N001520
Friday, January 11, 2002 10:55 AM
Interim Final Rule of the September 11 Victim Compensation Fund of 2001
This letter is submitted to furnish comments and recommendations regarding
the Special Master's 98 Percentile Rule incorporated as part of the Interim
Final Rule.
Amidst all the uproar regarding the compensation rules contained in the
Interim Final Rule, the central question seems to have been overlooked.
Simply, it is this: Is the Special Master administering the Act, as he is
charged to do in Section 404, Administration, or is he rewriting the Act,
which only Congress can do. Let's examine the evidence to answer that.
Determination of Economic Loss
The Special Master has decided that the determination of economic loss from
earnings shall be based on earnings up to but not more than the 98 percentile
of US income, equal to $231,000 maximum. He concludes in the Interim Final
Rule that payments based on income higher than $231,000 would be "excessive"
relative to survivor's needs, but he indicates that "extraordinary
circumstances", not defined, might increase the actual payment.
The statute never uses the word "excessive" nor any synonym for it regarding
the amount of compensation, nor does it specify nor suggest an upper limit to
the victim's compensation. However, the statute does define "economic loss"
as any pecuniary loss, including the loss of earnings, due to death. It does
not place a cap on the loss, as the Special Master, has done.
In fact, the statute requires the Special Master to determine the extent of
the harm to the claimant, including "any economic and non economic losses".
Obviously, the term "any economic losses" does not mean "some" of the losses,
or "losses up to $231,000", but "all" of the losses.
Amount of Compensation
The statute also requires the Special Master to determine the amount of
compensation to which the claimant is entitled, based on the harm to the
claimant, the facts of the claim and the individual circumstances of the
claimant. The Special Master has zeroed in on the term "individual
circumstances" as a way to cap the victim's compensation and throughout the
Interim Final Rule has offered various reasons for reducing the amount of
compensation for high income victims to less than their actual economic loss.
The first sentence in the previous paragraph is included in Section
405(b)(1)(B)(ii). That section describes the amount of compensation to which
a claimant is entitled. The inclusion of the term "individual circumstances"
in that section would more logically be interpreted to justify an increase in
the computed compensation, not a reduction. The only place in the statute
where reductions in compensation are covered is in Section 405(b)(6), but
there is no provision there or elsewhere in the statute suggesting or
requiring that the earnings used in determining the amount of compensation be
limited. If Congress wanted such a limit, it would have so specified, as it
did by specifying the types of collateral compensation which it wanted to be
deducted. As previously shown, the Congress required that all economic losses
be used.
It seems that the Special Master decided at the outset to cap such
compensation and then searched through the statute to find a phrase to
justify it. In fact, in the section entitled "Statement by the Special
Master", he states that "The statute specifies that individual circumstances
beyond economic and non economic harm should be taken into account". The
words "beyond economic and non economic harm" do not appear anywhere in the
statute, contrary to his assertion.
This unrelenting assault on the earnings of high paid workers results in
regulations which exceed both the spirit and the letter of the Act.
The Special Master's primary justification for rewriting the statute is based
on his interpretation of Section 407 of the Act which requires the Attorney
General ".... to promulgate regulations to carry out this title...." on
four procedural matters as well as "other matters determined appropriate by
the Attorney General." The "other matters" phrase does not authorize the
Special Master or Attorney General to expand or restrict the terms of the
statute, as the Special Master has done, but merely "....to carry out this
title". Webster's dictionary defines "carry out" as follows: to put (plans,
instructions, etc.) into practice; to get done, bring to completion,
accomplish ---- not to revise, expand, restrict or change.
The Special Master has repeatedly said in public that he has not capped the
amount of compensation that will be paid, but his 98 Percentile Rule does, in
effect, cap the payment.
His 98 Percentile Rule is arbitrary and not in compliance with either the
spirit or the letter of the statute. It is a rewriting of the statute.
Fair Treatment
In the Interim Final Rule he has also stated that an objective of the
regulations is that each claimant shall "be treated fairly based on the
claimant's own individual circumstances and relative to other claimants". But
in many instances, probably most, his 98 Percentile Rule results in unfair
treatment. The following illustration is not hypothetical nor theoretical; it
is a factual representation of an actual situation and, as noted previously,
also represents the situation of many victims whose income is being capped by
the Special Master.
The statute includes life insurance as a collateral source which
must be deducted from the computed payment. Obviously, the larger amount of
life insurance one had, the greater would the deduction be. But what type of
person would have large amounts of life insurance? Firstly, he would be a
hard worker who worked long 60 and 70 hour weeks in a stress filled job
enabling him to achieve a high income, and, secondly, he would be one who was
a prudent and loving spouse and parent who paid high premiums for many years
in order to provide his loved ones with some financial protection after his
death. He was not the high living, free wheeling, big spending guy who spends
everything on the good times today and lets tomorrow take care of itself.
Congress, in its wisdom, chose to repudiate the concept of hard
work, prudence and self reliance by reducing the victim's compensation by the
amount of life insurance he paid for. This amounted to more than one million
dollars for high income individuals in many instances, including the one in
this illustration, substantially reducing their compensation under the
statute.
Then, the Special Master decided to slam these victims a second time
by capping the amount of income they can use in computing economic loss,
resulting in a lower amount of compensation from which they must deduct a
high insurance payment which they wouldn't have been able to afford in the
first place if they were in the 98 percentile.
The message seems to be don't work hard, don't save, don't be
prudent because the government will penalize you if you do.
Obviously, by introducing a second penalty to high wage workers, but to no
one else, on top of the one imposed by Congress, the 98 Percentile Rule voids
the objective of fairness.
Litigation
In conclusion, the Special Master states that the Fund offers the claimant an
alternative to litigation. Unfortunately, his unilateral imposition of a
salary cap, on top of the reductions mandated in the statute, will force most
high income workers into litigation if it isn't rescinded.
Individual Comment
Babylon, NY