57412 Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Rules and Regulations 

DEPARTMENT OF LABOR 

Office of Labor-Management 

Standards 

29 CFR Part 403 

RIN 1215–AB64 

Labor Organization Annual Financial 

Reports for Trusts in Which a Labor 

Organization Is Interested, Form T–1 

AGENCY: Office of Labor-Management 

Standards, Employment Standards 

Administration, Department of Labor. 

ACTION: Final rule. 

SUMMARY: The Employment Standards 

Administration (ESA) Office of LaborManagement Standards (OLMS) of the 

Department of Labor publishes this final 

rule to establish a form to be used by 

labor organizations to file trust annual 

financial reports (Form T–1) and to 

provide appropriate instructions and 

revise relevant portions of 29 CFR Part 

43 relating to such reports. On March 4, 

2008, the Department published a notice 

of proposed rulemaking setting forth the 

Department’s Form T–1 proposal. Under 

the proposal, certain labor organizations 

would file annual reports about certain 

trusts to which they contributed money 

or otherwise provided financial 

assistance or over which they exercised 

managerial control. This document sets 

forth the Department’s review of and 

response to comments on the proposal. 

This final rule requires that a labor 

organization with total annual receipts 

of $250,000 or more file a Form T–1 for 

each trust of the type defined by section 

3(l) of the Labor-Management Reporting 

and Disclosure Act (LMRDA) and that 

meets one of the two following filing 

triggers: The labor organization, alone or 

with other labor organizations, either: 

Appoints or selects a majority of the 

members of the trust’s governing board; 

or makes contributions to the trust that 

exceed 50 percent of the trust’s receipts 

during the trust’s fiscal year. This final 

rule provides five exemptions to the 

Form T–1 filing requirements: A 

political action committee (PAC) fund, 

if publicly available reports on the PAC 

fund are filed with federal or state 

agencies; any political organization for 

which reports are filed with the IRS 

under section 527 of the IRS code; trusts 

required to file a Form 5500 under the 

Employee Retirement Income Security 

Act (ERISA); federal employee health 

benefit plans that are subject to the 

provisions of the Federal Employees 

Health Benefits Act (FEHBA); and any 

trust for which an independent audit 

has been conducted, in accordance with 

the standards set forth in this final rule. 

This final rule will apply prospectively. 

DATES: Effective Date: This rule will be 

effective on December 31, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Denise Boucher, Director, Office of 

Policy, Reports, and Disclosure, Office 

of Labor-Management Standards 

(OLMS), U.S. Department of Labor, 200 

Constitution Avenue, NW., Room N– 

5609, Washington, DC, (202) 693–1185 

(this is not a toll-free number). 

Individuals with hearing impairments 

may call 1–800–877–8339 (TTY/TDD). 

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority 

This final rule is issued pursuant to 

section 208 of the LMRDA, 29 U.S.C. 

438. Section 208 authorizes the 

Secretary of Labor to issue, amend, and 

rescind rules and regulations to 

implement the LMRDA’s reporting 

provisions. Secretary’s Order 4–2007, 

issued May 2, 2007, and published in 

the Federal Register on May 8, 2007 (72 

FR 26159), contains the delegation of 

authority and assignment of 

responsibility for the Secretary’s 

functions under the LMRDA to the 

Assistant Secretary for Employment 

Standards and permits re-delegation of 

such authority. This rule implements 

section 201 of the LMRDA, which 

requires covered labor organizations to 

file annual, public reports with the 

Department, disclosing the labor 

organization’s financial condition and 

operations during the reporting period. 

29 U.S.C. 431(b). As administratively 

implemented, section 201 requires a 

labor organization to identify its assets 

and liabilities, receipts, salaries and 

other direct or indirect disbursements to 

each officer and all employees receiving 

$10,000 or more in aggregate from the 

labor organization, direct or indirect 

loans (in excess of $250 aggregate) to 

any officer, employee, or member, loans 

(of any amount) to any business 

enterprise, and other disbursements. 

The statute requires that such 

information shall be filed ‘‘in such 

detail as may be necessary to disclose [a 

labor organization’s] financial 

conditions and operations.’’ Id. 

Section 208 directs the Secretary to 

issue rules ‘‘prescribing reports 

concerning trusts in which a labor 

organization is interested’’ as she ‘‘may 

find necessary to prevent the 

circumvention or evasion of [the 

LMRDA’s] reporting requirements.’’ 29 

U.S.C. 438. Section 3(l) of the LMRDA 

provides: 

‘‘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. 

29 U.S.C. 402(l). 

II. Background 

A. Introduction 

On March 4, 2008, the Department 

issued a notice of proposed rulemaking 

(73 FR 11754) proposing to establish a 

Form T–1 to capture financial 

information pertinent to ‘‘trusts in 

which a labor organization is 

interested’’ (section 3(l) trusts), 

information that has largely gone 

unreported despite the trusts’ significant 

effect on labor organization financial 

operations and their members’ own 

interests. As noted in the proposal, the 

establishment of the Form T–1 is part of 

the Department’s continuing efforts to 

better effectuate the reporting 

requirements of the LMRDA, which are 

designed to empower labor organization 

members by providing them the means 

to maintain democratic control over 

their labor organizations and to ensure 

proper accounting of labor organization 

funds. Labor organization members are 

better able to monitor their labor 

organization’s financial affairs and to 

make informed choices about the 

leadership of their labor organization 

and its direction when labor 

organizations provide financial 

information required by the LMRDA. By 

reviewing the reports, a member may 

ascertain the labor organization’s 

priorities and whether they are in 

accord with the member’s own priorities 

and those of fellow members. At the 

same time, this transparency promotes 

both the labor organization’s own 

interests as a democratic institution and 

the interests of the public and the 

government. Furthermore, the LMRDA’s 

reporting and disclosure provisions, 

together with the fiduciary duty 

provision, 29 U.S.C. 501, which directly 

regulates the primary conduct of labor 

organization officials, operate to 

safeguard a labor organization’s funds 

from depletion by improper or illegal 

means. Timely and complete reporting 

also helps deter labor organization 

officers or employees from embezzling 

or otherwise making improper use of 

such funds. 

The proposal noted that the Form 

T–1 closes a reporting gap under the 

Department’s former rule whereby labor 

organizations were only required to 

report on ‘‘subsidiary organizations.’’ As 

noted in the proposal, labor 

organizations use section 3(l) trusts, 


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which by definition have a primary 

purpose to provide benefits for the 

members of the labor organization or 

their beneficiaries, 29 U.S.C. 402(l), for 

a myriad of purposes. Common 

examples of section 3(l) trusts include 

credit unions, strike funds, development 

or investment groups, training funds, 

apprenticeship programs, pension and 

welfare plans, building funds, and 

educational funds. Such trusts may be 

administered by trustees appointed by a 

labor organization(s), either singly or 

jointly with other labor organizations, or 

jointly with an employer(s). As 

discussed below, trusts administered 

jointly by trustees appointed by labor 

organization(s) and employer(s) are 

known as Taft-Hartley trusts. By 

requiring that labor organizations file 

the Form T–1 for specific section 3(l) 

trusts, labor organization members and 

the public will receive some of the same 

benefit of transparency regarding the 

trust that they now receive under the 

Form LM–2, thereby preventing a labor 

organization from using the trust to 

circumvent or evade its reporting 

obligations. 

This final rule takes into account the 

Department’s earlier efforts in 2003 and 

2006 to implement a Form T–1. In 

fashioning this final rule, and as 

discussed in greater detail in the 

proposed rule, the Department relies on 

guidance from the United States Court 

of Appeals for the District of Columbia 

Circuit in its review of the 2003 Form 

T–1 rule (68 FR 58374, Oct. 9, 2003), 

American Federation of Labor and 

Congress of Industrial Organizations v. 

