The ERISA Industry Committee (ERIC) has held several conversations with member companies affected by the September 11th terrorists attacks and has conveyed to relevant agencies and the Congress information regarding relief needed for various purposes. This letter expands on and summarizes the information ERIC has provided to date. We emphasize that while federal agencies have taken several helpful actions following September 11th, more relief is required to respond adequately to this extraordinary occurrence, which was not envisioned under current benefits law.

Thus, Congress should provide prompt and comprehensive relief to employers and employees who were affected by the September 11th terrorist attacks. Congress should promptly enact legislation to address the hardships that the attacks have created, and federal agencies should move promptly to implement additional relief.

Immediate relief is required in three major areas:

1. Relief for employees whose work location or housing was affected.

As a result of the attacks, many employees who previously worked at locations that were damaged or destroyed have been required to transfer to new work sites, often located many more miles and many more hours from their homes than their previous work sites. Because of such relocations, many employees are incurring substantial additional travel, food, and housing expenses. Because of the magnitude of the disaster, affected employees could incur these expenses for upwards of two years. Moreover, the law presumes that there is a principal or regular place of business from which the employee is temporarily reassigned, while in the present circumstances that place of business no longer exists.

The existing law governing the tax deductibility of employment related travel, food and housing expenses was not designed to deal with the effects of an attack on civilian targets and may not allow employees to deduct the substantial additional expenses they must incur as a result of this calamity, and it may subject them to substantial tax liability for the reimbursements and relief that many affected employers are providing. See, e.g., Int. Rev. Code § 162(a) (a taxpayer is not treated as temporarily away from home during any period of employment exceeding one year); Rev. Rul. 93-86, 1993-2 C.B. 71 (if employment away from the taxpayer's regular or principal place of business is realistically expected to last for more than one year, the taxpayer's travel expenses are not deductible.)

Congress should promptly revise the travel expense provisions of the Internal Revenue Code to address this problem.

The attacks also made some employees' homes either inaccessible or uninhabitable. Congress should enact legislation providing that employees and survivors who receive employer-provided housing, food, and clothing assistance should not be subject to tax for the value of that assistance.

2. Relief for victims' survivors.

Many employers wish to provide additional benefits (e.g., health benefits) to survivors of the victims of the attacks -- for example, by providing the survivors with benefits that are not available to the survivors of other deceased employees or by waiving waiting periods that would otherwise apply. In order to do this, employers may need relief from the Internal Revenue Code nondiscrimination requirements that apply to such benefits (e.g., the nondiscrimination requirements that apply to self-insured health benefits under §§ 105(h), 501(c)(9), 505(b), and 4976 of the Internal Revenue Code). Congress should clarify that providing assistance in these circumstances does not violate the nondiscrimination requirements.

Many employers also wish to provide scholarship assistance to the victims' survivors. There is a risk that such scholarships will be included in the taxable income of the recipient. Cf. Rev. Proc. 76-47, 1976-2 C.B. 670 (standards for determining whether a grant under an "employer-related grant program" is a scholarship or fellowship grant under Code § 117(a)). Taxing such scholarships would significantly reduce the value of the scholarships and subvert their objectives. Congress should clarify that such scholarships are tax-free.

3. Relief from legal deadlines.

The September 11th attacks have impaired the ability of employers and employees to meet statutory deadlines that apply to employee benefits and employee benefit plans. This has occurred not only where the employee or employer was located in a disaster area, but also where the employee or employer was otherwise affected (for example, because of the death of critical personnel, the closing of the stock markets, or the impact on recordkeepers and other service-providers).

Among the actions for which relief is needed are the following provisions that impose specific time frames for employer action that has been impeded by the attacks of September 11:

• Deposits of employee contributions, including § 401(k) contributions, in employee benefit plans.

• Deposit of minimum required pension contributions [IRS Notice 2001-61 granted relief only regarding deductibility of contributions] .

• Delivery of distribution notices.

• Filing of Forms 5500 [ In Announcement 2001-103, the Internal Revenue Service and the Pension and Welfare Benefits Administration have granted administrative relief].

• Filing of Form 1 with the PBGC [The PBGC has granted administrative relief in an announcement appearing in the October 11, 2001, Federal Register].

• Meeting of plan termination deadlines for terminations underway on September 11th [The PBGC has granted administrative relief in an announcement appearing in the October 11, 2001, Federal Register].

• Rollover deposits.

• Corrective distributions under IRC §§ 401(k) and 401(m).

• Delivery of COBRA notices.

Although the Internal Revenue Service, the Pension and Welfare Benefits Administration, and the Pension Benefit Guaranty Corporation have moved quickly to provide some administrative relief, more wide-ranging assistance is needed. The relief granted by the three agencies is constricted by statute. It also has been restricted principally to five New York counties and Arlington County in Virginia. We emphasize that more wide-ranging relief is required. Most urgently, the World Trade Center attacks directly affected the entire New York metropolitan area, including nearby areas in New Jersey and Connecticut.

Thus, Congress should direct the three agencies to provide relief to those persons similarly affected regardless of any accident of geography. The relief should be based on the loss suffered by people and not limited to a specific geographic region. At a minimum, Congress should direct the three agencies to extend the relief they granted to the five New York counties to the entire New York metropolitan area. The same considerations that caused the agencies to grant relief to the five counties apply with equal force to the entire New York metropolitan area.

We strongly urge the Congress and the agencies to move immediately to address the issues outlined in this letter in their entirety.

Sincerely yours,

Mark J. Ugoretz
President

Janice M. Gregory
Vice President