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DOL Form T-1 for Trusts – It’s Back!

Form T-1, originally proposed in 2002, and rescinded in 2010, has been re-proposed. The public comment period ends on July 29, 2019. The current proposal looks very similar to the final version of the previously proposed Form T-1.

Form T-1 is less complicated than a Form LM-2 but still involves significant reporting burdens on organizations considered trusts under the proposal. If finalized, the Form T-1 would become effective not less than 30 days after its publication release in the Federal Register and the first Form would be due no sooner than 15 months thereafter.

General Overview

This proposed rule requires that only labor organizations with total annual receipts of $250,000 or more be required to file Form T-1 for each “trust where the labor organization is interested” as defined by section 3(l) of the Labor-Management Reporting and Disclosure Act (LMRDA).   A “trust in which a labor organization is interested” is defined as a trust or other organization that the labor organization created or established, or selects or appoints one or more members of governance AND a primary purpose is to provide benefits for the members of the labor organization or their beneficiaries.   Not all reported “trusts” would require a Form T-1.

The proposed Form T-1 rule would be required for any “trust” that meets one of the two following filing tests deemed as indicating either management or financial control.  The labor organization, alone or with other labor organizations, either:

  1. appoints or selects a majority of the members of the trust’s governing board, or
  2. makes contributions to the trust that exceed 50 percent of the trust’s receipts during the trust’s fiscal year. (Employer contributions made to a trust pursuant to a CBA shall be considered by the labor organization).

The proposed rule provides exemptions to the Form T-1 filing requirements exceptions:

  1. a political action committee (PAC) fund, if publicly available reports on the PAC fund are filed timely and complete with federal and state agencies;
  2. any political organization for which reports are publicly available and filed timely and complete with the IRS under section 527 of the IRS code;
  3. trusts who file a Form 5500 under the Employee Retirement Income Security Act (ERISA); 29 U.S.C. sections 1021 and 1024
  4. federal employee health benefit plans that are subject to the provisions of the Federal Employees Health Benefits Act (FEHBA); and
  5. for-profit commercial banks established or operated pursuant to the Bank Holding Act of 1956.
  6. any trust meets the definition of a labor organization that already files Form LM-2, Form LM-3 or Form LM-4
  7. any entity that the LRMDA exempts reporting such as a labor organization comprised entirely or state or local government employees or a state or local central body.
  8. subsidiary organization of labor organizations that should already be reporting to the DOL.
  9. Only the parent labor organization would be required to complete Form T-1 where a national or international union and its affiliates together meet either the management control test or the financial control test. Affiliates would identify the existence of the trust on their LM report and the parent organization would be required to file the Form T-1 for the trust.

Audit Exception, a partial exemption for any trust for which an independent audit has been conducted, in accordance with the standards set forth in the rule which includes filing the audit with a completed Form T-1 page 1 (Items 1-15 and Items 26 and 27) along with a copy of the audit. The audit must include notes to the financial statements that disclose for the preceding twelve-month period:

  • losses, shortages, or other discrepancies in the trust’s finances;
  • the acquisition or disposition of assets, other than by purchase or sale;
  • liabilities and loans liquidated, reduced, or written off without the disbursement of cash;
  • loans made to labor organization officers or employees that were granted at more favorable terms than were available to others; and
  • loans made to officers and employees that were liquidated, reduced, or written off.

The audit must also be accompanied by schedules that disclose for the preceding twelve-month period:

  • a statement of the assets and liabilities of the trust, aggregated by categories and valued at current value, and the same data displayed in comparative form for the end of the previous fiscal year of the trust; and
  • a statement of trust receipts and disbursements aggregated by general sources and applications, which must include the names of the parties with which the trust engaged in $10,000 or more of commerce along with the total of the transactions with each party.
    • statements regarding the total amount of assets, liabilities, receipts, and disbursements of the trust;
    • a schedule that separately identifies any individual or entity from which the trust receives $10,000 or more, individually or in the aggregate, during the reporting period by source;
    • a schedule that separately identifies any entity or individual that received disbursements that aggregate to $10,000 or more, individually or in the aggregate, from the trust during the reporting period by source;
    • the names of all the trust’s officers and all employees making more than $10,000 in salary and allowances and all direct and indirect disbursements to them.

Form T-1, due 90 days after the labor organization’s year-end, covers the trust’s most recent fiscal year ending on or before the closing date of the labor organization own fiscal year; and is proposed to require the following:

  • 14 questions that identify the trust;
  • six yes/no questions covering issues such as whether any loss or shortage of funds was discovered during the reporting year and whether the trust had made any loans to officers or employees of the labor organizations at terms below market rates;
  • statements regarding the total amount of assets, liabilities, receipts, and disbursements of the trust;
  • a schedule that separately identifies any individual or entity from which the trust receives $10,000 or more, individually or in the aggregate, during the reporting period by source;
  • a schedule that separately identifies any entity or individual that received disbursements that aggregate to $10,000 or more, individually or in the aggregate, from the trust during the reporting period by source;
  • the names of all the trust’s officers and all employees making more than $10,000 in salary and allowances and all direct and indirect disbursements to them.

Labor organizations are not required to separately identify any individual or entity on Schedule 1 from which the trust receives receipts of $10,000 or more, individually or in the aggregate, during the reporting period, if the receipts are derived from pension, health, or other benefit contributions that are provided pursuant to a collective bargaining agreement covering such contributions.

The Form T-1 includes a requirement to disclose the names of all officers of the trust, all employees of the trust who receive $10,000 or more during a reporting period and all direct or indirect disbursements to each of these officers and employees similar to LM reporting including credit card transactions.

The proposal provides explicit recognition that payments related to the Health Insurance Portability and Accountability Act of 1996 (HIPAA) are confidential information not to be reported.  Consistent with Form LM, sensitive or confidential information about organizing strategy, negotiation strategy or like information may be treated as confidential and may be reported in aggregate rather than itemized.

Form T-1 must be signed by the President and Treasurer of the labor organization and filed electronically.  Trust recordkeeping is 5 years after the filing of Form T-1, consistent with the LMRDA.

In September 2008, the DOL provided the following information which is important to understand how this could impact Apprenticeship Plans specifically under this proposal: 

 Employee benefit plans that are required to file, and do file a complete and timely report, under 29 U.S.C. 1021 and 1024 are an exemption from Form T-1 reporting.  This current proposal states that the DOL’s intent is to be consistent with the 2008 final rule regarding the Form 5500 filing exemption but other portions of the proposal and the proposed instructions have replaced “required to file Form 5500” with “who file a Form 5500”  under 29 U.S.C. 1021 and 1024 are exempt.  Favorably interpreted, this provides a filing option for Apprenticeship plans.

 The Department’s Employee Benefits Security Administration (EBSA) advised that it would not consider a plan fiduciary to have violated ERISA’s fiduciary duty or prohibited transaction provisions by providing officials of a sponsoring labor organization with financial and other information from the plan’s books and records as needed to complete the Form T-1, provided the plan is reimbursed for any material costs incurred in collecting and providing the information to the labor organization officials.

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