Chao, 409 F.3d 377 (DC Cir. 2005) and 

the District Court for the District of 

Columbia in its review of the 2006 Form 

T–1 rule (71 FR 57716, Sept. 29, 2006), 

American Federation of Labor and 

Congress of Industrial Organizations v. 

Chao, 496 F. Supp. 2d 76 (D.DC 2007). 

See 73 FR 11757. Thus, this final rule 

limits the labor organization’s reporting 

requirement to those trusts in which the 

labor organization has managerial 

control or financial dominance, as 

defined in this rule. 

The Department initially provided for 

a 45 day comment period ending April 

18, 2008. 73 FR at 11754. In response to 

a number of requests, the Department 

published a notice extending the 

comment period to May 5, 2008. 73 FR 

16611. The Department received 556 

comments on the Form T–1 proposed 

rule. Of these comments, approximately 

88 were unique comments. The 

remaining comments were form letters 

endorsing the proposal. Comments were 

received from labor organizations, 

employer, trade and public interest 

groups, Taft-Hartley plans, accounting 

firms, a Member of Congress and labor 

organization members. 

B. The LMRDA’s Reporting and Other 

Requirements 

In enacting the LMRDA in 1959, a 

bipartisan Congress made the legislative 

finding that in the labor and 

management fields ‘‘there have been a 

number of instances of breach of trust, 

corruption, disregard of the rights of 

individual employees, and other failures 

to observe high standards of 

responsibility and ethical conduct 

which require further and 

supplementary legislation that will 

afford necessary protection of the rights 

and interests of employees and the 

public generally as they relate to the 

activities of labor organizations, 

employers, labor relations consultants, 

and their officers and representatives.’’ 

LMRDA, section 2(a), 29 U.S.C. 401(a). 

The statute creates a comprehensive 

scheme designed to empower labor 

organization members by providing 

them the means to maintain democratic 

control over their labor organizations 

and ensure a proper accounting of labor 

organization funds. 

The legislation was the direct 

outgrowth of a Congressional 

investigation conducted by the Select 

Committee on Improper Activities in the 

Labor or Management Field, commonly 

known as the McClellan Committee, 

chaired by Senator John McClellan of 

Arkansas. In 1957, the committee began 

a highly publicized investigation of 

labor organization racketeering and 

corruption; its findings of financial 

abuse, mismanagement of labor 

organization funds, and unethical 

conduct provided much of the impetus 

for enactment of the LMRDA’s remedial 

provisions. See generally, Benjamin 

Aaron, The Labor-Management 

Reporting and Disclosure Act of 1959, 

73 Harv. L. Rev. 851, 851–55 (1960). 

During the investigation, the committee 

uncovered a host of improper financial 

arrangements between officials of 

several international and local labor 

organizations and employers (and labor 

consultants aligned with the employers) 

whose employees were represented by 

the labor organizations in question or 

might be organized by them. Similar 

arrangements also were found to exist 

between labor organization officials and 

the companies that handled matters 

relating to the administration of labor 

organization benefit funds. See 

generally, Interim Report of the Select 

Committee on Improper Activities in the 

Labor or Management Field, S. Rep. No. 

85–1417 (1957); see also, William J. 

Isaacson, Employee Welfare and Benefit 

Plans: Regulation and Protection of 

Employee Rights, 59 Colum. L. Rev. 96 

(1959). 

The statute was designed to remedy 

these various ills through a set of 

integrated provisions aimed at labor 

organization governance and 

management. These include a ‘‘bill of 

rights’’ for labor organization members, 

which provides for equal voting rights, 

freedom of speech and assembly, and 

other basic safeguards for labor 

organization democracy, see LMRDA, 

sections 101–105, 29 U.S.C. 411–415; 

financial reporting and disclosure 

requirements for labor organizations, 

their officers and employees, employers, 

labor relations consultants, and surety 

companies, see LMRDA, sections 201– 

06, 211, 29 U.S.C. 431–36, 441; detailed 

procedural, substantive, and reporting 

requirements relating to labor 

organization trusteeships, see LMRDA, 

sections 301–06, 29 U.S.C. 461–66; 

detailed procedural requirements for the 

conduct of elections of labor 

organization officers, see LMRDA, 

sections 401–03, 29 U.S.C. 481–83; 

safeguards for labor organizations, 

including bonding requirements, the 

establishment of fiduciary 

responsibilities for labor organization 

officials and other representatives, 

criminal penalties for embezzlement 

from a labor organization, loans by a 

labor organization to officers or 

employees, employment by a labor 

organization of certain convicted felons, 

and payments to employees for 

prohibited purposes by an employer or 

labor relations consultant, see LMRDA, 

sections 501–05, 29 U.S.C. 501–05; and 

prohibitions against extortionate 

picketing and retaliation for exercising 

protected rights, see LMRDA, sections 

601–11, 29 U.S.C. 521–31. As explained 

in the Department’s 2002 proposal and 

2003 rule (67 FR 79280, 79290; 68 FR 

at 58374), the reporting regimen had 

hardly changed in the more than 40 

years since the Department issued its 

first reporting rule under the LMRDA. 

The original rule was published in 1960. 

See 25 FR 433, 434 (1960). 

Section 201 of the LMRDA requires 

labor organizations to file annual, public 

reports with the Department, detailing 

the labor organization’s financial 

condition and operations during the 

reporting period, and, as implemented, 

identifying its assets and liabilities, 

receipts, salaries and other direct or 

indirect disbursements to each officer 

and all employees receiving $10,000 or 

more in aggregate from the labor 

organization, direct or indirect loans (in 

excess of $250 aggregate) to any officer, 

employee, or member, any loans (of any 

amount) to any business enterprise, and 

other disbursements. 29 U.S.C. 431(b). 


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1The fiduciary duty owed by trustees and others 

to refrain from taking a proscribed action has never 

been thought to be sufficient by itself to protect the 

interests of a trust’s beneficiaries or a principal. 

Although a fiduciary’s own duty to a trust’s 

beneficiaries, like the duty owed by an agent to a 

principal, include disclosure and accounting 

components (See Restatement (Third) of Trusts § 2; 

Restatement (Third) of Agency § 8.01 (T.D. No. 6, 

2005) et seq.; see also 1 American Law Institute, 

Principles of Corporate Governance § 1.14 (1994)), 

public disclosure requirements, government 

regulation, and the availability of civil and criminal 

process, complement and help ensure a trustee’s 

observance of his or her fiduciary duty. 

The statute requires that such 

information shall be filed ‘‘in such 

detail as may be necessary to disclose [a 

labor organization’s] financial 

conditions and operations.’’ Id. This 

information is reported on the Form 

LM–2 by labor organizations that have 

$250,000 or more in total annual 

receipts. 

Section 202 of the LMRDA requires 

all labor organization officials to 

annually disclose any income or 

interests, as there identified, they have 

received that pose an actual or potential 

conflict of interest. See 29 U.S.C. 432. A 

labor organization official must also 

identify any income paid to, or financial 

interests held by, the official’s spouse or 

minor children, if such payment is from 

or interest is held in a business or 

company under circumstances that 

could give rise to a conflict of interest. 

Id. The section 202 information is 

reported on the Form LM–30. Section 

203 of the Act also requires an 

employer, with certain exceptions, to 

annually file a report showing in detail, 

the date and amount of any payment, 

loan, promise, agreement or 

arrangement to any labor organization or 

representative of a labor organization 

and a full explanation of any such 

transaction. See 29 U.S.C. 433. The 

section 203 employer information is 

reported on the Form LM–10. 

