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*Welcome Changes to the **Third Country Diplomat Program***

The Third Country Diplomat (TCD) Program was established as a pilot in July 1996.  The concept was simple.  Expand the commissary’s membership base and, in turn, increase sales.  At that time, three employee associations took advantage of the opportunity to open the commissary up to accredited third country diplomats.  Since that time, nearly two dozen posts have received approval to participate in the program.  

If these numbers seem small, it is because they are.  Associations participating in the program were required to provide a list of diplomatic missions considered for inclusion.  Diplomats whose governments did not provide excellent reciprocal customs and tax treatment to U.S. mission personnel serving in their home country were either denied access or granted access with an additional twenty percent fee on  commissary purchases.  It was anticipated that these measures would increase the Department of State’s leverage for resolving reciprocity issues with errant countries.  However, some posts felt it was 

easier to opt for non-participation than to tell   their   closest  allies   that   they   were 

required to pay an additional fee above commissary shelf prices.

In June, the Department’s Office of Foreign Missions reviewed program results and determined that denying access or imposing the fee failed to serve its intended purpose.  As such, the requirement to report/specify missions selected for inclusion has been lifted.  Essentially this program change allows Boards of Directors (with post management approval) to determine which diplomatic missions to include without restriction once Department approval is granted to participate in the program.   Boards of Directors should determine the appropriate fee/deposits to charge without  regard to reciprocity.  

This program change does not affect the requirement to report/specify international organizations for which posts would like to provide commissary access.  Posts must continue to request approval for each individual international organization.  Employees of international organizations under consideration must have fully accredited diplomatic status by the host country for the purpose of duty-free privileges.  Employees of international organizations only holding tourist passports may not be included even when granted duty-free privileges by the host government.  The Office of Commissary and Recreation Affairs (A/OPR/CR) reviews the list of international organizations under consideration to ensure the U.S. government’s participation in the organization.  If the international organization is not deemed to be a recognized international organization, the request for inclusion is denied.  Additional international organizations may be added to post’s program at any time upon A/OPR/CR approval.  

Employee associations seeking to participate in the TCD program may request approval via cable.  In the request, the Principal Officer at post must certify that the following criteria have been met:

· Host government approval has been obtained.  

· The employee association is fully reimbursing post for logistical support (utilities, rent when space is USG leased, etc.) as it pertains to the commissary if operating on USG owned or leased property.  These provisions must be documented in a license agreement and submitted to A/OPR/CR for review and approval prior to program implementation.

· Revised bylaws have been drafted to include an appropriate membership category for TCDs provided commissary access.  Revised bylaws must be submitted to A/OPR/CR for review and approval. 

· All foreign missions selected to participate have provided the association with written documentation of the diplomats’ duty-free privileges.

Program guidelines are contained in State 114462 (available from our intranet site in the collective cable directory).  If you have questions regarding the TCD program, please contact the CR Operations Team.

· ***MAKE NOTE...***

During the last half of 2002, a number of staffing changes took place in CR.  Details, details, details...

In October, we welcomed our newest addition to the CR staff, Cynthia (Cyndi) Burleigh is a former Controller of an international real estate company.  Cyndi also brings several years of experience as an auditor of not-for-profits and municipalities.  Cyndi joins the staff as the new Accounting Team Leader.  She is a graduate of Salisbury State University with a B.S. in Accounting and earned the designation of Certified Public Accountant from the State of Maryland.  She is a native of New York and was married in April.

In July, we bid farewell to Accountant Chuck McShane.  During Chuck’s tenure he spent a great deal of his time analyzing audit reports.  He traveled to Tel Aviv and New Delhi to assist employee associations in those locations.  Chuck, his wife and their new son are now serving a tour of duty at the American Embassy in Dar es Salaam, Tanzania.  

In November, we bid farewell to Accountant Francisco Lloret.  Francisco joined the staff in July 1997 as the Accounting Team Leader.  He was instrumental in developing and facilitating financial-related workshops for CR training conferences, identifying employee association trends, providing assistance to our colleagues overseas and developing new ways to improve CR services.  Francisco provided on-site assistance to too many employee associations to name.  He is currently attending Financial Management Officer training at the National Foreign Affairs Training Center and will be serving a tour of duty at the American Embassy in Yaounde, Cameroon.     

Frequently Asked Questions

Each month, we receive many different questions from association managers, post management, Boards of Directors and sometimes members about employee association operations.  Not every question is as unique as one might think.  In fact, many of you have the same concerns, comments and/or questions.  We thought we would share some of those with you along with our guidance.

