (8) "Net advance amount" means the gross advance amount less the aggregate amount of the actual and estimated transfer expenses required to be disclosed under s. 895.66 (5).

AB129,3,13 (9) "Payee" means an individual who is receiving tax-free payments under a structured settlement and proposes to make a transfer of the payment rights.

AB129,3,15 (10) "Periodic payments" includes both recurring payments and scheduled future lump sum payments.

AB129,3,18 (11) "Qualified assignment agreement" means an agreement providing for a qualified assignment within the meaning of section 130 of the federal Internal Revenue Code, Title 26, USC.

AB129,3,20 (12) "Settled claim" means the original tort claim resolved by a structured settlement.

AB129,3,23 (13) "Structured settlement" means an arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim.

AB129,3,25 (14) "Structured settlement agreement" means the agreement, judgment, stipulation, or release embodying the terms of a structured settlement.

AB129,4,3 (15) "Structured settlement obligor" means the party that has the continuing obligation to make periodic payments to the payee under a structured settlement agreement or a qualified assignment agreement.

AB129,4,5 (16)   "Structured settlement payment rights" means rights to receive periodic payments under a structured settlement.

AB129,4,9 (17) "Terms of the structured settlement" means the terms or conditions of the structured settlement agreement, the annuity contract, any qualified assignment agreement, and any order or other approval of any court that authorized or approved the structured settlement.

AB129,4,15 (18) (a) "Transfer" means any sale, assignment, pledge, hypothecation, or other alienation or encumbrance of structured settlement payment rights made by a payee for consideration. Except as provided in par. (b), transfer does not include the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution.

AB129,4,20 (b) "Transfer" includes the creation or perfection, by an insured depository institution, of a security interest in structured settlement payment rights if there is an action to redirect the structured settlement payments to the insured depository institution, or an agent or successor in interest thereof, or otherwise to enforce a blanket security interest against the structured settlement payment rights.

AB129,4,22 (19) "Transfer agreement" means the agreement providing for a transfer of structured settlement payment rights.

AB129,5,4 (20) "Transfer expenses" means all expenses of a transfer that are required under the transfer agreement to be paid by the payee or deducted from the gross advance amount, including court filing fees, attorney fees, escrow fees, lien recordation fees, judgment and lien search fees, finders' fees, commissions, and other payments to a broker or other intermediary. Transfer expenses do not include preexisting obligations of the payee payable for the payee's account from the proceeds of a transfer.

AB129,5,6 (21) "Transferee" means a party acquiring or proposing to acquire structured settlement payment rights through a transfer.

AB129,3 Section 3 . 895.66 of the statutes is created to read:

AB129,5,11 895.66 Mandatory disclosures. Not less than 5 business days before a payee signs a transfer agreement, the transferee shall provide to the payee a separate disclosure statement, in bold type no smaller than 14 points, that contains all of the following:

AB129,5,13 (1) The amounts and due dates of the structured settlement payments to be transferred.

AB129,5,14 (2) The aggregate amount of the payments.

AB129,5,17 (3) The discounted present value of the payments to be transferred and the amount of the applicable federal rate used in calculating the discounted present value.

AB129,5,18 (4) The gross advance amount.

AB129,5,22 (5) An itemized listing of all applicable transfer expenses, other than attorney fees and related disbursements payable in connection with the transferee's petition for approval of the transfer, and the transferee's best estimate of the amount of any such fees and disbursements.

AB129,5,23 (6) The net advance amount.

AB129,5,25 (7) The amount of any penalties or liquidated damages payable by the payee in the event of any breach of the transfer agreement by the payee.

AB129,6,3 (8) A statement that the payee has the right to cancel the transfer agreement, without penalty or further obligation, not later than the 3rd business day after the date the agreement is signed by the payee.