DOL Announces Final Rule on Form T-1, Annual Trust Report

On March 6, 2020, the DOL issued a final Form T-1 rule. Under the rule, labor organizations with total annual receipts of $250,000 or more are required to file Form T–1, under certain circumstances, for each trust in which the labor organization is interested. This means a trust or other fund or organization which was:

• Created or established by a labor organization or one or more of the trustees or one or more members of the governing body of which is selected or appointed by a labor organization.
• A primary purpose of which is to provide benefits for the members of such labor organization or their beneficiaries.

Labor organizations must file Form T–1 where the labor organization, either alone or in combination with other labor organizations has financial or managerial domination over the trust which means the labor organization either:

• Selects or appoints the majority of the members of the trust’s governing board.
• Contributes more than 50 percent of the trust’s receipts which includes contributions made pursuant to a collective bargaining agreement.

Form T–1 is filed by the labor organization with the information provided by the trust. Disclosures include:

• 14 questions identifying the trust and the labor organization.
• 6 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, which were granted at more favorable terms than were available to others.
• Reporting of total amounts of assets, liabilities, receipts and disbursements of the trust.
• 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 similar to Form LM-2 itemization pages; this detailed reporting excludes receipts derived from pension, health, or other benefit contributions that are provided pursuant to a collective bargaining agreement.
• 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 and the purpose of disbursement similar to Form LM-2 itemization pages; detailed reporting excludes benefit payments to participants pursuant to a written document.
• Schedule of disbursements to officers and employees of the trust who received more than $10,000 including gross salary, allowances, disbursements for official trust business and other disbursements similar to LM-2 reporting for officers and employees including credit card transactions and use of automobiles.

There are several exemptions available for labor organizations to limit the number of Form T-1 filings. The exemptions are:

• Any political action committee (“PAC”) or a political organization (26 U.S.C. 527), that submits timely, complete and publicly available reports required by federal or state law with government agencies.
• Federal employee health benefit plans subject to the Federal Employees Health Benefits Act.
• For-profit commercial banks established or operating pursuant to the Bank Holding Act of 1956.
• Credit unions subject to the Federal Credit Union Act.
• Trusts that files a Form LM–2, Form LM–3, or Form LM–4 or the LMRDA are exempt from reporting.
• Employee benefit plans that file Form 5500 Annual Return/Report under the Employee Retirement Income Security Act of 1974 (“ERISA”). Includes Apprenticeship and Training Plans only if Form 5500 is filed.
• An audit exemption exists that requires a completed and signed page 1 of the Form T-1 and attaches an audit report prepared in accordance with prescribed standards, which essentially include all information required by the Form T-1.
• Labor organizations wholly-owned subsidiary organizations whose financial transactions must already be reported on the union’s Form LM–2 report.

A labor organization is required to file a Form T–1 within 90 days after the conclusion of its first fiscal year that begins on or after June 4, 2020. A Form T–1 covers a trust’s most recently concluded fiscal year, and a Form T–1 is required only for trusts whose fiscal year begins on or after June 4, 2020. A trust’s “most recently concluded fiscal year” is the fiscal year beginning on or before 90 days before the filing union’s fiscal year.

Form T-1 must be signed by the president and treasurer or corresponding principal officers of the labor organization and are personally responsible for its filing and accuracy.