Q: *How do we determine an appropriate salary for our manager and can CR provide pay scales from other employee associations?*  CR does not maintain wage data for employee associations.  In fact, we do not recommend that Boards of Directors base salary levels on what other employee associations are paying employees in those locations.  The Board must consider such factors as the size of the operation, job responsibilities/duties and the number of staff supervised.  In addition, local factors such as economic conditions, labor laws and wages for similar jobs will come into play.  Most importantly, the Board must determine what the association can afford to pay.

Q: *Is it legal for the association to rent videos to our members?*  Absolutely.  When purchasing videos from an authorized source, the employee association may make videotaped movies and DVDs available on a rental or gratuitous basis for the private home viewing of its members.  This practice is permitted under the “first sale doctrine” codified in U.S. copyright laws.  While the “first sale doctrine” does not permit the employee association to conduct public performances of copyrighted material, CR maintains an umbrella agreement with the Motion Picture Licensing Corporation to allow for public showings often referred to as “movie night”.  Full details on the umbrella license and the conduct of public performances are contained in 00 State 237217 (available from the CR intranet site in the collective cable directory).

Q: *Are we required to withhold/pay taxes on the income of employee association contractors?*  Most definitely.  Employee associations are considered USG instrumentalities for Federal tax purposes.  As such, all U.S. citizens and U.S. resident aliens performing work for the association are considered employees for Federal tax purposes.  This is true even when the individual works a nominal number of hours or an intermittent/seasonal schedule.  Employee associations, not the individual employee, are responsible for collecting, matching and reporting all social security and Medicare payments.  A simplified tax program and instructional are available from the CR intranet site to assist in meeting these requirements.  Please visit our resource library from the home page.  Employee associations may also contact the CR Operations Team directly for assistance.  

Have you checked off that final year 2002 reporting requirement?  You know, the assessment payment.  Each year, employee associations are required to submit an assessment payment based on the gross revenue of the previous calendar year.  Assessment notifications were provided to employee associations via cable in September.  Payments were due November 1.  Some payments remain outstanding.  If you have not received a confirmation from us acknowledging receipt of your payment, please contact the CR Accounting Team for assistance.

Retirement Planning *Options for Employee Associations*

In order to attract and retain the best staff, employers must generally offer competitive compensation packages.  A retirement plan provides employees an attractive means of saving for retirement.  Many associations do not offer retirement planning options to employees often due to the misconception that such plans come with high costs and heavy administrative demands.  However, there are simple retirement plans that may be feasible for employee associations.  These include a Simplified Employee Pension (SEP IRA), Simple IRA or Profit Sharing Plan for those subject to U.S. taxes.

The SEP IRA is very popular in the small business community.  A major draw is that employer contributions are flexible from year to year.  The contribution is not taxable to the participants until withdrawn.  The self-directed SEP IRA offers employees the ability to choose investments that meet their specific retirement needs.  

A Simple IRA is designed for organizations with 100 or fewer employees and is a salary deferral plan structured to eliminate many of the complex administrative requirements often associated with traditional 401(k) plans.  The Simple plan allows for employee contributions of the employee’s annual earned income.  For the required employer contribution, the association can either match 3% of the employees’ contribution or pay a flat 2%.  The employer and employee can share the burden of funding the plan and investment earnings accumulate tax-deferred until distributed to the employee. 

  A Profit Sharing Plan allows for unrestricted tax-deductible contributions of up to 25% of the employee’s salary.  The employer makes all contributions and the percentage contributed can vary from year to year.  With this plan, the employer retains the flexibility of excluding part-time staff while participating employees enjoy an employer-funded benefit plan that offers the possibility to accumulate more assets on a tax-deferred basis than through a traditional individual retirement account (IRA).

These are a few of the options for employee associations seeking to provide an employer-sponsored retirement plan.  In reviewing each plan, you will note the mention of tax deferral options.  However, retirement plans need not be limited to U.S. citizen employees.  Employee associations may consider retirement planning options for local nationals and third country nationals as well.  Be certain to check local labor laws in this regard.  An association-sponsored retirement plan can make a difference in your employees’ standard of living.  The above plans are complex and it is recommend that the Board of Directors discuss these and other options with a qualified advisor.  You may contact   Stephen  Thompson  by  phone  at 

1-202-778-1970 or email at    SHThompson@LMUS.LeggMason.com.

*Stephen is a retired Foreign Service Officer and a Financial Advisor for Legg Mason Wood Walker, Inc., a diversified securities brokerage and  financial services firm.*

***Look for the next issue of The CRonicle to be published in February 2003.   See you next year!***

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