With regard to each of these reports, 

the LMRDA states that the Secretary of 

Labor shall ‘‘prescribe the[ir] form and 

publication * * * and such other 

reasonable rules and regulations 

(including rules prescribing reports 

concerning trusts in which a labor 

organization is interested) as [it] finds 

necessary to prevent the circumvention 

or evasion of such reporting 

requirements.’’ 29 U.S.C. 438. This final 

rule adopts the Form T–1 to require 

labor organizations to report on certain 

section 3(l) trusts so as to provide labor 

organization members with an 

accounting of how funds are invested or 

otherwise expended by the trust. The 

Form T–1 provides transparency of 

labor organization finances and 

effectuates the goals of the LMRDA. 

C. Overview of the Form T–1 Final Rule 

and Reasons for the Rule 

This final rule provides that the 

largest labor organizations, those with 

total annual receipts of $250,000 or 

more, must file a Form T–1 for those 

section 3(l) trusts in which the labor 

organization, either alone or in 

combination with other labor 

organizations, has management control 

or financial dominance. For purposes of 

this rule, a labor organization must file 

a Form T–1 for a trust if it alone or in 

combination with other labor 

organizations (1) selects or appoints the 

majority of the members of the trust’s 

governing board, or (2) contributes more 

than 50 percent of the trust’s receipts 

during the annual reporting period; 

contributions made pursuant to a 

collective bargaining agreement shall be 

considered contributions by the labor 

organization. 

The Form T–1 requires that the labor 

organization itemize major transactions 

of the trust during the annual reporting 

cycle on two schedules: Schedule 1, 

which would separately identify any 

individual or entity from which the 

trust received ‘‘major receipts’’ of 

$10,000 or more, individually or in the 

aggregate during the reporting period; 

and Schedule 2, which would 

separately identify any entity or 

individual that received ‘‘major 

disbursements’’ of $10,000 or more, 

individually or in the aggregate, from 

the trust during the reporting period. 

The final rule does not require 

itemization of receipts by a trust made 

pursuant to a collective bargaining 

agreement or disbursements made by 

the trust pursuant to a written 

agreement that specifies the detailed 

basis on which the payments are to be 

made by the trust. The Form T–1 

includes a Schedule 3 that requires 

disclosure of the names of all officers of 

the trust, all employees of the trust who 

receive $10,000 or more during a 

reporting period, and all direct or 

indirect disbursements to each of these 

officers and employees. 

The Form T–1 provides for a number 

of exemptions or alternative means of 

compliance with the reporting 

requirement. No Form T–1 is required 

for any trust that meets the statutory 

definition of a labor organization as 

such trust would already file a separate 

Form LM–2, LM–3 or LM–4. An 

exemption is provided for trusts that are 

established as a Political Action 

Committee (PAC) or as a political 

organization under section 527 of the 

Internal Revenue Code, 26 I.R.C. section 

527, provided timely, complete and 

publicly available reports are filed with 

the appropriate federal or state agency. 

This final rule includes an exemption 

for trusts that constitute a federal 

employee health benefit plan subject to 

the provisions of the Federal Employees 

Health Benefits Act (FEHBA), 5 U.S.C. 

8901 et seq., and for trusts where the 

plan administrator is required to file an 

annual report under ERISA (Form 5500 

exemption). The requirements of the 

Form 5500 exemption are discussed 

more fully below. The final rule also 

includes an alternative means of 

compliance by filing an audit of the 

trust, provided the audit is prepared 

according to standards set forth in the 

Form T–1 instructions and the audit is 

filed with a Form T–1 with Items 1–15 

and Items 26 and 27 completed. 

This final rule will make it more 

difficult for a labor organization, its 

officials, or other parties with influence 

over the labor organization to avoid, 

simply by transferring money from the 

labor organization’s books to the trust’s 

books, the basic reporting obligation 

that would apply if the funds had been 

retained by the labor organization. Labor 

organization officials and trustees both 

owe a fiduciary duty to their labor 

organization and the trust, respectively, 

but the Department’s case files reveal 

numerous examples of embezzlement of 

funds held by both labor organizations 

and their section 3(l) trusts.1 The Form 

T–1, by disclosing information to labor 

organization members, among the true 

beneficiaries of such trusts, will 

increase the likelihood that wrongdoing 

is detected and may deter individuals 

who might otherwise be tempted to 

divert funds from the trusts. See 

Archibald Cox, Internal Affairs of Labor 

Organizations Under the Labor Reform 

Act of 1959, 58 Mich. L. Rev. 819, 827 

(1960) (‘‘The official whose fingers itch 

for a ‘fast buck’ but who is not a 

criminal will be deterred by the fear of 

prosecution if he files no report and by 

fear of reprisal from the members if he 

does’’). 

Because the labor organization’s 

obligation to submit a Form T–1 

overlaps with the responsibility of labor 

organization officials to disclose 

payments received from the trust (see 29 

U.S.C. 432), the prospect that one party 

may report the payment increases the 

likelihood that a failure by the other 

party to report the payment will be 

detected. Moreover, given the increased 

transparency that results from the Form 

T–1 reporting, in some instances the 

Form T–1 reporting may cause the 

parties to reconsider the primary 

conduct that would trigger the reporting 

requirement. As discussed above, the 

LMRDA’s primary reporting obligation 

(Forms LM–2, LM–3, and LM–4) applies 

to labor organizations as institutions; 


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other important reporting obligations 

under the LMRDA apply to officers and 

employees of labor organizations (Form 

LM–30), requiring them to report any 

conflicts between their personal 

financial interests and the duty they 

owe to the labor organization they serve, 

and to employers who must report 

payments to labor organizations and 

their representatives (Form LM–10). See 

29 U.S.C. 432; 29 U.S.C. 433. Thus, 

requiring labor organizations to report 

the information requested by the Form 

T–1 rule provides an essential check for 

labor organization members and the 

Department to ensure that labor 

organizations, their officials, and 

employers are accurately and 

completely fulfilling their reporting 

duties under the Act, obligations that 

can easily be ignored without fear of 

detection if reports related to trusts are 

not required. 

Both historical and recent examples 

demonstrate the vulnerability of trust 

funds to misuse and misappropriation 

by labor organization officials and 

others. The McClellan Committee, as 

discussed above, provided several 

examples of labor organization officials 

using funds held in trust for their own 

purposes rather than for their labor 

organization and its members. 

Additional examples of the misuse of 

labor organization benefit funds and 

trust funds for personal gain may be 

found in the 1956 report of the Senate’s 

investigation of welfare and pension 

plans, completed as the McClellan 

Committee was beginning its 

investigation. See Welfare and Pension 

Plans Investigation, Final Report of the 

Comm. of Labor and Public Welfare, S. 

Rep. No. 1734 (1956); see also Note: 

Protection of Beneficiaries Under 

Employee Benefit Plans, 58 Colum. L. 

Rev. 78, 85–89, 96, 107–08 (1958). In the 

most comprehensive report concerning 

the influence of organized crime in 

some labor organizations, a presidential 

commission concluded that ‘‘the 

plunder of labor organization resources 

remains an attractive end in itself. 

* * * The most successful devices are 

the payment of excessive salaries and 

benefits to organized crime-connected 

labor organization officials and the 

plunder of workers’ health and pension 

funds.’’ President’s Commission on 

Organized Crime, Report to the 

President and Attorney General, The 

Edge: Organized Crime, Business, and 

Labor Unions 12 (1986). 

The enactment, administration, and 

enforcement of ERISA has ameliorated 

much abuse, but many section 3(l) trusts 

are not covered by ERISA and the 

annual reporting under ERISA serves a 

different purpose than the reporting 

under the LMRDA. The Department has 

discovered numerous situations, as 

illustrated by the following examples, 

where funds held in section 3(l) trusts 

have been used in a manner that, if 

reported, would have been scrutinized 

by the members of the labor 

organization and this Department: 

• A case in which no information was 

publicly disclosed about the disposition 

of tens of thousands of dollars (over 

$60,000 on average per month) by 

participating locals into a trust 

established to provide statewide strike 

benefits. No information was disclosed 

because the trust was established by a 

group of labor organization locals and 

not wholly controlled by any single 

labor organization. 

