OLMS News 03-03

As we conduct Compliance Assistance seminars across the country, we are compiling a list of questions that are posed at these seminars, and adding them to the Frequently Asked Questions on our Web site at https://www.dol.gov/agencies/olms. Some of the questions have been very specific and some very broad. Below are new questions that we have recently added to the Web site, broken out by subject. Should you have any follow-up questions please feel free to submit them via e-mail to OLMS at: olms-public@dol.gov.

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LM-2 General Questions

Q. If a labor organization itself has under $250,000 in total annual receipts for a fiscal year beginning on or after January 1, 2004, but the receipts from a "subsidiary organization" (that meets the definition in the Form LM-3 instructions) bring its receipts to over $250,000, what form does the labor organization file?

A. The labor organization files a Form LM-2. The instructions for Form LM-3, the form used by unions with under $250,000 in total annual receipts, state that the receipts of subsidiary organizations must be included in determining which form to file, and the instructions for Form LM-2 provide that the receipts of a trust which is wholly owned, wholly controlled, and wholly financed by the labor organization must be included in determining which form to file.

Q. In the case described above, when the receipts of a subsidiary organization bring the labor organization's receipts to $250,000 or above, does the labor organization file a Form T-1 for the subsidiary organization?

A. The labor organization would be required to file a Form T-1 for the subsidiary organization, as a trust in which the labor organization is interested, if the subsidiary organization meets the statutory definition of a trust and if the subsidiary had receipts of $250,000 or more during the fiscal year and the labor organization made a financial contribution to the subsidiary of $10,000 or more (or had a contribution made on its behalf of $10,000 or more) during the fiscal year.

However, if the labor organization considers the subsidiary organization to be part of the labor organization, the labor organization may report the transactions of the subsidiary organization on its Form LM-2, in lieu of filing a Form T-1, by consolidating the financial information for the subsidiary organization and the labor organization on the Form LM-2.

Q. If a parent labor organization imposes a trusteeship over a subordinate labor organization that files Form LM-3, will the parent body be required to re-create the subordinate body's records in order to file Form LM-2 while it is in trusteeship?

A. Form LM-2 must be filed for any union that is in trusteeship.

Q. Will the Department accept reports filed on the revised Form LM-2 and new Form T-1 before March 2005?

A. Yes.

LM-2 Filing Questions

Q. What are the standards used for determining whether to grant a hardship exemption?

A. As stated in the instructions for revised Form LM-2 and new Form T-1, the condition for a temporary hardship exemption is whether the labor organization "experiences technical difficulties that prevent the timely preparation and submission of an electronic filing . . .", and the condition for a continuing hardship exemption is whether the form cannot be filed electronically "without undue burden or expense."

LM-2 Schedules 1-20 Questions

Q. Are members' dues that are more than 90 days delinquent at the end of the fiscal year reportable in "Accounts Receivable"?

A. Delinquent dues are the type of item that would be reported in this category. If the total amount of dues receivable from all members is over $5,000, this category must be reported separately in Schedule 1. However, the names of individual members are not reported.

Q. How should a labor organization determine the value of its ownership interest in a trust such as a training fund?

A. The value of an ownership interest is not a matter that can be determined under the LMRDA. Labor organization officers will have discretion to determine the value of their organizations' ownership interest in trusts. The union's ownership interest in a trust which is an investment must be reported in Schedule 5 and the union's ownership interest in a trust of a non-investment nature must be reported in Schedule 7.

Q. Must labor organizations require their officers and employees to maintain records to verify the allocation of their time in Schedules 11 and 12?

A. The Form LM-2 instructions allow officers and employees discretion in determining the allocation of their time. Only a good faith estimate, not precise reporting, is required. No particular records are required to be created.

Q. If an officer notes his/her activities on a daily calendar, must he/she keep the calendars for five years?

A. Yes, if the calendars are used in determining the allocation of time. The LMRDA requires that supporting records be maintained for five years after a report is filed. Therefore, if notations on calendars are used to determine the information reported on Form LM-2, the calendars must be maintained for five years after the report is filed.

