What Form T-1 Will Mean for Labor Organizations and Related Trusts

March 8, 2020 | Article

Final Rulemaking: April 6, 2020

Background
The final rulemaking for the Form T-1, which requires annual reporting by labor organizations on financial information pertinent to “trusts in which a labor organization is interested,” was made on April 6, 2020. A similar effort was made in 2008 but was postponed by litigation and ultimately rescinded in 2010. Now, the Form T-1 will need to be filed electronically with the OLMS and can be found as public information on their website.

The final rule calls for a labor organization with over $250,000 in annual receipts to file a Form T-1 to report information about “trusts” where either:

  • The labor organization appoints the majority of the members of the trust’s governing board
  • The labor organization 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. There will need to be a seperate Form T-1 filing for each trust.

The labor organization’s related trusts that are most likely to meet the rules for requiring the filing on the Form T-1 are:

  • Building corporations
  • Redevelopment corporations
  • Educational institutes
  • Apprenticeship and training plans
  • Labor management cooperation committees
  • Strike 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. In addition, disbursements to officer and employees of the trust will need to be detailed.

Effective Date
Reporting deadlines for Form T-1 are not imminent, but in light of the current pandemic, it is important to be proactive, stay aware of upcoming legal requirements and take appropriate measures to meet reporting obligations. Labor organizations are required to file a Form T-1 Trust Annual Report 90 days after the conclusion of the first fiscal year that ends on or after June 30, 2020. A Form T-1 covers a trust’s most recently concluded fiscal year and is required only for trusts whose fiscal year ends on or after June 30, 2020. A trust’s “most recently concluded fiscal year” is the fiscal year beginning 90 days or more before the filing union’s fiscal year. That translates as follows:

Where the trust and labor organization have the same fiscal years:

  • The trust and labor organization have fiscal years ending on December 31. The Form T-1 for the fiscal year ending December 31, 2021 must be filed not later than March 31, 2023.
  • The trust and the labor organization each has a fiscal year that ends on June 30. The labor organization’s first Form T-1 will be for the trust’s fiscal year ending June 30, 2021 and must be filed not later than September 28, 2022.

Where the trust and labor organization have different fiscal years:

  • The trust’s fiscal year ends on June 30. The labor organization’s fiscal year ends on September 30. Its first Form T-1 for this trust will be for the trust’s fiscal year ending June 30, 2021 and must be filed not later than December 29, 2021.
  • The trust’s fiscal year ends on June 30. The labor organization’s fiscal year ends on December 31. Its first Form T-1 for this trust will be for the trust’s fiscal year ending June 30, 2021 and must be filed not later than March 31, 2022.

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 as follows: (note this is not a complete list)

  • Trusts that are employee benefit plans who file a Form 5500 (specific to Training Trusts, who have the option to file a Form 5500).
  • Trusts established under a political action committee (PAC) and public federal and state reports.
  • Trusts already filed under an existing Form LM-2, LM-3 or LM-4.
  • Subsidiary organization of labor organizations that should already be reporting to the DOL.
  • A partial exemption is allowed for trusts that have an independent audit that meets detailed reporting schedule requirements and also partially files the form T-1.

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.

The OLMS website has detailed information about the Form T-1, including text of the final rule, facsimiles of the Form T-1 and instructions, and information on filing electronically. Click here to view the details, and contact our Employee Benefit & Retirement Plans team to discuss the additional impacts on your organization.

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