• A case in which a credit union trust 

largely financed by a local labor 

organization had made large loans to 

labor organization officials but had not 

been required to report them because 

the trust was not wholly owned by any 

single local. (One local accounted for 97 

percent of the credit union’s funds on 

deposit). Membership in the credit 

union was limited to members of three 

locals; all of the credit union directors 

were local officials and employees. Four 

loan officers, three of whom were 

officers of the Local, received 61 percent 

of the credit union’s loans. 

Under the final rule, each labor 

organization in these examples would 

have been required to file a Form T–1 

because each of these funds is a 3(l) 

trust. In each instance, the labor 

organization’s contribution to the trust, 

including contributions made on behalf 

of the organization or its members, 

made alone or in combination with 

other labor organizations, represented 

greater than 50 percent of the trust’s 

revenue in the one-year reporting 

period. The labor organizations would 

have been required to annually disclose 

for each trust the total value of its assets, 

liabilities, receipts, and disbursements. 

For each receipt or disbursement of 

$10,000 or more (whether singly or in 

the aggregate), the labor organization 

would have been required to provide 

the name and business address of the 

individual or entity involved in the 

transaction(s), the type of business or 

job classification of the individual or 

entity, the purpose of the receipt or 

disbursement, its date, and amount. 

Further, the labor organization would 

have been required to provide 

additional information concerning any 

trust losses or shortages, the acquisition 

or disposition of any goods or property 

other than by purchase or sale; the 

liquidation, reduction, or write off of 

any liabilities without full payment of 

principal and interest, and the extension 

of any loans or credit to any employee 

or officer of the labor organization at 

terms below market rates, and any 

disbursements to trust officers and to 

employees of the trust who received 

more than $10,000 from the trust. 

The need for the Form T–1 is also 

demonstrated by additional examples of 

improper administration and diversion 

of funds from section 3(l) trusts. Labor 

organization officials in New York were 

convicted in a ‘‘pension-fund fraud/ 

kickback scheme’’ where labor 

organization officials were bribed by 

members of organized crime to invest 

pension fund assets in corrupt 

investment vehicles. The majority of the 

funds were to be invested in legitimate 

securities, but millions of dollars were 

placed into a sham investment, which 

was to be used to fund kickbacks to the 

labor organization officers, while the 

return on investment from the majority 

of the legitimately invested assets would 

cover the amounts lost as kickbacks. 

U.S. v. Reifler, 446 F.3d 65 (2d Cir. 

2006); see The Final Report of the New 

York State Organized Crime Task Force: 

Corruption and Racketeering in the New 

York City Construction Industry (1990) 

27–29, 91–92 (describing devices 

typically used by labor organization 

officials and third parties to divert trust 

funds for their own enrichment). 

In another case, nepotism and no-bid 

contracts depleted a labor organization’s 

health and welfare funds of several 

million dollars. The problems 

associated with the fund included, 

among others, paying the son-in-law of 

a board member, a local labor 

organization official, a salary of 

$119,000 to manage a scholarship 

program that gave out $28,000 per year; 

paying a daughter of this board member 

$111,799 a year as a receptionist; and 

paying $123,000 for claims review work 

that required only a few hours of effort 

a week. See Steven Greenhouse, 

Laborers’ Union Tries to Oust Officials 

of Benefits Funds, N.Y. Times, June 13, 

2005, at B5. If the Department’s 

proposed rule had been in place, the 

members of the affected labor 

organizations, aided by the information 

disclosed in the labor organizations’ 

Form T–1s, would have been in a much 

better position to discover the improper 

use of the trust funds and thereby 

minimize the injury to their stake in the 

trust. Further, the fear of discovery 

might have deterred the wrongdoers 

from engaging in the offending conduct 

in the first place. 

As the foregoing discussion makes 

clear, the Form T–1 rule, as set forth in 

this final rule, will add necessary 

safeguards to deter circumvention and 

evasion of the LMRDA’s reporting 


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2The instructions to the Form LM–2 were 

published as part of the 2003 final rule. The 

instructions contain some information relating to 

the Form T–1. The Department will revise the 

relevant portions of the Form LM–2 instructions to 

conform with today’s final rule. 

3Labor organizations hold financial interests in 

various types of section 3(l) trusts, some of which 

they jointly administer with employers and others 

that are wholly administered by labor organizations 

or a trustee or trustees selected by labor 

organizations. Although the Department received 

numerous comments about its proposal, none 

suggested that the test was inappropriate for trusts 

other than those operated jointly with employers. 

The comments instead focused on the application 

of the test to ‘‘Taft-Hartley’’ trusts, i.e., joint labor 

organization and employer trusts established 

pursuant to section 302 of the Taft-Hartley Act. 29 

U.S.C. 186(c) 

It deserves emphasis that the managerial control 

test will not trigger a Form T–1 filing requirement 

for Taft-Hartley funds because they have boards 

whose directors are divided equally between 

employers and labor organizations. (The managerial 

control test requires labor organizations to appoint 

a majority of the board.) Thus, only where the labor 

organization or a combination of labor organizations 

are responsible for a majority of the receipts of the 

trust (financial dominance test) will a Form T–1 be 

required for the trust, and, as discussed later in the 

text of this preamble, this will apply in the 

relatively small number of instances where a TaftHartley fund does not fall within the exemption for 

entities filing the Form 5500. Although many 

commenters asserted, in effect, that labor 

organizations should not have to file a Form T–1 

for any Taft-Hartley trust, they fail to acknowledge, 

as further discussed in the text of the preamble, that 

the DC Circuit recognized the Department’s ability 

to fashion a reporting obligation based either on 

managerial control or financial dominance. 

requirements. It will be more difficult 

for labor organizations and complicit 

trusts to avoid the disclosure required 

by the LMRDA. Labor organization 

members will be able to review financial 

information they may not otherwise 

have had, empowering them to better 

oversee their labor organization’s 

officials and finances as contemplated 

by Congress.2

III. Comments on the Proposal and the 

Department’s Response to the 

Comments 

A. Determining Management Control 

and Financial Dominance 

The final rule adopts a modified 

management control and financial 

dominance test for determining those 

trusts for which a labor organization is 

required to file the Form T–1. 

The Department has clarified the test 

to better identify how to determine 

whether a labor organization’s 

contributions to the section 3(l) trust 

during a reporting period trigger a 

reporting obligation. As a general rule, 

a labor organization must file a report 

only if it alone or in combination with 

other labor organizations (1) selects or 

appoints the majority of the members of 

the trust’s governing board, or (2) 

contributes more than 50 percent of the 

trust’s receipts during the annual 

reporting period; contributions made 

pursuant to a collective bargaining 

agreement shall be considered 

contributions by the labor organization. 

The Department has also modified two 

terms used in the proposed rule in 

determining whether a labor 

organization must file a Form T–1 for a 

section 3(l) trust by: 

• Substituting ‘‘receipts’’ in place of 

‘‘revenues,’’ the term used in the 

proposal; the change addresses 

accounting concerns raised by some 

commenters; and 

• Substituting the phrase 

‘‘contributions made pursuant to a 

collective bargaining agreement shall be 

considered the labor organization’s 

contributions’’ in place of 

‘‘contributions made on behalf of the 

labor organization or its members shall 

be considered the labor organization’s 

contribution’’; this change clarifies that 

only contributions by employers that are 

required under an agreement negotiated 

by labor organizations should be 

counted as labor organization 

contributions and that other 

contributions, including contributions 

made by employees themselves should 

not be counted as labor organization 

contributions. 

The Department received numerous 

comments on the proposed management 

control and financial dominance test. 