Q. Will officers and employees be required to maintain timesheets to complete Schedules 11 and 12?

A. Officers and employees will not be required to maintain timesheets so long as they use good faith estimates for calculating the percentage of time spent on activities that fall within Schedules 15 through 19. An individual may round to the nearest 10%. When the time reported by an individual in an activity is less than 5% of his or her total work time, the best estimate to the nearest percentage should be reported rather than rounding to zero. The total must equal 100%. It is understood that these figures may be imprecise.

Q. How should disbursements for support staff be allocated?

A. If the support staff is clearly connected to an individual officer, such as the president's confidential secretary, disbursements for that person should be allocated following the allocation used by the officer. Likewise, the salary paid to other support staff should be allocated at the same ratio as the program staff they support. Otherwise, the disbursements should be allocated to "General Overhead."

Q. How should disbursements to a law firm of $45,000 be reported, where 1/3 is attributable to representation activities, 1/3 to overhead, and 1/3 to lobbying?

A. $15,000 would be reported in Schedule 15 (Representational Activities), $15,000 would be reported in Schedule 18 (General Overhead), and $15,000 would be reported in Schedule 16 (Political Activities and Lobbying).

Q. If a labor organization makes payments to different hotels within a chain (such as a Hyatt in Washington and a Hyatt in New York), do the different hotels count as a single entity for determining whether the disbursements are major for purposes of Schedules 15 through 19?

A. No. Only disbursements to the same entity or individual must be aggregated. Hotels within a chain are not ordinarily a single entity. In these situations, if the disbursements are made payable to apparently distinct entities with different names, labor organizations need not conduct further investigation to determine whether they are actually a single entity.

Q. What is the relationship between the percentage of the labor organization's disbursements used for representation activities and the portion of nonmember fees that is chargeable to nonmembers under Beck and other Supreme Court decisions?

A. The reporting requirements for Form LM-2 are based on the disclosure purposes of the LMRDA. Information that is relevant for these purposes may also be relevant for purposes of the Supreme Court's decision in Beck, which requires affected unions, upon objection by an agency fee payer, to subtract from the amount of the dues required of members a sum that reflects the per capita share of the union's activities that are not germane to its representational function. It is not, however, the intent of the Department of Labor to collect information specific to the Beck requirements.

T-1 General Questions

Q. If a labor organization's fiscal year ending date is December 31 and its trust's fiscal year ending date is June 30, does the labor organization have to file a Form T-1 for the trust with its Form LM-2 for 2004?

A. No. The trust's fiscal year that was completed on June 30, 2004 began on July 1, 2003. Since the trust's fiscal year did not begin on or after January 1, 2004, the effective date of the final rule, a Form T-1 for the trust is not required with the labor organization's 2004 report. But absent any changes in the trust, the labor organization will have to file a Form T-1 with its 2005 report that covers the fiscal year of the trust that concluded on June 30, 2005.

Q. Must the officers and employees of a trust be covered by the labor organization's bond?

A. Officers and employees of a trust in which a labor organization is interested must be bonded under LMRDA section 502. There is no change from the present situation. It is up to the labor organization and the trust as to whether there is a single bond or whether each entity has a separate bond.

Q. Must the funds of a trust be included in determining the required amount of the labor organization's bond? If so, are the trust's funds required to be included even if the trust is "nonsignificant" (has less than $250,000 in receipts or less than $10,000 is contributed directly or indirectly by the labor organization to the trust)?

A. If the officers and employees of a trust are covered by the labor organization's bond, then the funds of the trust must be included in determining the required amount of the labor organization's bond, even if the trust is "nonsignificant." If the trust has a separate bond, the trust's funds are not included in determining the required amount of the labor organization's bond.

Q. What kinds of entities will be reported on Form T-1?

A. Examples of the kinds of entities that may be a "trust in which a labor organization is interested" include, but are not limited to: building corporations, redevelopment corporations, educational institutions, banks, joint employer/union training and apprenticeship funds, job targeting funds, and benefit plans.

