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Form T-1: Who and What – Reporting Officers and Employees

Part 5 of a 5-Part Series on the New DOL Form T-1

Welcome back one last time for the finale to our T-1 blog series! Click Parts 1-4-hyperlink if you missed Parts 1 through 4.

In this last installment, we cover Schedule 3 of the T-1, Disbursements to Officers and Employees of the Trust.  Like other T-1 schedules, Schedule 3 is a somewhat pared-down version of the LM-2’s Schedules 11 and 12.  To note, the DOL recently proposed changes to the Form LM-2; comparisons between the T-1 and the LM-2 throughout our T-1 series relate to the LM-2 in its current form.

In Schedule 3, the union must report all officers of the trust, even those not receiving salary or disbursements (or disbursements made on their behalf by the trust).  For employees of the trust, only those who received more than $10,000 in gross salaries, allowances, and direct and indirect disbursements from the trust during its reporting period need to be reported.  Benefit payments are excluded from Schedule 3 if made pursuant of a written agreement; instead, they are reported with other disbursements in Item 24 (and are subject to the $10,000 individually identified disbursements rule).

Per the instructions, an officer of the trust is “any person designated as an officer in the trust’s governing documents, any person authorized to perform the executive functions of the trust, and any member of its executive board or similar governing body.” This could include members of an executive board or board of directors, trustees, or an administrator. If an officer or employee held more than one position during the reporting period, it should be reported in Item 25 (Additional Information), disclosing each position and the dates during which it was held.

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Direct disbursements are payments made to an officer or employee by the trust in the form of cash, property, goods, services, or other things of value.  Indirect disbursements are payments made by the trust to another party for cash, property, goods, services, or other items of value received by or on behalf of the officer or employee.  In other words, the officer or employee doesn’t receive the payment, but the payment is made for the personal interest or benefit of the officer or employee.  Real-world examples of indirect disbursements include payments from the trust made directly to a car rental agency for an officer’s or employee’s car rental and an officer’s or employee’s credit card charge at a restaurant when the trust pays the credit card company directly.

Amounts reported in Schedule 3 fit into four different columns for gross salary (Column B), allowances (C), disbursements for official business (D), and other disbursements (E).  Gross salary is total compensation before tax withholdings and other payroll deductions and includes payments from the trust for ‘lost time’ (time devoted to trust activities).  Allowances include direct and indirect disbursements to the officer or employee on a daily, weekly, monthly, or other periodic bases, excluding payments based on mileage or meals.  In Column (D), report all direct and indirect disbursements to officers and employees for official business, including expenses that were reimbursed directly to an officer or employee, meal allowances and mileage allowances, expenses for officers’ or employees’ meals and entertainment, and various goods and services furnished to officers or employees but charged to the trust. If these disbursements were for the personal benefit of the officer or employee and not necessary for conducting official trust business, such disbursements should instead be reported in Column (E). The preceding rules described in this paragraph mirror those of Schedules 11 and 12 from Form LM-2.

The big exception to Schedule 3 reporting, just like in the LM-2, relates to indirect disbursements for temporary lodging (think hotel/motel, room rent charges only) or transportation by public carrier (airfare or train ticket, not taxi or car service) necessary for conducting official business. Suppose the officer or employee is in travel status away from his or her home and principal place of employment with the trust, and payment is made by the trust directly to the provider or through a credit arrangement (thus making it an indirect disbursement as previously discussed). In that case, such disbursements are reported with other disbursements in Item 24 (instead of in Schedule 3).

There are other nuances impacting amounts reported in Schedule 3, including treatment of office supplies, equipment and facilities furnished to officers and employees, meeting expenses, operating and maintenance costs of automobiles, travel advances, payments to individuals other than officers and employees, and reimbursements for purchases of investments and fixed assets.  If any of these apply to your situation, please contact us for further guidance.

Comparing officer and employee reporting in T-1 to the LM-2, the most substantive change is that time allocations to functional categories (like Representational Activities, Political Activities and Lobbying, Contributions, General Overhead, and Administration in the LM-2) do not apply in the T-1.  While there’s still quite a bit to track with respect to officers and employees, this difference does simplify T-1 reporting to an extent.

Using a modern, flexible accounting platform, like NetSuite, could ease the pain of accumulating this information manually.  Cloud-based accounting software helps you get to the right numbers, right away, at the click of a button.  If your union needs to file a T-1 (or multiple T-1s), in addition to an LM-2, it’s more important than ever to consider the benefits of an upgrade.

Author: Jason Edwards, CPA | jedwards@withum.com

Labor Organization Practice Group

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