Most commenters opposed the proposed 

test, focusing on its application to TaftHartley trusts.3 Commenters asserted 

that the proposal was contrary to the 

decisions in court challenges to the 

Department’s earlier efforts to establish 

a Form T–1: AFL–CIO v. Chao, 409 F.3d 

377 (DC Cir. 2005) (2003 final rule); 

AFL–CIO v. Chao, 496 F. Supp. 2d 76, 

90 (D.DC 2007) (2006 final rule); 

violated ERISA or at least created 

unnecessary burden for section 3(l) 

trusts subject to ERISA; ignored the 

legal status of trusts and the fiduciary 

duty that trust officials owe to the trust 

exclusively, not to the labor 

organizations or employers participating 

in the trust; and mistakenly 

characterized contributions by 

employers on behalf of employees to the 

trusts as contributions by or on behalf 

of the participating labor organizations. 

Some commenters expressed concern 

about practical difficulties associated 

with the proposal, including how to 

differentiate between labor organization 

members and others as beneficiaries 

under the trust and how to measure the 

trust’s revenues during a reporting 

period to determine whether labor 

organization contributions constitute a 

majority of such revenues. 

Whether the Management Control and 

Financial Dominance Test Is Justified 

and Consistent With Form T–1 Court 

Decisions 

A Member of Congress expressed a 

concern—which is representative of 

several other comments—that the 

Department’s proposal failed to heed the 

instructions provided by the court of 

appeals and the district court in the 

above cited cases. With respect to the 

2006 rule, the same commenter stated: 

Without any explanation or justification 

* * * the 2006 final rule stated that in order 

to determine whether unions have financial 

domination over a trust, ‘‘contributions by an 

employer on behalf of the union members as 

required by a collective bargaining agreement 

are considered to be contributions of the 

union as are any contributions otherwise 

made on the union’s behalf.’’ Id. at 57,746. 

By counting employers’ contributions to 

trusts as union contributions, the rule 

continued to require disclosure from the vast 

majority of trusts in which unions are 

interested, since employers routinely make 

the majority of contributions to thousands of 

multi-employer Taft-Hartley funds that 

provide pension, health, and other benefits to 

union workers. 

Another commenter asserted that the 

Department’s proposal ‘‘is based on a 

basic misunderstanding of collective 

bargaining.’’ A third commenter 

described the Department’s proposal as 

based on the mistaken basis that 

‘‘employers have no interest in how a 

trust invests and spends its money.’’ 

The Department disagrees with the 

assertion that the determination that a 

labor organization has financial 

dominance based on employer 

contributions pursuant to a collective 

bargaining agreement is either 

unexplained or unjustified. The 

‘‘financial dominance’’ test was 

developed in response to the DC 

Circuit’s opinion in AFL–CIO v. Chao. 

In that case, the court vacated the 

Department’s 2003 Form T–1 final rule 

(68 FR at 58374) on the ground that the 

Department exceeded its authority by 

‘‘requiring general trust reporting.’’ Id. 

at 378–79, 391. As explained in the 

NPRM, the court held that ‘‘absent 

circumstances involving dominant 

control over the trust’s use of union 

members’ funds or union members’ 

funds constituting the trust’s 

predominant revenues, a report on the 

trust’s financial condition and 

operations would not reflect on the 

related union’s financial condition and 

operations.’’ 73 FR 11757. 

The NPRM further explained: 

[T]he court focused its inquiry on the 

extent of the labor organizations’ relationship 


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4 In its proposal, the Department noted that in 

other contexts, effective, de facto, or practical 

control is an appropriate measure of control, 

explaining that such a standard would also be 

consistent with the DC Circuit’s opinion. In the 

proposal, the Department observed that some legal 

commenters had expressed the view that practical 

control over many Taft-Hartley trusts had been 

ceded to labor organizations. 73 FR at 11762. The 

Department invited comment on whether this 

observation was accurate and, if so, for this reason 

or other independent reasons, whether the 

Department should establish a reporting threshold 

that is based on less than predominant labor 

organization control over a section 3(l) trust. No 

commenter supports this observation as accurate 

and several stated that it was contrary to their 

experience. As such the Department has retained 

the filing thresholds contained in the NPRM instead 

of adopting lower thresholds. 

with section 3(l) trusts and indicia of their 

management control or financial domination 

of the trusts. Id. at 388–89. * * * [T]he 

appeals court found that the Secretary had 

not demonstrated how a labor organization’s 

contribution of $10,000, an amount that 

could be infinitesimal given the trust’s other 

contributions, could be indicative of the 

labor organization’s ability to exercise any 

effective control over the trust. 

* * * 

Under this proposal, management 

domination or financial control is 

determined by looking at the involvement of 

all labor organizations contributing to or 

managing the trust. As discussed above, the 

Department’s experience, as noted by the DC 

Circuit in its 2005 opinion, demonstrates that 

participating labor organizations may ‘‘retain 

a controlling management role, [even though] 

no individual union wholly owns or 

dominates the trust.’’ 409 F.3d at 389. This 

occurs, for example, where a trust is created 

from the participation of several labor 

organizations with common affiliation, 

industry, or location, but none alone holds 

predominant management control over or 

financial stake in the trust. Absent the Form 

T–1, the contributing labor organizations, if 

so inclined, would be able to use the trust as 

a vehicle to expend pooled labor organization 

funds without the disclosure required by 

Form LM–2 and the members of these labor 

organizations would continue to be denied 

information vital to their interests. If a single 

labor organization may circumvent its 

reporting obligations when it retains a 

controlling management role or financially 

dominates a trust, then a group of labor 

organizations may also be capable of doing 

so. A rule directed to preventing a single 

labor organization from circumventing the 

law must, in all logic, be similarly directed 

to preventing multiple labor organizations 

from also evading their legal obligations. 

73 FR at 11761. The NPRM also 

explained: 

[T]ypically the establishment of such trusts 

and their funding is set through collective 

bargaining. Such payments comprise a 

portion of the employer’s labor expenses, 

along with salaries, wages, and employer 

administered benefits. Thus, the money paid 

into the trusts reflects payments that 

otherwise could be made directly to 

employees as wages, benefits, or both, but for 

their assignment to the trusts. 

Id. 

With respect to the Department’s 

current proposal, a Member of Congress 

expressed the following opinion: 

The Department * * * does not explain 

how an employer’s contributions to an 

employee benefit fund (which is jointly 

administered by labor and management 

trustees) on behalf of its employees could 

cause a union to exercise such financial 

domination. The Department’s failure to 

explain the legal and empirical justifications 

for this controversial policy [has] deprive[d] 

interested parties of the opportunity to 

provide meaningful comments on the 

proposal and test the Department’s analysis. 

In addition, because the District Court noted 

that the question of whether an employer’s 

trust contributions cause union financial 

domination of trusts is an ‘‘empirical’’ 

question, the Department’s failure to present 

any empirical information makes it very 

likely that the District Court will vacate the 

rule for a third time. 

Another commenter stated that the 

Department relied heavily on a 

presumption that employer 

contributions to jointly-trusteed funds 

are tantamount to union contributions 

for the purposes of establishing ‘‘union 

domination’’ of the trusts, adding that 

unions cannot unilaterally compel 

employers to make contributions. 