Q. If there is a trust in which several labor organizations are interested, which labor organization files Form T-1?

A. Form T-1 must be filed by each labor organization that is a Form LM-2 filer if the trust had receipts of $250,000 or more and if the labor organization directly or indirectly contributed $10,000 or more to the trust during the fiscal year. Thus, more than one Form T-1 may be filed for a single trust.

Q. If a labor organization merely transmits "on behalf of members" $10,000 collected from those members to a trust, must the labor organization file Form T-1?

A. Yes, as long as the other reporting conditions are met.

Q. If a labor organization deposits funds in an account with a credit union it established, and the credit union qualifies as a trust in which a labor organization is interested, are those deposits considered to be "contributions" for purposes of determining whether the labor organization is required to file a Form T-1?

A. No. Deposits in the labor organization's account remain the property of the labor organization and are not contributions to the credit union.

Q. Would a bank established by a labor organization have the primary purpose of providing benefits for members, or would it be merely an investment? (Or would ownership of a bank for the purpose of investing union money for high returns be considered to have the indirect purpose of providing a benefit to members?)

A. This would have to be determined on a case by case basis. If a bank exists primarily to serve union members it could be concluded that its primary purpose was providing a benefit to members.

Q. If a trust receives payments from an employer for a benefit plan negotiated by the employer and a labor organization, do those payments count as contributions on behalf of the labor organization?

A. Yes.

Q. If a training fund trust which currently has an exemption from the ERISA reporting and disclosure requirements (ERISA Form 5500) resumes filing Form 5500 with DOL (which it is eligible to do), will it be exempt from filing Form T-1?

A. Yes.

Q. Must a labor organization file a terminal Form T-1 for a trust?

A. Yes, the labor organization must file a terminal Form T-1 if either the trust ceases to exist or the labor organization's interest in the trust terminates. However, a terminal Form T-1 should not be filed solely because, during the labor organization's fiscal year, its direct or indirect contribution to the trust falls below $10,000.

Q. Does the Department have the authority to investigate a trust?

A. Yes.

Q. If a labor organization files an audit in lieu of a complete Form T-1, will the audit be available on the OLMS Web site?

A. Yes. OLMS will put the audit in PDF format for disclosure on its public disclosure Web site.

T-1 Filing Questions

Q. What are the standards used for determining whether to grant a hardship exemption?

T-1 Recordkeeping

Q. How can a labor organization get the necessary information from a trust to file Form T-1?

A. Even though a trust is a separate entity from the reporting labor organization, it is reasonable to expect that the labor organization will have sufficient authority and/or influence to obtain the required information from a trust for which it must file a Form T-1 because (1) the labor organization had established the trust and/or selected one or more of the members of the trust's governing body, and (2) the labor organization directly or indirectly made a substantial ($10,000 or more) contribution to the trust. The labor organization will be expected to take whatever steps it can to secure the necessary information. OLMS expects that in many instances the trust will prepare the Form T-1 and provide it to the labor organization(s) for filing.

Q. What if the labor organization is unable to obtain the required information?

A. OLMS recognizes that there may be some situations when a labor organization will not have the leverage or authority to obtain trust records. The labor organization should contact OLMS and we will deal with those situations on a case-by-case basis.

Form LM-2 and Form T-1 Seminars

The Department of Labor's Office of Labor-Management Standards is conducting free seminars on the revised labor organization annual financial report Form LM-2, and the new Form T-1 Trust Annual Report. These seminars, being held by OLMS District Offices across the country, are open to any interested persons.

To view a list of the currently scheduled seminars including dates, times, locations please visit http://www.dol.gov/regs/compliance/olms/lm2ca.htm.

To locate the nearest OLMS District Office please visit https://www.dol.gov/agencies/olms/contact/regions.

Don't forget to bookmark the OLMS Web site at https://www.dol.gov/agencies/olms for the latest news and information!

Last Updated: 11-13-03

OLMS News 03-03

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