September 11 Digital Archive: XML Document
Kenneth L. Zwick
Director, Office of Management Programs
U.S. Department of Justice, Room 3140
940 Pennsylvania Avenue, N.W.
Washington, D.C. 20530
Re: September 11th Victim Compensation Fund of 2001
Dear Mr. Zwick:
The member companies of the American Council of Life Insurers commend the Department
of Justice in their public outreach in the initial determination of the structure of the September 11th Victim Compensation Fund of 2001 ( the "Fund"). The American Council of Life Insurers is the principal trade association representing the Life insurance premiums and 81 percent of annuity considerations in the United States among legal reserve life insurance companies. After review of the Notice of Inquiry and Advance Notice of Rulemaking published in the Federal Register on November 5, 2001, our members would like to contribute their thoughts in connection with payments to be made from the Fund.
It is our understanding that Congress intended that this Fund provide assistance to victims and families of victims and that the amounts to be awarded are based, in part , on the future economic losses sustained as a result of the injury or death. In light of this purpose, we would suggest that the Special Master making the awards be permitted to order that the amount be paid as an annuity. The use of an annuity in payment of compensation intended to replace future income or provide for future expenses is well established and is customarily utilized in a variety of similar situations, including awards and settlements under the Federal Tort Claims Act and the National Vaccine Injury Compensation Program (42 USC §300aa-15(f). In addition, annuities are often used in settlement of state personal injury claims.
An annuity is an excellent means to provide for future expenses. The periodic payments
replace the lost income. The payments are made in a predictable manner upon which the victims families will be able to rely. As articulated by the Claims Court in Loe v. Secretary of Dept. of Health and Human Services, 22 Cl. Ct. 430 ( 1991):
An annuity insures that the beneficiary receives a steady stream of income throughout his entire life. An annuity protects the trust's corpus from mismanagement or waste by the parent or guardian. Thus, an annuity eliminates any fear that the compensation might be invested in an unprofitable manner.
In Lewis v. Secretary of Health and Human Services, 90-968V, U.S. Claims Court, Office of the Special Masters (July 9, 1992), 1992 WL 178640 (C1. Ct.), the Special Master determining the form of a compensation award under a vaccine case noted that:
An annuity, however, does provide a guaranteed level of benefits for the life of the
beneficiary, regardless of fluctuations in rates of return in investments. A conservator cannot provide this assurance. Thus, where the award is turned over to a conservator to manage, it is conceivable that the beneficiary may outlive the trust corpus if projected rates of return are not realized or if she exceeds her projected actuarial life expectancy. An annuity, the benefits are provided for the entire life of the beneficiary, regardless of the duration of that life. A steady stream of payments for the beneficiary is ensured. The corpus of the award is essentially secure from any putative mismanagement or unforseen investment error.
Annuity issuers are mindful of the need for prompt resolution of claims made under this Fund. They are prepared to work with your Department in arranging expeditious payments for annuity awards. Annuity issuers are experienced in making periodic payments to annuity beneficiaries. They have the mechanisms in place to manage the payment streams and to assist payees with their payments over a long period of time. Annuity issuers provide lifetime guarantees of both payments as well as customer service. Our members suggest that permitting the Special Master to make awards using annuities will greatly benefit the families and will facilitate resolution of the claims from this national tragedy.
We would like to work with you in connection with the use of annuities in the September 11th Victim Compensation Fund. Thank you for your attention to this issue.
American Council of Life Insurers