The NPRM explained the 

Department’s rationale for establishing 

employer contributions as indicia of 

financial control over a trust by labor 

organizations. The NPRM sketched the 

contemporary and historical instances 

of the diversion of trust funds to labor 

organization officials and third parties 

working with them, including instances 

of trusts funded with employer 

contributions and theoretically subject 

to the control of trustees appointed by 

labor organizations and employers and 

subject to strict fiduciary duties. Trusts 

that are set up pursuant to collective 

bargaining agreements between a labor 

organization and the employer, the 

terms of which, and level of 

contributions to, are established in those 

agreements are subject to considerable 

influence by the labor organization.4 At 

the same time, the Department fully 

recognizes that labor organizations do 

not have a free hand in setting 

contribution amounts. As several 

commenters recognized, the amount of 

an employer’s contributions to such a 

trust is part of the employer’s total labor 

costs. How the employer’s ‘‘labor 

outlay’’ is allocated is of relatively 

greater concern to the labor organization 

than the employer, a factor that directly 

affects the amount of a trust’s funding, 

especially to the extent that money is 

allocated on some basis, such as 

training, that does not serve equally 

each particular individual’s interests, 

such as where there is an across the 

board increase in health benefits or in 

the hourly rate of pay. As such, 

contributions paid into the trust by 

employers provide an effective gauge of 

the labor organizations influence over a 

trust’s financial operations. 

In order to prevent circumvention or 

evasion for purposes of reporting, it is 

necessary to equate employer payments 

to the trust on behalf of employees as 

contributions by the labor organization, 

not in the sense that the contributions 

are the property of the labor 

organization, but rather that the amount 

of those contributions serves as a proxy 

for measuring the labor organization’s 

influence over the trust. As the D.C. 

Circuit explained, notwithstanding a 

trust’s funding by an employer, such 

trusts are properly regulated by the 

Department under 29 U.S.C. 208, 

because ‘‘[f]or such trusts, the union has 

used its bargaining power to establish 

the trust, to define the purposes for 

which funds may be used, to appoint 

union representatives to the governing 

board * * * and to obligate the 

employer to direct funds to the trust’s 

account.’’ AFL–CIO v. Chao, 409 F.3d 

387. Under the proposed and final rule, 

in contrast to the 2003 rule, a labor 

organization is required to file a Form 

T–1 only where the labor organization 

has predominant managerial control 

over the trust or the trust’s revenues are 

‘‘dominated by union member funds,’’ 

i.e., funds contributed on their behalf by 

an employer. See 403 F.3d at 391. 

Inasmuch as Taft-Hartley trusts by 

definition are funded by employer 

payments under these agreements, the 

commenters’ assertion, in essence, is 

reduced to the proposition that TaftHartley trusts cannot be subject to the 

Form T–1 reporting obligation given the 

source of their funding. This position, 

however, ignores the D.C. Circuit’s 

rejection of this theory. 409 F.3d at 387 

(‘‘[Section 3(l)’s] terms do not dictate a 

narrow conception of union financial 

operations such that as the AFL–CIO 

maintains, Taft Hartley * * * plans 

funded by employer rather than union 

contributions * * * would be beyond 

the reach of [the Department’s] authority 

under section 208’’). Moreover, this 

position also lacks support under the 

district court’s decision in AFL–CIO v. 

Chao, 496 F. Supp. 2d 76 (D.D.C. 2007) 

(vacating the 2006 Form T–1 Final Rule 

on procedural grounds). That decision 

simply noted that the AFL–CIO had 

asserted that the Department’s 

determination to include employer 

contributions as part of a labor 

organization’s financial stake in a trust 

lacked an ‘‘empirical basis.’’ See 496 F. 


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5A commenter asserted, without elaboration, that 

the Department’s proposal violates section 302(c) of 

the LMRA. The Department disagrees with this 

statement. As evinced by section 208 of the 

LMRDA, Congress expressly recognized the 

Department’s authority to require labor 

organizations to report on the financial interests of 

section 3(1) trusts. Moreover, there is a clear 

distinction between the reporting requirements of 

the LMRDA and the substantive requirements of 

section 302(c); that section strictly limits payments 

by employers to trusts in which labor organization 

have an interest without indicating that these 

requirements would ‘‘preempt’’ reporting 

requirements of the LMRDA or ERISA. 

Supp. 2d at 90. The court did not 

suggest that it agreed with the assertion. 

Id. This result is consistent with D.C. 

Circuit’s recognition of the Department’s 

authority to require labor organizations 

to report on the financial operations of 

Taft-Hartley trusts and the Court’s 

acknowledgment of the Department’s 

finding that a joint training fund (TaftHartley trust) could be required to file 

a Form T–1. See 409 F.3d at 387. As 

observed by the district court, ‘‘[t]he DC 

Circuit’s 2005 decision * * * left the 

Secretary ample discretion in fashioning 

a new rule’’ and that ‘‘included within 

the bounds of that discretion * * * was 

the decision to equate employer 

contributions made pursuant to a 

collective bargaining agreement with 

contributions from the unions 

themselves.’’ 496 F. Supp. 2d at 87. 

Additionally, as discussed above, the 

Department’s position fully recognizes 

that the funding of section 3(l) trusts is 

dependent upon collective bargaining. 

Because the amount of the contributions 

to a trust is tied directly to the collective 

bargaining agreement, it is entirely 

appropriate to use the payments made 

by an employer pursuant to that 

agreement as a proxy for measuring the 

influence of the labor organization over 

the trust. Where those contributions 

comprise a majority of the trust’s 

receipts, it is also entirely appropriate to 

require labor organizations to file a 

Form T–1. 

Under the final rule, management 

control or financial dominance is 

determined by looking at the 

involvement of all the labor 

organizations contributing to or 

managing the trust. As noted by the D.C. 

Circuit, the Department’s experience 

demonstrates that participating labor 

organizations may ‘‘retain a controlling 

management role, [even though] no 

individual union wholly owns or 

dominates the trust.’’ 409 F.3d at 389. 

This occurs, for example, where several 

labor organizations with common 

affiliation, industry, or location, 

participate in a trust, but none alone 

holds predominant management control 

over or dominates the trust financially. 

Absent the Form T–1, the contributing 

labor organizations, if so inclined, 

would be able to use the trust as a 

vehicle to expend pooled labor 

organization funds without the 

disclosure required by Form LM–2, 

thereby denying members of the 

participating labor organizations 

information vital to their interests. If a 

single labor organization may 

circumvent its reporting obligations 

when it retains a controlling 

management role or financially 

dominates a trust, then a group of labor 

organizations may also be capable of 

doing so. 

Whether the Management Control and 

Financial Dominance Test Is Necessary 

in Light of, and Can Be Reconciled 

With, Other Regulatory Regimes 

Commenters asserted that the 

proposal exceeds the Department’s 

authority under the LMRDA and 

ignored ERISA’s effectively exclusive 

regulation of Taft-Hartley trusts. 

Some commenters stated that 

Congress did not intend the Department 

to regulate employee benefit trusts 

under the LMRDA, and instead sought 

to regulate these trusts, mandate 

disclosure, and prevent misconduct 

through ERISA and the Welfare and 

Pension Plans Disclosure Act of 1958 

(WPPDA), the pension law that 

preceded ERISA.5 Accordingly, the 

commenters assert that the Department 

should withdraw its proposed financial 

dominance test, which has the primary 

effect of imposing LMRDA reporting 

requirements on ERISA plans. 

Most of the commenters objected to 

the financial dominance test on the 

ground that the trustees of a Taft-Hartley 

trust owe an absolute duty of loyalty to 

the trust—to the exclusion of any duties 

to either the labor organization or the 

employer. They explained that the 

funding of the trust by agreement 

between the labor organization and the 

employer does not evince labor 

organization (or management) control 

over the trust. 

There is no merit to the claim that 

ERISA was intended to supplant the 

LMRDA insofar as requiring labor 

organizations to report on the financial 

interests of trusts in which they hold 

management control or financial 

dominance. Section 514(d) of ERISA 

states: ‘‘Nothing in this subchapter shall 

be construed to alter, amend, modify, 

invalidate, impair, or supersede any law 

of the United States [with exceptions 

not here pertinent] or any rule or 

regulation issued under any such law.’’ 

