N001176
Thursday, December 27, 2001 10:46 AM
comments on interim rule and request for a meeting
The enclosed comments are submitted with respect to the interim rule.
My wife was one of those who was on the American Airlines plane that crashed
into the Pentagon. I recognize that many difficult issues have to be handled by a limited
number of people, but I request some indication of when whether or not I may
receive some response to the items raised...even if your response must
initially be incomplete.
In addition, I am responding to the Special Master's statement that meetings
would be available with individuals. Most of my comments are with respect
to others and do not pertain to me. However, I do need some guidance on how
to proceed with the life insurance claim noted in the comments.
Separately from an individual meeting, the Special Master also indicated
that he would come back to the Sheraton and other places to answer
questions. I request that you let me know when such meetings will take
place and that you post such information on the WEB site (even an indication
that it will be posted would be helpful).
Finally, my e-mail carrier is going down and will change my home e-mail, so
please "respond to all" so that I receive your response both here at home
and at work.
Thank you for your consideration.
Attachment 1:
COMMENTS ON INTERIM RULE
I have several comments about the interim final rule. Almost all of these comments relate to lack of information and an interpretation that in my view tends to penalize moderate-income people who save - in particular, the military - vis-à-vis higher income people who do not save. Except where specifically noted, none have application to my own circumstances as husband of one of the victims, and, in any case, my family has pledged to make any money of this type available to charity anyway.
I. Incorrect Reporting of 98th Percentile of the Wage Distribution and a Possible Effect on the Distribution of Funds
One complication is caused by statements that lead the reader to believe that some money is being applied to families with less income by cutting off the maximum award at the 98th percentile of the wage distribution. But the numbers cited for the 98th percentile of the wage distribution are well above that figure. It appears that the Special Master’s office is using a measure of adjusted gross income for families rather than wage income for individuals in setting this figure. There is no perfect measure of this number but an appropriate figure can be found by contacting the Social Security Administration for wage distributions. An example of a wage distribution table is attached, implying that the 98th percentile was a little less than $125,000 in 2000, a bit above that if adjusted for income growth to 2001. The Special Master’s office can also contact the Office of Tax Analysis at the Treasury to help it approximate the number it needs. However, by overstating substantially the 98th percentile in the wage distribution, the office may have inadvertently increased compensation to higher-income individuals relative to minimums it could have set for lower income individuals.
II. Treatment of Savings in Pensions
The interim rule is extraordinarily barren in detail on how to treat pensions and life insurance. Clarification is clearly needed. My comments here are not meant to reflect problems with the law’s requirement to count pensions - there may be objections here, too, but that problem can be amended only through legislation -- but rather with the failure of the interim rule to give much more detail on how collateral source deductions will be calculated.
RELEVANT CITES FROM THE STATUTE:
COLLATERAL SOURCE. The term `collateral source' means all collateral sources, including life insurance, pension funds, death benefit programs, and payments by Federal, State, or local governments related to the terrorist-related aircraft terrorist-related aircraft crashes of September 11, 2001 [emphasis added].
COLLATERAL COMPENSATION. The Special Master shall reduce the amount of compensation determined under paragraph (1)(B)(ii) by the amount of the collateral source compensation the claimant has received or is entitled to receive as a result of the terrorist-related aircraft terrorist-related aircraft crashes of September 11, 2001 [emphasis added].
As I read the law, the pension offsets should apply to funds that resulted form the terrorist-related aircraft crashes. While the rule does not provide guidance, the Special Master did state at a Sheraton meeting that Thrift Savings Plans pension savings would not be treated as collateral source compensation. The Thrift Savings plan is a defined contribution type of pension or "profit sharing" plan where individuals deposit money over time. The money is theirs regardless of any incident like death. Following this logic, it appears that the rule should state:
(1) If individuals already have deposits (defined contribution plans such as Thrift Savings Plan, IRAs, Keoghs, TIAA-CREF, money purchase, profit sharing, 401(k)), this money clearly does not result from the terrorist-related aircraft crashes since the money is available independently. Therefore, it would not be treated as a collateral source offset any more than would other saving.
