- Question: Where can I find the Form T-1 rescission rule?
- Question: Where can I find the Form T-1 Notice of Proposed Rescission?
- Question: Where can I find the old Form T-1 rule that was rescinded?
- Question: Why did the Department rescind the Form T-1?
Answer: The Form T-1, promulgated by the last Administration, imposed unjustified paperwork burdens on labor organizations. These new recordkeeping and reporting requirements were redundant to existing filing requirements, such as IRS and Employee Benefits Security Administration (EBSA) reporting, and, thus, unnecessary to preventing the circumvention or evasion of reporting requirements under the Labor-Management Reporting and Disclosure Act (LMRDA) or detecting or deterring wrongdoing. The rule ignored that the vast majority of union officers and employees do their work diligently and without incident, and that when civil and criminal violations do occur – and a union and its members are thereby victimized – OLMS already has an array of means to, and an established record of, bringing such wrongdoers to justice.
- Question: What was the Form T-1?
Answer: It was an annual financial disclosure report that would have been filed by certain labor organizations covering the finances of certain trusts in which they are interested. OLMS rescinded the Form T-1 before ever enforcing the filing requirement.
- Question: What is a trust?
Answer: Under the Labor-Management Reporting and Disclosure Act (LMRDA), a “trust in which a labor organization is interested” means a trust or other fund or organization (1) which was created or established by a labor organization, or one or more of the trustees or one or more members of the governing body of which is selected or appointed by a labor organization, and (2) a primary purpose of which is to provide benefits for the members of such labor organization or their beneficiaries.
Certain labor organization actions would trigger the Form T-1 reporting requirements when the labor organization during the reporting period, either alone or in combination with other labor organizations, selects or appoints the majority of the members of the trust's governing board or contributes more than 50 percent of the trust's receipts. When applying this financial or managerial dominance test, contributions made pursuant to a collective bargaining agreement (CBA) are considered the labor organization's contributions.
- Question: What kind of trusts would be reported?
Answer: Apprenticeship and training plans, labor-management cooperation committees, strike funds, and building corporations are examples.
- Question: Who would have filed the Form T-1?
Answer: The Form T-1 Trust Annual Report is required by larger labor unions, those with $250,000 or greater in total annual receipts and which, therefore, file the Form LM-2 annual union financial disclosure report
- Question: What did the Form T-1 require?
Answer: Labor organizations must provide specified aggregated and disaggregated information relating to the financial operations of the trust. Typically, a labor organization is required to provide information on the Form T–1 explaining certain transactions by the trust (such as disposition of property by other than market sale, liquidation of debts, loans or credit extended on favorable terms to officers and employees of the labor organization); and identifying major receipts and disbursements by the trust during the reporting period.
The Form T–1 included: 14 questions that identify the trust; six yes/no questions covering issues such as whether any loss or shortage of funds was discovered during the reporting year and whether the trust had made any loans to officers or employees of the labor organizations, which were granted at more favorable terms than were available to others; statements regarding the total amount of assets, liabilities, receipts and disbursements of the trust; a schedule that separately identifies any individual or entity from which the trust receives $10,000 or more, individually or in the aggregate, during the reporting period; a schedule that separately identifies any entity or individual that received disbursements that aggregate to $10,000 or more, individually or in the aggregate, from the trust during the reporting period and the purpose of disbursement; and a schedule of disbursements to officers and employees of the trust who received more than $10,000.
- Question: What trusts were exempted from the Form T-1 such that labor organizations were not required to report on them?
Answer: Under the rule, exemptions were provided for a labor organization’s:
- section 3(l) trusts where the trust, as a political action committee (“PAC”) or a political organization (the latter within the meaning of 26 U.S.C. 527), submits timely, complete and publicly available reports required of them by federal or state law with government agencies
- federal employee health benefit plans subject to the provision of the Federal Employees Health Benefits Act (FEHBA)
- for-profit commercial banks established or operating pursuant to the Bank Holding Act of 1956, 12 U.S.C. 1843
- credit unions
- trust that meets the statutory definition of a labor organization and files a Form LM–2, Form LM–3, or Form LM–4 or is an entity that the LMRDA exempts from reporting
- employee benefit plans that file a Form 5500 Annual Return/Report under the Employee Retirement Income Security Act of 1974 (“ERISA”)
- trusts for which an audit was conducted in accordance with prescribed standards and the audit is made publicly availabl
- subsidiary organizations of labor unions
Further, the Department permitted the parent union (i.e., the national/international or intermediate union) to file the Form T-1 report for covered trusts in which both the parent union and its affiliates meet the financial or managerial domination test. The Department also allowed a single union to voluntarily file the Form T–1 on behalf of itself and the other unions that collectively contribute to a multiple-union trust, relieving the Form T–1 obligation on other unions.
- Question: Have labor organizations been filing the Form T-1?
Answer: No. The Department announced a Form T-1 non-enforcement policy on March 29, 2021.
- Question: Why did OLMS choose to not enforce the Form T-1’s filing deadline?
Answer: OLMS reviewed the Form T-1, and found it apparent that legal and policy issues exist concerning whether the rule exceeded the scope of the statute and whether the purported benefits (e.g., detecting and deterring labor-management fraud and providing needed information to union members) justify its estimated burden.
- Question: Is OLMS backtracking on its commitment to protect union members from fraud?
