FAQs for Fiduciaries about ERISA & Apprenticeship and Training Plans

An apprenticeship and training plan (ATP) is an employee welfare benefit plan that is established or maintained to provide apprenticeship or other training programs.

ATPs that cover private sector workers and are financed out of trust funds are employee benefit plans covered by ERISA. Most private sector collectively bargained ATPs are covered by ERISA because the Labor-Management Relations Act states that the expenses for any joint labor/management apprenticeship committee must be paid from a separate fund.

ERISA requires employer-sponsored retirement and health plans for employees and their beneficiaries to have certain key elements:

• a written plan that names at least one official who manages the plan’s operations and administration,
• a trust to hold the plan’s assets, and
• documents to provide plan information to participating employees and to the government.

If an ERISA-covered ATP provides only apprenticeship or other training benefits, then it can be exempted from several ERISA requirements, including:

• annual reporting (Form 5500 Annual Report),
• audits,
• disclosures (Summary Plan Description, Summary of Material Modifications, etc.), and
• recordkeeping requirements.

However, the ATP still must file a notice with the Department of Labor, and fiduciaries are still subject to ERISA’s fiduciary responsibility standards.

Fiduciaries are the people and firms who have important authority over the plan, such as control over the plan’s investments or administration.

Being a fiduciary under ERISA means you must follow some commonsense rules about plan operations:

• Act solely in the interests of the participants and their beneficiaries.
• Be prudent.
• Follow the terms of the plan.
• Pay only reasonable plan expenses.

Fiduciaries who do not follow ERISA’s standards of conduct may be personally liable to pay any losses or give back any profits they gained from misusing the plan's assets.

You may hire a service provider to handle certain fiduciary responsibilities and set up the agreement so that they assume the liability. However, for a bargained plan, the board of trustees would be the fiduciaries responsible for controlling plan assets.

For any ERISA-covered plan, if you appoint a fiduciary for any purpose allowed under your plan, you must monitor them to ensure they are acting prudently.

For more information on a fiduciary’s duties, visit EBSA’s Understanding Your Responsibilities page.

Plans often hire service providers (third–party administrators or other outside professionals) to manage various aspects of a plan’s daily operations or provide additional services. Selecting a service provider is a fiduciary act and must be done prudently.

When considering potential service providers, provide them with the same information about the plan and what services you need so that you can compare their proposals. Service providers must give you certain information that will help you understand the services, assess the reasonableness of the compensation, and determine any conflicts of interest that may affect their performance.

After hiring a service provider, you should establish and follow a formal monitoring and review process to decide whether to continue using them or look for a replacement.

For more information on selecting and monitoring service providers, visit EBSA’s Working With Service Providers page.

To help protect plans, anyone who manages plan funds or property usually needs to have a fidelity bond. A fidelity bond is a kind of insurance that guards the plan against losses caused by fraud or dishonesty by the people covered by the bond.

Under ERISA, any fees and expenses charged to a plan must be "reasonable." As a fiduciary of an apprenticeship or training plan, you must make sure that every expense is justifiable as appropriate to carry out the mission of training apprentices in the program.

If you spend plan money without determining that the fees and expenses are both reasonable and further the plan’s educational goals, then you have breached your fiduciary responsibilities under ERISA and are personally liable for any resulting loss of plan assets.

Strong financial controls and written policies and procedures for travel, reimbursement, and credit card use are important ways to help an ATP’s fiduciaries meet their responsibilities.

For more information on developing policies and procedures for documenting expenditures, recordkeeping, reimbursing travel expenses, and internal financial controls, review the Office of Labor-Management Standards’ compliance tips.

Prohibited transactions are transactions that are not allowed because they could lead to conflicts of interest or misuse of plan assets.

The law forbids certain transactions with people who might improperly influence the plan, known as “parties in interest.” Some prohibited transactions between plans and parties in interest that might apply to ATPs are:

• a sale, exchange, or lease with a union;
• a contributing employer lending money or extending credit to a plan; and
• providing goods, services, or facilities.

Fiduciaries also cannot enter into transactions involving the plan that benefit themselves or where they are representing a party whose interests conflict with the plan’s interests.

The law includes exemptions that allow certain necessary transactions to happen, even if they would normally be prohibited. Exemptions can be drafted by Congress (statutory exemptions) or by the Department of Labor, and they can involve a class of plans (class exemptions) or one specific plan (individual exemptions).

For more information on class exemptions, visit EBSA’s Class Exemptions page. To learn more about exemptions for specific plans, visit the Individual Exemptions page.

A multiemployer apprenticeship plan can rent classroom space from a party in interest, but there are rules to prevent unfair transactions.

• The statutory exemption under ERISA section 408(b)(17) allows ATPs to rent space from certain service providers.
• The class exemption PTE 78-6 allows ATPs to rent space from contributing employers or unions.

These exemptions don't cover situations where the plan's decision-makers might have a personal interest in the deal. If a fiduciary or trustee has a conflict of interest, they should step back from the decision process, or the plan should ask EBSA for an individual exemption prior to executing a rental or lease agreement with a fiduciary or trustee of the plan.

For more information on leasing classroom space, see EBSA’s FAQs on Multiemployer Plan Leasing Arrangements.

Apprenticeship plans can use their assets for these activities, but they must adhere to specific conditions and standards to ensure compliance with ERISA.

Graduation ceremonies

• Expenses can include modest graduation ceremonies that offer light refreshments and award diplomas or certificates to apprentices. Excessive costs, such as full dinners for attendees and valet parking, are generally impermissible.

Advertising

• Outreach expenses must relate to marketing the apprenticeship or training program itself, not to advance the goals of the industry or sponsoring employers. Expense amounts should be prudent. For example, modest expenditures such as t-shirts with program logos may be appropriate, but tickets to sporting or entertainment events for apprentices and plan officials would generally be impermissible.

Contests and competitions

• Plans can cover reasonable costs for apprentices to participate in the contests to test and develop their skills in various elements of their trades, including necessary travel expenses and registration fees. Plans may also use assets to pay for the event’s organization and execution, such as venue costs and transporting equipment.

In all instances, plan fiduciaries must ensure that the expenses are reasonable and align with the plan's training mission. You should provide justification for expenses and establish adequate internal controls and written policies to avoid violating ERISA.

For more information, read EBSA’s field assistance bulletins on graduation ceremonies and advertising and on skills contests and competitions.

ATPs that provide only apprenticeship or other training benefits are exempt from ERISA’s annual reporting and disclosure requirements if they file a notice with the Department of Labor that includes:

• the plan's name,
• the plan sponsor's employer identification number (EIN),
• the plan administrator's name, and
• contact information for someone who can provide a description of courses offered by the plan, including prerequisites and enrollment procedures.

The fiduciary must also disclose this information to eligible employees upon request.

For more information on how to file the notice, visit EBSA’s Apprenticeship and Training Plan Notice page.

If you’ve made an improper transaction or payment, you may be able to voluntarily correct it through the Voluntary Fiduciary Correction Program (VFCP).

If you missed filing the required notice on time, you can use the Delinquent Filer Voluntary Compliance (DFVC) Program.