(2) In the case of defined benefit pension plans (DBs), the issue is much more complex. Many individuals have accrued benefits that are independent of the airplane crash. For example, a military person might be entitled to a pension because she has served 20 years anyway, so the only pension that might be considered as collateral source would be that pension that was over and above benefits already accrued (zero in some cases). In other cases there are clear paths for determining accrued benefits to date. In effect, to determine the collateral source pension, a simple method - but one with some problems as noted below -- might be to take the present value of benefits to be received and subtract the present value of benefits accrued to date. The latter clearly involves money not really resulting from the terrorist-related airline terrorist-related aircraft crashes.
(3) Unfortunately the issue gets more complex still. Many DBs have a very strange structure of accruals, depending upon length of service. In some cases, there is cliff vesting. Anyone not having served enough years to reach that cliff, however, could still be treated as having accrued a benefit roughly equal to what the actuaries would calculate had to be put aside to cover that person’s service. These actuarial calculations take into account the probability that a person will stay on long enough. For example, if a person has an 80 percent chance of lasting from year 4 to 5 in a pension plan with 5-year vesting, then actuaries will determine that enough money needs to be put aside long before year 5 (e.g., in this case roughly 80 percent times the accrual that would be present after 4 years if there were not such cliff vesting).
(4) But the latter calculation is still not sufficient either. It runs into the problem that someone who would stay with the firm extra years would sometimes accrue at a very fast rate. An extreme example is someone who is with a firm 4 years and 11 months and technically has no accrued benefits, but at 5 years receives a big spike in benefits reflecting all the past 5 years. Another example is a military person who has served 15 years, who has no accrued benefits, but would get a big spike at 20 years. In a private plan, the accrual rate from age 45 to 55 or 60 can also be very steep - so much so that the actuaries again try to create a level funding method to avoid low funding (at earlier ages) followed by very high funding rates (at later ages). The complication is caused by the fact that an additional year on the job in typical DB plans not only adds another year of benefits, but multiplies up the value of all previous years benefits (hence creating an exponential growth effect). One really needs to look at individuals’ circumstances and make appropriate adjustments. If a military or other person clearly is going to stay on to get vested benefits, then past accruals do not really determine well the value of the pension benefit to that person. Once again, it is incumbent on the office of the Special Master to provide information on how these matters will be handled.
III. Social Security
Many claimants were eligible for Social Security benefits, which they will now not receive. These benefits represent an economic loss. They represent a loss of a benefit to the family that is not discussed in the document.
IV. Life Insurance
(1) If life insurance includes a saving component, then like DC pension plans, that saving component is clearly not increased as result of the terrorist-related aircraft crashes.
(2) In some cases, the life insurance amount may be in dispute. For instance, I am in the midst of a claim with an underwriter for American Airlines who provided travel insurance for purchase of a ticket for my wife. This underwriter now has a tremendous incentive to continue to dispute or otherwise avoid my claim, and the interim rule has put me into a bind since this claim may be greater than the value of any money from the victim compensation fund - thus throwing me back into the regular court system which, it was my understanding, the fund was trying to avoid.
Relevant Cite: [CIVIL ACTIONS PERMISSIBLE]. Upon the submission of a claim under this title, the claimant waives the right to file a civil action (or to be a party to an action) in any Federal or State court for damages sustained as a result of the terrorist-related aircraft crashes of September 11, 2001. The preceding sentence does not apply to a civil action to recover collateral source obligations.
(3) Point (3) also raises the issue of whether collateral source income is net or gross of legal fees. The interim rule is unclear (i.e., is the rule compensation award less collateral insurance less legal fees?). Clarification is required.
V. Adult Children of Claimant:
The Special Master claimed in a session that he is not Solomon and cannot distinguish between the claim of someone who is aged 10 and someone who is aged 20. Yet the interim rule arbitrarily cuts off entirely someone who is 21 years plus 366 days versus someone who is 21 years and 365 days, or someone who moved out of dependency status on September 10 versus someone who did not move out until September 12. (The distinction apparently applies with respect to noneconomic loss.) The law does not require this type of distinction, and one wonders about its propriety.
