Lindquist Solutions

Like a boomerang, the Department of Labor’s (DOL) proposal for the Form T-1 filing requirement has returned. On March 4, 2008, the Form T-1 proposal emerged for the third time since 2002. If it goes into effect largely as is, it will have a substantial impact on labor organizations with total annual receipts of $250,000 or more as well as many related trusts, including pension and welfare plans, apprenticeship programs, training funds, credit unions, strike funds, investment groups, building funds and educational funds, many of which received exemptions in prior proposals.

Summary of Major Provisions of Proposed Form T-1 Regulations

Labor organizations with $250,000 or more in total annual receipts will be required to file Form T-1 for each trust where a labor organization, alone or in combination with other labor organizations, maintains management control or financial domination over the section 3(l) trust.
Form T-1 will require identification of major receipts and disbursements to individuals and entities that, individually or in aggregate, equal $10,000 or more. The amount of the receipt or disbursement, its purpose, and the name and address of the individual or entity involved must also be reported.
Form T-1 will require explanation of certain transactions made by the trust, such as dispositions of property other than market sales, liquidation of debts and loans, or credit extended on favorable terms to officers or employees of the trust.
Section 3(l) trusts that are part of employee benefit plans that file Form 5500 under ERISA are not exempt from the Form T-1 filing.
A partial exemption is granted for a trust that has an audit performed by an independent qualified public accountant, provided the first page of Form T-1 is submitted with an audit that satisfies the proposed standards, including a number of new disclosures not currently required.
The Form T-1 filing is due within 90 days of the labor organization’s fiscal year-end and must cover the section 3(l) trust’s most recent fiscal year, the fiscal year ending on or before the closing date of the labor organization’s own fiscal year.
Form T-1 must be filed electronically.

While the proposed rule is purported to be narrower in scope, we believe it is actually more far-reaching than any previous proposal. According to the Federal Register, labor organizations with $250,000 or more in total annual receipts will be required to file Form T-1 for each “LMRDA section 3(l) trust,” defined as a trust “…in which a labor organization is interested,” where the labor organization during the reporting period, either alone or in combination with other labor organizations:

By definition, the majority of Taft-Hartley trusts fall under the second provision. Unlike past DOL proposals to implement Form T-1, the current proposal states that exemptions will not be made for employee benefit plans that file Form 5500 under the Employee Retirement Income Security Act (ERISA).

Although the filing requirement will rest with qualifying labor organizations (with total annual receipts of $250,000 or more), just about everyone who deals with a labor organization or Taft-Hartley trust fund—trusts, administrators, labor-management cooperatives—will undoubtedly feel the effects of the proposed regulations.

Comments on the proposed regulations are due to the Office of Labor-Management Standards on or before April 18, 2008. This deadline will be upon us sooner than you think. Lindquist LLP plans to issue a letter of comment.