United States: IRS Issues Guidance On Participant Voting Requirement For Benefit Suspensions Under MPRA

Last Updated: September 8 2015
Article by Robert B. Wynne and James P. McElligott, Jr

Earlier this week, the Internal Revenue Service (IRS) issued proposed and temporary regulations (collectively, the Guidance) under the Multiemployer Pension Reform Act of 2014 (MPRA). As discussed in an earlier WorkCite article, MPRA permits multiemployer pension plans in "critical and declining status" to reduce the pension benefits payable to plan participants and beneficiaries if certain conditions are satisfied. Before a proposed benefit suspension can take effect, however, a vote of the plan participants and beneficiaries as to the suspension is required. The Guidance provides a detailed explanation relating to the administration of that voting requirement.

Participant Voting Requirement

The Guidance specifies that the participant voting requirement will be completed in three steps:

  • First, a package of ballot materials will be distributed to eligible voters.
  • Second, eligible voters will cast their votes and the votes will be collected and tabulated.
  • Third, the Department of the Treasury (Treasury), in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor (DOL), will determine whether a majority of eligible voters has voted to reject the proposed suspension, or whether to issue a final authorization to suspend benefits.

Under the Guidance, the Treasury can permit one or more designated service providers to assist in distributing the ballot materials and/or to collect and tabulate the votes.

Step One: Distribution of the Ballot Package

The Guidance provides that a ballot package to be sent to eligible voters (i.e., all plan participants and all beneficiaries of deceased participants) must include the approved ballot and a unique identifier for each eligible voter, intended to ensure the validity of the vote while maintaining the eligible voter's privacy in the voting process. Importantly, the plan sponsor (the plan's board of trustees) cannot itself distribute the ballot. Instead, the sponsor is responsible for furnishing a list of eligible voters so that the ballot can be distributed on the sponsor's behalf. These materials must be provided no later than seven days after the date that the Treasury has approved an application for a suspension of benefits.

Step Two: Eligible Voters Cast Votes; Votes are Collected and Tabulated

The Guidance provides that the voting period must begin (but need not end) within the 30-day period following the date of approval of an application for a suspension of benefits. Generally, the voting period will not close earlier than 21 days after the ballot distribution date. However, the Treasury, in consultation with the PBGC and the DOL, is permitted to specify a later end to the voting period under appropriate circumstances.

Votes must be collected and tabulated using an automated voting system under which each eligible voter must furnish a unique identifier in order to cast a vote. The Guidance states that such a system will be designed to record votes both electronically (through a website) and telephonically (through a toll-free number that will accommodate a touch-tone or interactive voice response). Notably, the Guidance does not provide for the collection of votes using paper ballots.

Step Three: Determine Whether Majority of Eligible Voters Has Rejected Proposed Suspension

Within seven days after the end of the voting period, the Treasury, in consultation with the PBGC and the DOL, will either (i) certify that a majority of all eligible voters has voted to reject the suspension or (ii) issue a final authorization to suspend benefits. The Guidance permits the Treasury, in consultation with the PBGC and the DOL, to establish additional policies and procedures to facilitate the vote, such as establishing a process for an eligible voter to challenge the vote.

DOL to Prepare Statement in Opposition to Proposed Suspension

The MPRA requires a ballot to contain a statement in opposition compiled from comments received during the approval process. The Guidance provides that this statement will be prepared by the DOL. The statement must be written in a manner that is readily understandable to the average plan participant and in a manner to ensure parity with the statement in support of the suspension. If there are no comments in opposition to the proposed suspension, the statement in opposition will indicate that there were no such comments.

Future Publication of Model Ballot

The Guidance provides that a model ballot may be published in the form of a revenue procedure, notice or other guidance published in the Internal Revenue Bulletin.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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