Attachment 2:
100% Tabulation of All Workers with All Wage Compensation Greater Than Zero in Calendar Year 2000
(Source:SSA's Master Earnings File, as of 10/13/01)
Cumulative Cumulative Cumulative % Cumulative Cumulative
Wage intervals workers Cumulative % compensation of taxable wages % of taxable
(millions) of workers ($ millions) compensation ($ millions) wages
_____________________________________________________________________________________________________________
< 5,000 27.395 18.50 56,233 1.27 70,623 1.54
< 10,000 43.426 29.32 174,409 3.94 193,204 4.22
< 15,000 57.734 38.98 351,878 7.94 374,633 8.18
< 20,000 71.516 48.28 590,433 13.33 616,884 13.47
< 25,000 84.368 56.96 874,947 19.75 906,855 19.80
< 30,000 95.784 64.67 1,182,041 26.68 1,221,054 26.66
< 35,000 105.547 71.26 1,490,724 33.65 1,537,694 33.57
< 40,000 113.614 76.71 ,783,549 40.26 1,837,694 40.12
< 45,000 120.173 81.14 2,051,917 46.32 2,112,399 46.11
< 50,000 125.343 84.63 2,287,237 51.63 2,353,368 51.37
< 55,000 129.472 87.41 2,494,213 56.30 2,565,313 56.00
< 60,000 132.694 89.59 2,670,346 60.28 2,745,641 59.94
< 65,000 135.249 91.31 2,821,831 63.70 2,901,084 63.33
< 70,000 137.268 92.68 2,950,840 66.61 3,034,026 66.23
< 75,000 138.879 93.77 3,061,252 69.10 3,148,233 68.73
< 80,000 140.197 94.65 3,157,742 71.28 3,248,381 70.91
< 85,000 141.251 95.37 3,239,869 73.13 3,333,806 72.78
< 90,000 142.096 95.94 3,309,764 74.71 3,406,581 74.37
< 95,000 142.799 96.41 3,371,224 76.10 3,470,772 75.77
< 100,000 143.380 96.80 3,424,841 77.31 3,526,879 76.99
< 105,000 143.877 97.14 3,473,095 78.40 3,577,497 78.10
< 110,000 144.287 97.42 3,514,826 79.34 3,621,215 79.05
< 115,000 144.638 97.65 3,552,277 80.18 3,660,516 79.91
< 120,000 144.935 97.85 3,585,488 80.93 3,695,404 80.67
< 125,000 145.205 98.04 3,616,977 81.64 3,728,435 81.39
< 130,000 145.432 98.19 3,644,607 82.27 3,757,439 82.03
< 135,000 145.631 98.32 3,669,710 82.83 3,783,770 82.60
< 140,000 145.804 98.44 3,692,376 83.35 3,807,543 83.12
< 145,000 145.959 98.54 3,713,470 83.82 3,829,711 83.60
< 150,000 146.096 98.64 3,732,884 84.26 3,850,151 84.05
< 155,000 146.226 98.73 3,751,922 84.69 3,870,155 84.49
< 160,000 146.340 98.80 3,769,130 85.08 3,888,202 84.88
< 165,000 146.446 98.87 3,785,729 85.45 3,905,635 85.26
< 170,000 146.540 98.94 3,800,737 85.79 3,921,372 85.60
< 175,000 146.634 99.00 3,816,467 86.15 3,937,898 85.96
< 180,000 146.713 99.05 3,829,979 86.45 3,952,043 86.27
< 185,000 146.787 99.10 3,842,945 86.74 3,965,622 86.57
< 190,000 146.852 99.15 3,854,661 87.01 3,977,884 86.84
< 195,000 146.912 99.19 3,865,871 87.26 3,989,593 87.09
< 200,000 146.969 99.23 3,876,731 87.51 4,000,998 87.34
< 250,000 147.360 99.49 3,961,089 89.41 4,089,153 89.27
< 300,000 147.573 99.63 4,017,766 90.69 4,148,177 90.56
< 350,000 147.703 99.72 4,058,810 91.62 4,190,961 91.49
< 400,000 147.788 99.78 4,090,122 92.32 4,223,411 92.20
< 450,000 147.848 99.82 4,115,213 92.89 4,249,475 92.77
< 500,000 147.892 99.85 4,135,527 93.35 4,270,546 93.23
< 1,000,000 148.042 99.95 4,235,030 95.60 4,373,905 95.48
< 1,500,000 148.074 99.97 4,273,769 96.47 4,414,415 96.37
< 2,000,000 148.087 99.98 4,296,308 96.98 4,437,940 96.88
< 2,500,000 148.095 99.99 4,312,512 97.34 4,455,232 97.26
< 3,000,000 148.099 99.99 4,324,261 97.61 4,467,579 97.53
< 3,500,000 148.102 99.99 4,333,906 97.83 4,477,997 97.76
< 4,000,000 148.104 99.99 4,341,650 98.00 4,486,193 97.93
< 4,500,000 148.106 99.99 4,348,752 98.16 4,493,704 98.10
< 5,000,000 148.107 100.00 4,354,508 98.29 4,499,807 98.23
< 10,000,000 148.112 100.00 4,388,457 99.06 4,537,276 99.05
< 20,000,000 148.113 100.00 4,406,003 99.45 4,556,783 99.48
< 50,000,000 148.114 100.00 4,420,018 99.77 4,571,809 99.80
________________________________________________________________________________________________________
Total 148.114 100.00 4,430,172 100.00 4,580,819 100.00
Notes: All wage compensation equals total wage compensation plus deferred comp less distributions
from deferred comp. Taxable wages include all wages subject to OASDI or Medicare tax.