29 U.S.C. 1144(d). The WPPDA 

contained a similar provision, casting 

doubt on the assertion that these Acts 

constrain the Department’s authority 

under the LMRDA. See WPPDA section 

10(b) (72 Stat. at 1003 (1958) (WPPDA 

does not exempt any person from any 

duty under any present or future federal 

law affecting the administration of 

employee welfare or pension benefit 

plans)). In the Department’s view, the 

LMRDA and ERISA serve 

complementary purposes. There also is 

an evident similarity between the duty 

labor organizations officials owe to their 

labor organization and the duty trust 

officials owe to their trust. 

Contrary to an implicit premise 

underlying many of the comments that 

ERISA and the LMRDA are co-extensive 

insofar as labor organization-related 

trusts are concerned, ERISA applies to 

only a subset of the section 3(l) trusts. 

Some section 3(l) trusts are not covered 

at all by ERISA. Title I of ERISA covers 

only pension and ‘‘employee welfare 

benefit plans’’ established or maintained 

(1) by any employer engaged in 

commerce or in any industry or activity 

affecting commerce; or (2) by any 

employee organization or organizations 

representing employees engaged in 

commerce or in any industry or activity 

affecting commerce; or (3) both. 29 

U.S.C. 1003(a). While there is 

considerable overlap between section 

3(l) trusts and ERISA ‘‘employee welfare 

benefit plans,’’ some funds in which 

labor organizations participate fall 

outside ERISA coverage, including 

strike funds, recreation plans, hiring 

hall arrangements, and unfunded 

scholarship programs. 29 CFR 2510.3–1. 

Other section 3(l) trusts that are subject 

to ERISA are not required to file the 

Form 5500 or file only abbreviated 

annual reports. See, e.g., 29 CFR 

2520.104–20 (welfare plans with fewer 

than 100 participants); 29 CFR 

2520.104–26 (unfunded dues financed 

welfare plans); 29 CFR 2520.104–27 

(unfunded dues financed pension 

plans). See also Reporting and 

Disclosure Guide for Employee Benefit 

Plans, U.S. Department of Labor (2004 

ed.), available at http://www.dol.gov/ 

ebsa/pdf/rdguide.pdf. 

Several commenters stated that 

section 302 of the Labor Management 

Relations Act (Taft-Hartley Act) 

contains structural requirements 

designed to avoid any possibility of 

labor organization dominance, 

including a requirement that payments 

must be held in trust for the sole and 

exclusive benefit of employees and their 

dependents, and a requirement of an 

annual audit. They assert that section 

302 was enacted precisely ‘‘to ensure 

that the funds in such a trust are not 

used as a labor organization ‘war 

chest’.’’ NLRB v. Amax Coal Co., 453 


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U.S. 322 (1981). By definition, therefore, 

they argue that trusts that are subject to 

section 302 cannot be subject to labor 

organization dominance and therefore 

pose no risk of ‘‘circumvention or 

evasion’’ of the LMRDA’s reporting 

requirements. In the NPRM, the 

Department explicitly recognized the 

fiduciary duties that apply to trustees 

under ERISA. Nothing in the proposal 

suggested that trustees routinely ignore 

these duties and put the interests of 

their labor organizations or their own 

interests ahead of their obligation to the 

trust. The Department recognizes that 

most trustees faithfully observe their 

duties. Nonetheless, it cannot be 

doubted that there are also instances 

where those duties are ignored with the 

attendant loss of funds held in trust for 

the labor organization and its members. 

This rule is prophylactic; as such, of 

necessity it must require reporting even 

where trustees faithfully observe their 

duties. At the same time, its reach is 

necessary to empower labor 

organization members to determine 

whether transactions between the trust 

and other individuals and entities are 

proper. In many instances, the rule also 

allows labor organization members and 

this Department to determine whether 

transactions by or with the trust created 

a reciprocal reporting obligation on 

labor organization officials and 

employers who have separate reporting 

obligations under the LMRDA. As stated 

in the NPRM, ‘‘[b]ecause a labor 

organization’s obligation to submit a 

Form T–1 overlaps with the 

responsibility of the labor organization 

officials [pursuant to 29 U.S.C. 432] to 

disclose payments received from the 

trust, the prospect that one party may 

report the payment increases the 

likelihood that a failure by the other 

party to report the payment will be 

detected.’’ 

As an additional benefit, the 

transparency provided by the rule may 

have the salutary benefit of deterring 

individuals from engaging in improper 

or illegal transactions. Neither as 

proposed nor modified in this final rule 

does the reporting obligation interfere 

with ERISA. Indeed, given that labor 

organizations now have no obligation to 

file Form T–1 for many if not most 

trusts subject to ERISA, the arguments 

against the proposal on this basis lose 

much of their force. 

Where trusts are not subject to ERISA 

or not required to file the annual reports 

required of most ERISA-regulated trusts, 

the Form T–1 reporting obligation 

provides labor organization members 

their first opportunity, in most 

instances, to receive an annual report on 

the financial operations of their labor 

organization’s section 3(l) trusts. 

Whether the Management Control and 

Financial Dominance Test Creates 

Unwarranted Compliance Difficulties 

Some commenters expressed concern 

about the practical difficulty of 

determining whether a trust beneficiary 

was a labor organization member or not. 

Some commenters noted that although 

the trusts have records distinguishing 

between contributions submitted 

pursuant to collective bargaining 

agreements—as distinct from 

contributions submitted on behalf of 

non-bargaining unit groups, the trusts 

do not have records permitting them to 

differentiate employer contributions 

made on behalf of labor organization 

members from contributions made on 

behalf of non-labor organization 

employees. These commenters stated 

that in order to provide such data labor 

organizations would be required to ask 

participating employers to take on an 

additional reporting obligation to the 

plans. A commenter explained that in 

order to determine whether the 50% 

revenue threshold was met, the trust 

and the labor organization would have 

to exchange records to identify trust 

participants who are members of the 

labor organization, a task that would 

require significant time. 

These concerns are based upon a 

simple misunderstanding of the 

proposal and are easily resolved. As 

discussed in the NPRM, 73 FR 11758– 

61, the labor organization exercises 

effective control over a trust if it directly 

contributes the trust’s funds or if it 

negotiates with an employer for 

employer funding of the trust. Whether 

the individuals on whose behalf 

contributions are made pursuant to a 

collective bargaining agreement are 

themselves members of the labor 

organization is irrelevant. Thus, it is not 

necessary to determine how many 

beneficiaries of the trust are members or 

non-members of the labor organization 

to determine whether the threshold has 

been met; instead the relevant factor for 

making this determination is the 

amount of receipts contributed pursuant 

to the collective bargaining agreement, 

whether made on behalf of members or 

non-members. 

Contributions made pursuant to a 

collective bargaining agreement by an 

employer will be considered 

contributions of the labor organization 

(as, of course, would contributions by 

the labor organization itself). The 

instructions and regulation have been 

revised accordingly. Consequently, the 

phrase ‘‘contributions made on behalf of 

the labor organization or its members 

shall be considered the labor 

organization’s contribution’’ has been 

revised to read ‘‘contributions made 

pursuant to a collective bargaining 

agreement shall be considered the labor 

organization’s contributions.’’ 

Contributions received by the trust on 

behalf of persons represented by the 

labor organization but who are not 

members of the labor organization (such 

as agency fee payers) would thus be 

included within the definition of 

‘‘receipts.’’ The test is whether the 

contributions are made pursuant to a 

collective bargaining agreement. The 

test is not whether the beneficiaries of 

the trust are labor organization 

members. 

