DOL Rescinds Form T-1, Trust Annual Report
December 1, 2010

Today, the Department of Labor (DOL) published a three-part rule in the Federal Register that rescinded Form T-1, Trust Annual Report; returned reporting of subsidiary organizations to Form LM-2, Labor Organization Annual Report; and amended its interpretation of "labor organization" under the Labor-Management Reporting and Disclosure Act (LMRDA) with respect to intermediate bodies of public sector organizations.

Form T-1

It seems that Form T-1 has been on a roller coaster ride since the DOL first proposed it in 2002. Eight years later, after a number of revisions and bouts in the courtroom, the DOL has withdrawn Form T-1 completely.

Form T-1 was intended to be an annual financial disclosure report to be filed by labor organizations with total annual receipts of $250,000 or more about certain trusts in which they are interested ("section 3(l) trusts"), such as building corporations, apprenticeship/training trusts, educational institutes, credit unions, labor union and employer joint funds, and job targeting funds. Upon further review of Form T-1, the DOL concluded that the trust reporting required under the rule was overly broad and not necessary to prevent circumvention or evasion of existing reporting requirements.

Reporting of Subsidiary Organizations

In conjunction with the Form T-1 withdrawal, the DOL returned reporting of entities that are wholly owned, controlled and financed by a single union ("subsidiary organizations") to Form LM-2. Labor organizations were required to report subsidiary organizations on Form LM-2 prior to 2003, when the DOL overhauled Form LM-2 and simultaneously established Form T-1 reporting.

Going forward, labor organizations will have the option of consolidating the subsidiary's financial information in the Form LM-2 report filed for the labor organization or attaching a separate audit report completed by a certified public accountant.

Additionally, the DOL is modifying subsidiary reporting on Form LM-3, Labor Organization Annual Report, for organizations with total annual receipts of $10,000 - $249,999, to be consistent with Form LM-2.

The DOL maintains that reporting of subsidiary organizations will increase transparency and provide more detailed itemization of subsidiaries.

Interpretation of "Labor Organization" under LMRDA

The third change the DOL made was to amend its interpretation of the term "labor organization" under the LMRDA. The DOL has returned to its pre-2003 policy that a "labor organization" does not include intermediate bodies that are wholly composed of public sector labor organizations. Labor organizations typically have a three-tier hierarchy, and intermediate bodies are those labor organizations that are subordinate to international unions, but higher than local unions.   It appears that intermediate organizations in the public sector will not be required to file Forms LM-2, LM-3 or LM-4 under this amended interpretation.

Effective Date

The final rule will be effective January 3, 2011. The changes to Form LM-2 and LM-3 reporting requirements will apply to labor organizations with fiscal years beginning on or after January 1, 2011.

Contact your Lindquist LLP partner with any questions.

 

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