100% Count on 10/13/01
Table 3. Distribution of wage earners by all compensation, for persons with all compensation greater than zero in 2000
Amount of all Number of persons Deferred compensation Total compensation Amount of taxable
compensation contributions less distributions earnings
____________________________________________________________________________________________________________________________
$0.01 to $4,999.99 27,394,588 $90,038,527.34 $56,233,481,594.23 $70,622,890,534.49
5,000.00 to 9,999.99 16,031,223 $375,659,188.81 $118,175,378,261.84 $122,581,486,261.72
10,000.00 to 14,999.99 14,308,143 $987,167,243.46 $177,468,670,785.60 $181,429,044,709.59
15,000.00 to 19,999.99 13,782,493 $2,248,800,729.25 $238,555,406,042.25 $242,250,599,061.78
20,000.00 to 24,999.99 12,851,720 $4,119,726,883.59 $284,514,535,855.17 $289,970,841,731.91
25,000.00 to 29,999.99 11,416,289 $6,047,699,485.72 $307,093,633,128.41 $314,199,600,779.09
30,000.00 to 34,999.99 9,762,890 $7,713,851,735.92 $308,683,325,912.94 $316,639,659,276.50
35,000.00 to 39,999.99 8,066,599 $8,978,715,053.63 $292,824,312,892.76 $299,999,593,146.94
40,000.00 to 44,999.99 6,559,310 $9,713,852,600.98 $268,368,354,953.84 $274,705,044,377.37
45,000.00 to 49,999.99 5,169,446 $9,694,633,714.24 $235,319,577,871.75 $240,968,862,359.49
50,000.00 to 54,999.99 4,129,657 $9,381,922,096.20 $206,976,164,018.04 $211,945,240,339.73
55,000.00 to 59,999.99 3,221,160 $8,737,049,427.85 $176,133,425,489.04 $180,328,297,066.94
60,000.00 to 64,999.99 2,555,108 $7,895,731,075.73 $151,484,739,938.75 $155,442,679,059.55
65,000.00 to 69,999.99 2,019,298 $7,074,189,636.98 $129,008,527,500.51 $132,942,590,560.91
70,000.00 to 74,999.99 1,611,481 $6,254,592,341.28 $110,412,853,363.15 $114,206,264,906.64
75,000.00 to 79,999.99 1,317,583 $5,490,428,836.59 $96,490,033,496.93 $100,147,845,419.66
80,000.00 to 84,999.99 1,053,813 $4,712,781,567.97 $82,126,920,050.26 $85,425,802,489.55
85,000.00 to 89,999.99 845,629 $4,017,506,471.65 $69,894,527,051.67 $72,775,011,408.61
90,000.00 to 94,999.99 702,818 $3,478,747,696.12 $61,460,253,168.10 $64,191,026,253.02
95,000.00 to 99,999.99 581,163 $2,998,798,567.86 $53,617,202,376.87 $56,106,183,695.90
100,000.00 to 104,999.99 496,833 $2,615,876,853.32 $48,254,162,752.27 $50,618,194,696.00
105,000.00 to 109,999.99 409,497 $2,262,733,194.95 $41,730,083,186.08 $43,718,124,425.76
110,000.00 to 114,999.99 350,850 $1,988,264,036.71 $37,451,438,731.08 $39,301,575,102.45
115,000.00 to 119,999.99 297,483 $1,724,206,764.99 $33,210,534,570.22 $34,887,905,064.72
120,000.00 to 124,999.99 269,917 $1,531,472,731.64 $31,489,062,023.85 $33,030,247,328.96
125,000.00 to 129,999.99 227,488 $1,355,837,678.04 $27,630,101,025.92 $29,004,795,295.07
130,000.00 to 134,999.99 198,642 $1,193,360,778.63 $25,103,450,457.25 $26,330,119,165.96
135,000.00 to 139,999.99 172,698 $1,064,961,340.46 $22,665,946,881.65 $23,773,239,162.29
