Under the Multiemployer Pension Reform Act of 2014 (MPRA), financially troubled multiemployer pension plans in “critical and declining” status are permitted to reduce the pension benefits payable to retirees and beneficiaries. Under the applicable rules, the reduction first requires approval by the US Department of Treasury (Treasury), in consultation with the US Department of Labor (DOL) and the Pension Benefit Guaranty Corporation (PBGC). Within 30 days of such regulatory approval, the suspension then must be presented to eligible participants and beneficiaries for a vote to ratify or reject the benefit reductions under a process supervised by Treasury. Under applicable regulations, the benefit reduction approved by Treasury will go forward unless a majority of eligible voters reject the reduction. In counting votes, eligible voters to whom ballots were not provided (because they could not be located) are counted as votes to reject the benefit reduction, but eligible voters to whom ballots were provided, but who failed to vote, are counted as votes to ratify the benefit reduction. These default voting rules have resulted in the implementation of benefit reductions where the number of non-voting eligible voters exceeded the number of eligible voters who affirmatively voted for the benefit reductions.
Prior legislative efforts to revise the default “opt out” voting rules have not been successful. But Congress continues to consider revisions to these rules. The most recent example is the Pension Accountability Act, introduced on March 15, 2019, by Senator Rob Portman (R-Ohio) with backing from Senator Sherrod Brown (D-Ohio). As Congress considers a broader fix for financially troubled multiemployer pension plans, revisions to MPRA remain top of mind.
We are closely monitoring these and other developments in the multiemployer space. Please reach out to the author or your Morgan Lewis contact if you have any questions about possible revisions to the default “opt out” voting rules, other potential MPRA revisions, or any other multiemployer plan matters.