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Putting Your Apprenticeship Fund's Competition to the Test

The DOL's Guidance Regarding Contest Expenditures

The U.S. Department of Labor (DOL) continues to scrutinize apprenticeship training funds. In December 2014, the DOL issued guidance to its field agents regarding expenditures for apprentice training skills competitions in Field Assistance Bulletin (FAB) 2014-02.

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Apprenticeship contests can be local, regional, national or international and provide apprentices a chance to test and develop the skills they have acquired during their apprenticeship. 

Apprentice training funds are subject to the Employee Retirement Income Security Act of 1974 (ERISA) and, as such, their trustees are subject to all of the fiduciary requirements under the act. When considering an apprentice training skills competition, trustees must ask if they are acting prudently when authorizing the use of fund assets for such a purpose.  FAB 2014-02 indicates that expenditures for skills competitions are allowable providing: (1) the contest directly provides a training benefit to plan participants, and (2) the competition helps plan fiduciaries to assess the effectiveness of their program.

FAB 2014-02 doesn’t provide carte blanche for all expenses associated with an apprenticeship competition. The DOL has indicated that the types of expenditures below are allowable, as long as they are reasonable. 

Expenses for:

  • Plan participants (registration fees, travel, lost wages, etc.)
  • Others, such as instructors (if they play a necessary role in conducting the competition) and contest organizers
  • Plan fiduciaries (if they are to evaluate the adequacy of the program)
  • Prizes to those participating in the competition—as long as they are consistent with the training purpose (e.g., tools)
  • Modest gifts to those organizing the competition
  • Organizing and conducting the competition
  • Celebratory gatherings/dinners (taking care to not provide meal per diem for those attending)

The DOL has not provided a definition of reasonable expenses. The FAB clearly indicates that travel expenses for other plan officials, employer or union officials, or guests of contestants are not permissible. In addition, all of the competition expenses should be approved by a responsible fiduciary in accordance with the fund’s established policies.

Any apprentice training fund establishing a competition should keep in mind that reasonable amounts are the rule of thumb. Documentation related to the contest’s purpose and functions should be established in the fund’s meeting minutes.  The fund should also establish a budget and a formal expenditure policy, which are both approved by the fund fiduciaries. The key to prevailing under DOL scrutiny is the ability to establish that all costs and expenditures were reasonable and that all of the fund’s established policies and procedures were followed.

Author: Debbie Roessl Dimery, CPA, Partner

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