What Proposed Form T-1 Could Mean for Labor Organizations and Trust Funds

September 3, 2019 | Article

The Office of Labor-Management Standards (OLMS) proposed the establishment of a Form T-1. The Form T-1 would require annual reporting on financial information pertinent to “trusts in which a labor organization is interested.” A similar effort was made in 2008 but was postponed in litigation and ultimately rescinded in 2010.

The proposal calls for a labor organization with over $250,000 in annual receipts to file a Form T–1 to report information about “trusts” where: 1) the labor organization appoints the majority of the members of the trust’s governing board, or 2) contributes more than 50% of the trust’s receipts. For this purpose, contributions in accordance with a Collective Bargaining Agreement are considered to be labor organization contributions. The OLMS believes this action will help provide the means for more transparency under the Labor Management Reporting and Disclosure Act (LMRDA).

The labor organization associated trusts most likely to meet the rules for requiring the filing on the Form T-1 are building trusts, strike funds, labor-management cooperation committees and training trust funds. In general, the Form T-1 would need to provide aggregated and disaggregated information relating to financial operations of the trust; for instance, major receipts and major disbursements over $10,000 for one transaction or a combination of transactions will need to be reported by name to an individual or entity.

Comment Period
The OLMS provided the chance to comment on the proposed rulemaking of establishing an annual filing of the Form T-1. Our multi-employer plan audit group has written the OLMS and identified some of the new information required by the T-1 that is public information that is already found in the Labor Organization’s Form LM-2 and IRS Form 990, as well as the IRS Form 990 of the trusts. In addition, obtaining the level of detail needed from the trusts by the abbreviated due date (90 days after labor organizations’ fiscal year-end) of the Form T-1 may prove difficult and could be costly to the participants in those trusts. Last, the division of data for trusts where more than one labor organization is involved may result in duplicate or gaps in information.

Alternative Reporting
There are exceptions that allow labor organizations to reduce the breadth of entities they would report on the T-1. Some of the common trusts exempt from reporting again on the T-1 would be:

  • Ones that are employee benefit plans that file a Form 5500
  • Trusts established under a political action committee (PAC)
  • Trusts already filed under an existing Form LM-2, LM-3 or LM-4

This does leave some alternatives for apprenticeship programs and training trust funds that are considered welfare employee benefit plans. Currently, filing a Form 5500 is optional for apprenticeship programs and training trust funds. However, they may choose to file a Form 5500 in the future as an alternative to the expense of providing information to the labor organization so that it could file the Form T-1 on trust operations. In addition, a trust may provide a publicly available audit that would need to include additional detailed disclosures as designated by the OLMS as an alternative to a full Form T-1 reporting for that trust.

Next Steps
We will continue to monitor the results of the comment period and subsequent actions and provide on the directions this rulemaking is heading and any final action by the OLMS. If a final action by the OLMS is to move forward with the Form T-1, we will provide guidance on completing any required forms or alternative reporting. If the proposal is made final, the earliest the first T-1 would be due is 15 months after the final rulemaking.

Stay current on your favorite topics


Applicable Services

Take a deeper dive into this Insight’s subject matter.

Employee Benefit & Retirement Plans