Answer: No. As stated in the proposal to rescind and in the final rule, OLMS has a track record of effectively enforcing the LMRDA, which goes back decades and many administrations. Indeed, in recent years OLMS played a key role in securing over a dozen indictments and convictions in the UAW-Fiat Chrysler scandal, without the Form T-1. Just recently, OLMS worked with EBSA to secure the conviction of a former union official who embezzled funds from the union’s health plan, a trust. See: https://www.dol.gov/newsroom/releases/ebsa/ebsa20210105
Moreover, the Department determined that rescission of the form would preserve OLMS’ resources to combat fraud by removing duplicative review and enforcement costs.
- Question: Is OLMS reducing transparency for union members?
Answer: No. Since T-1 reporting has never been implemented, this rescission will not reduce the nature or amount of financial information unions have been required to report since the substantial revision of the LM reporting rules in 2002. Union members will continue to receive detailed information about their union’s finances, including the identity and contact information of the union’s trusts, through the annual Form LM-2 report available in the OLMS Public Disclosure Room.
Additionally, the union trusts typically file detailed disclosure reports, such as the EBSA Form 5500 and IRS Form 990. Thus, the Form T-1 would have established a redundant reporting regime.
As stated in its proposal to rescind and in the final rule, redundant reporting forces labor unions to incur significant burdens on top of those already incurred for the annual Form LM-2 report, costs ultimately absorbed by the workers who are union members.
- Question: Will reduced transparency limit the ability of OLMS to detect and deter fraud?
Answer: As stated in the final rule, the Form T-1 does not provide additional information necessary for OLMS to track fraud or prevent the circumvention or evasion of reporting requirements under the Labor-Management Reporting and Disclosure Act (LMRDA). Existing reporting regimes already provide valuable information. Further, fraudulent employer payments, such as those in the UAW-Fiat Chrysler scandal, would be covered by the Form LM-10 employer reporting regime. Thus, OLMS already has investigatory authority over potentially unlawful employer payments to union officials without the arguably burdensome Form T-1. Also, the implementation and enforcement of the Form T-1 may actually deprive OLMS of resources needed to enforce the LMRDA, thereby limiting the ability of OLMS to detect and deter fraud.
- Question: If the Form T-1 had been in place, wouldn’t it have deterred the UAW and Fiat Chrysler officials from engaging in the conduct for which they were convicted?
Answer: As stated in the NPRM and final rule, after consideration, the Department now believes that those cases do not provide support for the 2020 rule and that, instead, the ability to obtain such results without the Form T-1 undercuts the need for imposing a new reporting burden. Working jointly with the Department of Justice and others, the Department of Labor secured convictions of management and union officials associated with the National Training Center (NTC). Since the LMRDA Section 202 and 203 reporting requirements would require disclosure of these payments, and require the parties to file reports pursuant to the Department’s Form LM-30 Labor Organization Officer and Employee Report and Form LM-10 Employer Report, the Department already has investigatory authority and access to necessary financial information to effectively investigate this matter.
Importantly, the general public, including members of labor organizations, already has access to reports containing similar, if not identical, information that would be included on the Form T-1, and the Department already has the necessary investigatory authority to identify and eradicate the specific fraud that the Form T-1 was meant to combat. For example, the NTC filed a Form 990 that listed three of the six UAW officials who took unlawful payments from FCA under Part VII (Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Individuals, and Independent Contractors). The Form 990, on Schedule I (Grants and Other Assistance to Organizations, Governments, and Individuals in the United States), provided for reporting of payments to two other UAW officials’ sham charities.
- Question: What happened to earlier versions of the Form T-1?
Answer: The three prior versions of the Form T-1 were either vacated by courts or rescinded.
Initially, portions of a 2003 rule relating to the Form T-1 were vacated by the Federal Court of Appeals for the District of Columbia Circuit in AFL-CIO v. Chao, 409 F.3d 377, 389-391 (D.C. Cir. 2005). The court held that the form “reaches information unrelated to union reporting requirements and mandates reporting on trusts even where there is no appearance that the union's contribution of funds to an independent organization could circumvent or evade union reporting requirements by, for example, permitting the union to maintain control of the funds.”
In 2007, the U.S. District Court for the District of Columbia vacated a second version of the Form T-1, criticizing the Department for failing to use notice-and-comment rulemaking.
The Department issued another proposed rule for a revised Form T-1 on March 4, 2008.
After notice and comment, the 2008 Form T-1 final rule was issued on October 2, 2008. The 2008 Form T-1 rule took effect on January 1, 2009. Under that rule, Form T-1 reports would have been filed beginning March 31, 2010, for fiscal years that began no earlier than January 1, 2009.
On December 3, 2009, the Department issued a notice of proposed extension of filing due date to delay for one calendar year the filing due dates for Form T-1 reports required to be filed during calendar year 2010. On December 30, 2009, following notice and comment, the Department published a rule extending for one year the filing due date of all Form T-1 reports required to be filed during calendar year 2010.
Following a February 2010 NPRM proposing to rescind the Form T-1, the Department published the final rule rescinding it on December 1, 2010. In its rescission, the Department stated that it considered the reporting required under the rule to be overly broad because it covered many trusts, such as those funded by employer contributions, without an adequate showing that reporting for such trusts is necessary to prevent the circumvention or evasion of the laws on reporting. Further, the Department found that it was not necessary to prevent circumvention or evasion of Title II reporting requirements.
Last Updated: 12-30-21