Personal Hardship Relief – Common Criteria for Employee Assistance Programs

A growing number of companies are offering their employees relief funds for natural disasters, but only about 60 percent provide grants for personal hardship issues.

The programs have a list of basic criteria for which an employee may apply for relief. The IRS very clearly defines the criteria for Qualified Disaster Relief in section 139 of the Victims of Terrorism Tax Relief Act of 2001 (section 139). Most companies try to follow this definition. Unfortunately many companies describe these criteria incorrectly. For employee hardship, the IRS criteria is less clear, which often leads to confusion and potential errors. Of course, most of these programs are designed to fulfill the IRS requirements that the employee be in the charitable class and that the relief expenses are unusual, not able to be foreseen or planned for, and not covered by insurance or other only eligible assistance.

A survey of the current practices confirms that most fund programs which address employee hardships limit themselves to a range of four to six criteria. The criteria each company chooses vary wildly, although most choose the same two or three popular options. Of the ten most common criteria, most grants are made for health care expenses. Health care represents by far the largest segment of grants and continues to grow. The most common criteria are listed below:

Qualified Disaster:

• Results from terrorist or military actions
• Results from an accident involving a common carrier
• Presidentially-declared disaster
• Deemed catastrophic by the Secretary of the Treasury

Personal Hardship:

• Non-routine medical expense
• Serious illness or injury
• Fire, flood or natural disaster (not a Qualified Disaster)
• Violent crime
• Death of employee or eligible dependent
• Domestic violence
• Military deployment
• Unemployment issues with family
• Housing – Extraordinary expenses not covered by insurance
• Other undue hardship not caused by employee & not specifically listed

Many of the fund programs are coupled with the company pointing the employee to additional community resources or public non-profit whose missions are to provide relief for some of these issues such as the www.redcross.org or www.salvationarmy.org.