140,000.00 to 144,999.99 154,806 $953,126,441.87 $21,094,328,462.53 $22,168,350,263.43
145,000.00 to 149,999.99 137,494 $862,030,824.31 $19,414,006,850.74 $20,439,425,559.54
150,000.00 to 154,999.99 130,185 $791,525,616.57 $19,037,971,138.74 $20,004,303,321.87
155,000.00 to 159,999.99 113,830 $712,417,800.89 $17,207,995,758.73 $18,047,410,170.90
160,000.00 to 164,999.99 106,253 $649,172,417.13 $16,598,871,988.03 $17,432,668,188.86
165,000.00 to 169,999.99 93,149 $590,511,817.69 $15,007,587,515.88 $15,737,110,305.12
170,000.00 to 174,999.99 94,578 $561,893,611.20 $15,729,791,806.42 $16,525,883,405.01
175,000.00 to 179,999.99 79,002 $501,304,766.84 $13,512,652,089.92 $14,145,230,412.79
180,000.00 to 184,999.99 73,641 $462,746,543.36 $12,965,838,014.05 $13,579,211,344.38
185,000.00 to 189,999.99 64,747 $419,803,670.17 $11,715,705,881.16 $12,261,889,834.26
190,000.00 to 194,999.99 60,277 $389,645,549.40 $11,210,314,739.92 $11,708,786,345.10
195,000.00 to 199,999.99 56,859 $369,160,507.69 $10,859,506,833.42 $11,404,515,593.14
200,000.00 to 249,999.99 391,377 $2,532,583,828.55 $84,358,197,276.63 $88,155,394,591.60
250,000.00 to 299,999.99 213,087 $1,385,387,493.47 $56,676,770,094.65 $59,024,556,472.25
300,000.00 to 349,999.99 129,769 $839,027,399.55 $41,044,396,402.66 $42,783,613,804.47
350,000.00 to 399,999.99 85,385 $552,121,486.80 $31,311,526,509.03 $32,449,768,336.07
400,000.00 to 449,999.99 60,196 $388,937,253.64 $25,090,986,749.92 $26,064,304,316.67
450,000.00 to 499,999.99 43,486 $282,893,115.19 $20,314,513,979.87 $21,070,992,649.16
500,000.00 to 999,999.99 149,837 $1,008,585,665.49 $99,502,739,292.78 $103,359,254,880.95
1,000,000.00 to 1,499,999.99 32,341 $237,163,796.03 $38,739,653,733.18 $40,509,861,436.57
1,500,000.00 to 1,999,999.99 13,174 $100,359,859.95 $22,538,815,495.45 $23,524,636,081.75
2,000,000.00 to 2,499,999.99 7,309 $56,734,891.80 $16,203,366,376.38 $17,292,314,756.19
2,500,000.00 to 2,999,999.99 4,316 $37,470,699.05 $11,749,439,259.31 $12,346,642,003.55
3,000,000.00 to 3,499,999.99 2,992 $25,112,320.90 $9,644,505,272.69 $10,418,345,916.04
3,500,000.00 to 3,999,999.99 2,075 $15,398,727.15 $7,743,995,157.39 $8,196,118,263.55
4,000,000.00 to 4,499,999.99 1,679 $12,771,538.12 $7,102,348,842.66 $7,510,459,206.00
4,500,000.00 to 4,999,999.99 1,217 $9,946,653.57 $5,755,650,600.33 $6,103,186,379.65
5,000,000.00 to 9,999,999.99 5,009 $43,217,853.39 $33,949,195,047.85 $37,469,197,734.62
10,000,000.00 to 19,999,999.99 1,313 $13,937,947.32 $17,545,818,469.90 $19,506,567,979.12
20,000,000.00 to 49,999,999.99 475 $4,541,174.85 $14,015,176,745.91 $15,025,906,169.50
50,000,000.00 or more 91 $628,605.42 $10,154,606,931.87 $9,010,350,187.69
_____________________________________________________________________________________________________________________________
Total 148,113,768 $138,558,766,137.27 $4,430,172,376,698.43 $4,580,819,019,590.40
Individual Comment
Alexandria, VA