Voting Procedure for Suspension of Benefits
On September 2, 2015, the Department of the Treasury ("Treasury") issued rules for administering the participant vote on an application to suspend benefits under the Multiemployer Pension Reform Act of 2014 ("MPRA"). The regulations require the Trustees1 to compile a list of eligible voters and their addresses and to prepare a ballot package that can be mailed to participants. The plan is responsible for all costs associated with the ballot package, including postage. However, the actual mailing and vote tallying will be done either by Treasury or a third party designated by Treasury, not by the plan. The temporary regulations apply beginning June 17, 2015, and will remain in effect until June 15, 2018.
The MPRA permits multiemployer plans that are projected to become insolvent in the next 20 years ("critical and declining plans") to suspend benefits (which is a reduction in benefits) if the suspension will prevent the insolvency.2 Under the law, benefits cannot be reduced below 110 percent of the amount guaranteed by the Pension Benefit Guaranty Corporation (PBGC).
The MPRA and the June 2015 proposed regulations lay out a detailed and complex procedure that plans must follow to have a proposed suspension of benefits approved. Under the law and regulations, a plan must apply to Treasury, demonstrate the need for the benefit reduction, show that the reduction will avoid insolvency and design the reduction to be equitable to participants and beneficiaries. If Treasury approves the application, then the proposed suspension is submitted to a vote by the participants and beneficiaries. If a majority of those voting reject the proposed benefit suspension, it may not be implemented unless the plan is a "systemically important" plan. In that case, Treasury must either approve the proposed benefit reductions contained in the suspension application or devise its own substitute plan of benefit reductions projected to avoid insolvency.
The June 2015 proposed regulations did not specify the procedure for administering the required vote by plan participants. The new regulations address the administration of the vote.
Procedure for Participant Voting
The regulation divides the process for obtaining the participant and beneficiary vote on the proposed benefit suspensions into three parts.
- A package containing required disclosures and ballot materials is compiled and distributed to eligible voters;
- The votes are collected and tabulated; and
- Treasury determines (in consultation with the Department of Labor (DOL) and the PBGC) if a majority of eligible voters has voted to reject the suspension.
Treasury may designate a service provider to distribute the ballot packages, tabulate the votes, and report the results of the vote.
The Ballot Package
The plan sponsor is responsible for creating the ballot package and furnishing a list of eligible voters and their addresses to whomever will administer the actual vote. The package must contain the disclosures required by the law and enumerated in the regulations on benefit suspensions. The ballot package must also contain for each participant the estimate of the effect of the proposed suspension on the participant, which was included in the initial notice of suspension sent to participants when the application was filed with the Treasury. If the estimate is no longer valid, the plan must include an updated notice. In addition, the plan must provide a list of those participants and beneficiaries that the plan could not locate for the initial notice, and the e-mail addresses of those participants and beneficiaries who received the initial notice of the suspension application by e-mail or who regularly receive communications from the plan by e-mail. This package must be provided within 7 days after the date on which Treasury approves the suspension application.
Cheiron Observation: There must be a separate benefit package for each voter containing the voter's address and the individualized impact statement.
The ballot package must also include a statement in opposition to the proposed suspension, which the DOL will compile from the comments submitted in response to the notice of application for the suspension. It is anticipated that a model ballot will be published in the form of a revenue procedure, notice, or other guidance published in the Internal Revenue Bulletin.
Distribution of the Package
Treasury, or the designated service provider, will receive the ballot package from the plan sponsor, create a unique identifier for each eligible voter, send the package by first class mail to the last known mailing address of each eligible voter, and then accumulate and tabulate the results.3 This must be done within 30 days of Treasury's approval of the suspension application. In addition, once it is notified that the ballots have been sent out, the plan must provide electronic notice of this fact to those participants for whom it was required to furnish e-mail addresses. If ballots are returned as undeliverable, the plan sponsor must make reasonable efforts to locate those participants and beneficiaries and may send a supplemental ballot by electronic mail. The plan sponsor cannot itself distribute the ballot but is responsible for paying the associated costs.
Collecting and Tabulating the Vote
The regulations require voting to be collected and tabulated using an automated voting system that allows votes to be cast either electronically or through an interactive voice telephone system using a toll-free number. Each voter must be furnished a unique identifier in order to cast a vote. Voting will close as of the later of 30 days after Treasury approval of the suspension application or 21 days after the ballots are sent. In addition, the regulations permit Treasury (in consultation with the DOL and PBGC) to specify a later end to the voting period in appropriate circumstances. If a service provider is designated to collect and tabulate votes, then the service provider will provide Treasury with the report of the results of the vote, including a breakdown of the number of eligible voters who voted, the number of eligible voters who voted in support of and to reject the suspension, and certain other information (presumably the identity of those who voted). It is unclear how the results will be published and communicated to the Trustees.
The regulations also allow Treasury (in consultation with the DOL and the PBGC) to establish such policies and procedures as may be necessary to facilitate the administration of the vote. The policies and procedures may include establishing a process for an eligible voter to challenge the vote.
Determination of Whether a Majority of Eligible Voters Reject the Proposed Suspension
Within seven (7) days after the close of voting, Treasury, in consultation with the Secretary of Labor and the PBGC, will determine if a majority of eligible voters have rejected the proposed suspension. If a majority has not rejected the proposed suspension, Treasury will issue a final authorization with regard to the proposed suspension.
Comments and Public Hearing
Comments and requests for a public hearing on the proposed regulations are due by November 2, 2015.
- Mail submissions to: CC:PA:LPD:PR (REG-123640-15), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
- Hand deliver submissions between the hours of 8 a.m. and 4 p.m. Monday through Friday to: CC:PA:LPD:PR (REG-123640-15), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC.
- Electronically submit submissions via the Federal eRulemaking Portal at: http://www.regulations.gov (IRS REG-123640-15).
All comments will be made available to the public.
A public hearing on the proposed regulations published by the Treasury in June 2015 (which prescribe the procedure for plans to follow to suspend benefits (the "June 2015 proposed regulations")) is scheduled at 9:00 a.m. on September 10, 2015 in the Amphitheater of the Ronald Reagan Building and International Trade Center, 1300 Pennsylvania Ave., NW, Washington, DC. Persons who requested by August 18, 2015 to speak at the September 10 hearing also may discuss the September 2 proposed regulations at such hearing.
Cheiron Observation: The proposed voting procedure, which requires use of postage, a sophisticated electronic tallying system, a service provider, and unique identifiers, may significantly add to the cost of the suspension process.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.
1 The regulations refer to the "plan sponsor" which is generally the Board of Trustees (or Trustees, for short). This alert will refer to the Trustees or the plan sponsor interchangeably.
2 See the Cheiron Alert dated June 22, 2015 and the Cheiron Advisory dated May 15, 2015 for a description of the law and the June 2015 regulations.
3 Because each participant and beneficiary is assigned an individual identifier and their votes tracked, the plan cannot be involved in either creating the identifiers or tabulating the votes.