On May 6, the U.S. Department of the Treasury denied the application of the Central States, Southeast and Southwest Areas (Central States) pension plan for benefit suspensions. According to Treasury, the plan's proposal was fundamentally flawed in three ways. The first two reasons Treasury gave were that the proposed benefit suspensions were not reasonably estimated to allow the plan to avoid insolvency and were not equitably distributed (the plan did not explain to Treasury's satisfaction the variations in the treatment of different classes of participants).

Poor communication is the third way the plan's proposal failed to satisfy the requirements. According to Treasury, the plan's notices to participants were not written in a manner so as to be understood by the average plan participant. Treasury explains:

The notices extensively use technical language without adequate explanation"
"Critical terms used in the notices are not defined in the notices but only by cross-reference to other documents (e.g., the plan document and the rehabilitation plan document)"
"The cross-referenced definitions in those other documents are not understandable to the average plan participant

Few pension plans are getting the kind of attention that's being paid to Central States. But many plans looking to the possibility of benefit suspensions in the future can take this opportunity to learn from Treasury's issues with Central States's application. Remember that good participant communications need to be included in your calculations.

For more perspective, read Tim Connor's article Central States Pension Plan and the Multiemployer Pension Reform Act.