Final rule on payroll deductions for trade association SSFs

On July 14, 2005, the Commission voted to revise its rules to allow corporate members of a trade association to provide incidental services, including the use of a payroll deduction or check-off system, to collect and forward voluntary employee contributions to the trade association’s SSF. The rules require any member corporation that provides such incidental services, and the corporation’s subsidiaries, divisions, branches and affiliates, to make the same services available to a labor organization representing employees of the corporation or the corporation’s subsidiaries, divisions, branches or affiliates, at cost, upon written request of the labor organization.

Background

Under the Federal Election Campaign Act (the Act), a trade association may solicit contributions to its SSF from a corporate member’s stockholders and executive and administrative personnel and their families (the restricted class) so long as the corporation approves the solicitation ahead of time and does not approve a solicitation by any other trade association for the same calendar year. 2 U.S.C. §441b(b)(4)(D); 11 CFR 114.8(c). Once these conditions are met, the regulations do not limit the methods that a trade association may use to solicit and facilitate the making of voluntary contributions to its SSF. Before this rulemaking, however, the regulations did limit the methods that a consenting member corporation could use to collect and forward contributions to a trade association’s SSF. Specifically, 11 CFR 114.8(e)(3) stated that a “member corporation may not use a payroll deduction or check-off system for executive or administrative personnel contributing to the separate segregated fund of the trade association.”

In 2003, the Commission received a rulemaking petition from America’s Community Bankers and its SSF, the America’s Community Bankers Community Campaign Committee, asking the Commission to change its rules to allow a corporate member of a trade association to make payroll deductions and checkoff systems available to the corporation’s restricted class employees for their voluntary contributions to the trade association’s SSF. The Commission issued a Notice of Availability for the petition, and received 30 comments, all of which supported the proposed change.

In December 2004, the Commission published a Notice of Proposed Rulemaking (NPRM) that set forth draft rules on the subject. See the February 2005 Record, page 2. The Commission held a public hearing on the proposed rules on May 17, 2005. The written comments and the transcripts of the hearing are available at https://sers.fec.gov/fosers/.

Final rules

After considering public comments and testimony, the Commission issued final rules. The final rules:

• Remove the prohibition on corporate use of a payroll deduction or check-off system for contributions by executive and administrative class employees to the SSF of a trade association of which the corporation is a member (11 CFR 114.8(e)(3));
• Authorize a member corporation to provide incidental services to collect and transmit voluntary contributions from its solicitable class employees to a trade association’s SSF, including a payroll deduction or check-off system, upon written request of the trade association (new 11 CFR 114.8(e)(4));
• Require any corporation that provides these incidental services, and its subsidiaries, divisions, branches and affiliates, to make the same services available upon written request to a labor organization representing members who work for the corporation or its subsidiaries, divisions, branches or affiliates, for contributions to the labor organization’s SSF, at a cost not to exceed any actual expenses incurred (new 11 CFR 114.8(e)(4); and
• Clarify that the provision of incidental services pursuant to new 11 CFR 114.8(e)(4) is not a prohibited form of corporate facilitation (new 11 CFR 114.2(f)(5)).

In making these changes to the rules, the Commission focused on the special relationship that exists between a trade association and its member corporations. The Commission also recognized that recent advisory opinions had given corporate members of trade associations some latitude in collecting and forwarding contributions to their trade associations’ SSFs,* other than through a payroll deduction or check-off system, and that technological and societal changes support a change in the treatment of payroll deductions when used by member corporations.

The final rule was published in the July 21, 2005, Federal Register (70 FR 41939) and is available on the FEC website at http://www.fec.gov/law/law_rulemakings.shtml and from the FEC faxline, 202/501-3413.

*See AO 2003-22, in which the Commission interpreted the regulations to permit a corporate member of a trade association to collect voluntary contributions in the form of paper checks from its solicitable class, and to forward those to the trade association’s SSF.