Whether Financial Dominance Should 

Be Measured by ‘‘Receipts’’ or by 

‘‘Revenue’’ 

Several commenters asked the 

Department to clarify how to determine 

whether the labor organization’s 

contributions comprised a majority of 

the trust’s revenues during the reporting 

period. In the NPRM, the Department, as 

noted above, framed its financial 

dominance test in terms of a labor 

organization’s contributions (more than 

50%) of the trust’s revenues during the 

annual reporting period. The term 

‘‘revenue’’ was used by the D.C. Circuit 

in discussing how the Department could 

properly fashion a reporting obligation 

where a labor organization or labor 

organizations financially dominated a 

trust. See AFL–CIO v. Chao, 409 F.3d at 

390. The court did not define this term, 

nor suggest that its usage was to limit 

the Department to an approach 

constrained by the technical meaning 

ascribed to the term by accountants. 

Some commenters noted that the term 

‘‘revenue’’ has a different meaning than 

‘‘receipts.’’ One commenter, noting that 

accounting professionals use slightly 

different interpretations of what 

constitutes ‘‘revenue,’’ proposed the 

following as included within its reach— 

contributions, interest and liquidated 

damages charged for delinquent 

contributions, all investment income, 

realized gains, grants, rents, 

reimbursements and other income, 

grants and employee elective deferrals 

to 401(k) and cafeteria plans. Some 

commenters asserted that if ‘‘revenue’’ 

is defined in such a way as to include 

income such as capital gains, interest, 

dividends and the like, then many trusts 

will fall in and out of Form T–1 

coverage depending on market returns. 

They explained that this could result in 

a lack of disclosure in good financial 

years, and conversely, could require 

reporting in poor financial years. The 

resulting shifting reporting requirements 


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would lead to a lack of consistent 

reporting on these trusts and create 

confusion for labor organization 

members. Thus, for example, if 

‘‘revenue’’ includes all amounts 

received from the sale of securities, even 

when promptly reinvested or ‘‘rolled 

over,’’ the amount of ‘‘revenue’’ 

attributable to the trust could easily 

dwarf any other source of income or 

receipts, reducing the number of Form 

T–1 reports filed. 

The Department agrees that the rule 

should be clarified. To address these 

concerns, the Department has adopted 

for this purpose the ‘‘receipts’’ test used 

in the Form LM–2. Thus, the 

instructions to the Form T–1 now 

provide that ‘‘receipts’’ means anything 

actually received by the labor 

organization within that fiscal year, 

with the one exception being sales of 

investments that are promptly 

reinvested. In that situation, only the 

capital gain is counted toward the gross 

receipts figure. 

For purposes of the Form T–1, the 

term ‘‘receipts’’ will include cash, 

interest, dividends, realized short and 

long term capital gains, rent, royalties 

and other receipts of any kind. 

It will exclude investment proceeds 

that are promptly reinvested. Generally, 

‘‘promptly reinvested’’ means 

reinvesting (or ‘‘rolling over’’) the funds 

in a week or less without using the 

funds for any other purpose during the 

period between the sale of the 

investment and the reinvestment. This 

change lessens the likelihood that 

market fluctuations will move the trust 

in and out of coverage in a given fiscal 

year. Market performance volatility will 

be less likely to affect reporting 

requirements because receipts will not 

be registered until gains from the sale of 

securities are realized. 

A commenter pointed out that labor 

organization members have an interest 

in the governance of the trusts that 

extends beyond the fiscal year in which 

particular contributions were made, 

suggesting that the financial dominance 

test should look to a multi-year period 

to determine Form T–1 coverage. While 

the Department believes there is some 

merit to the suggestion, the Department 

believes that a multi-year approach is 

unworkable. The key factor to showing 

financial dominance is the position of 

the labor organization as an entity that 

bargains with employers and is thus in 

a position to exert control over the 

contributions to the trust. If there are no 

contributions made in a particular fiscal 

year it is difficult to show that a labor 

organization is in a position to 

financially dominate these trusts. 

Furthermore, outside the Taft-Hartley 

trust context, a labor organization is 

more likely to be required to file a Form 

T–1 because it has managerial control 

over a trust and not because of financial 

dominance. 

Two commenters stated that the 

Department’s test would require reports 

from single employer trusts (whose 

contributions are not established 

pursuant to a collective bargaining 

agreement) that have equal (labor 

organization and employer) 

representation on their governing 

boards. One of these commenters also 

stated that some single employer plans, 

established pursuant to a collective 

bargaining agreement, are administered 

without any labor organization 

involvement. The Department has 

determined that these plans, and other 

such trusts that are employer created 

and employer administered, do not fall 

within the scope of section 3(l). 

Whether Elective Deferrals Are 

Considered in Determining Financial 

Dominance 

One commenter, a 401(k) plan 

multiemployer defined contribution 

pension plan, receives payments from 

employees who have the option to defer 

a portion of their wages to the plan. 

Employees have the opportunity, in 

addition, to control how their funds are 

invested. The commenter expressed 

uncertainty over whether these elective 

deferrals made by the employees 

themselves are considered labor 

organization-derived payments that 

establish financial dominance, arguing 

that they should not be so treated. The 

Department agrees that employeedirected payments to the trust should 

not be treated as labor organization 

contributions. 

Managerial Control and Taft-Hartley 

Funds 

The Department received few 

comments on the managerial control test 

it proposed. These comments were in 

the context of trustees appointed to the 

board of directors of a Taft-Hartley fund. 

The boards of these funds are allocated 

half to employer representatives and 

half to labor organization 

representatives. As such no Taft-Hartley 

fund would ever meet the managerial 

control trigger for filing the Form T–1 as 

the trigger requires the labor 

organization to appoint or select a 

majority of the board before filing is 

required. However, as discussed above, 

Taft-Hartley funds could be subject to 

the financial dominance test. 

B. Applicability of the Form T–1 

Reporting Requirement to Smaller Labor 

Organizations 

The Department proposed a reporting 

threshold based solely on the size of the 

labor organization; labor organizations 

with total annual receipts of at least 

$250,000 must file a Form T–1 for a 

section 3(l) trust, if the labor 

organization alone or with other labor 

organizations exercises management 

control or financial dominance over the 

trust. The Department received no 

comments regarding this aspect of its 

proposal. This final rule maintains this 

reporting threshold and the Form T–1 

reporting requirement only applies to 

those labor organizations with total 

annual receipts of at least $250,000. The 

Department believes that limiting the 

Form T–1 reporting requirement to the 

largest labor organizations responds to 

concerns that the Form T–1 would 

impose a substantial burden on smaller 

labor organizations. By requiring a Form 

T–1 to be filed only by a labor 

organization with annual receipts of at 

least $250,000, the proposed rule is 

consistent with the reporting threshold 

for Form LM–2. The $250,000 reporting 

threshold ensures that labor 

organizations required to file Form T–1 

will be better prepared to meet the 

recordkeeping burden, having already 

had experience with the recordkeeping 

and reporting software utilized for the 

filing of Form LM–2. 

C. Elimination of Threshold 

Requirements in Prior Rules 

In addition to limiting reporting to 

labor organizations with at least 

$250,000 in annual receipts, the 2003 

and 2006 final rules conditioned 

reporting on a two-part threshold 

($10,000 or greater contribution 

threshold for the reporting labor 

organization and a $250,000 or greater 

receipts threshold for the trust). In the 

NPRM, the Department proposed 

eliminating these thresholds and this 

final rule does not include a 

contribution threshold for the reporting 

labor organization or a receipt threshold 

requirement for the trust. 

Several commenters objected to the 

removal of the $10,000 contribution 

threshold for reporting labor 

organizations and stated that the 

threshold should be maintained. 

Commenters stated that the $10,000 

contribution threshold represented a 

reasonable determination by the 

Secretary of the appropriate balance of 

benefit and burden, i.e. the burden of 

filing the Form T–1 on labor 

organizations contributing less than 

$10,000 outweighed the marginal 


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increase in transparency. Commenters 

asserted that it would be hugely 

disproportionate to impose the 

burdensome cost of Form T–1 

compliance when a small amount of 

labor organization funds are at stake. A 

commenter questioned whether the 

management control and financial 

dominance requirements for filing a 

Form T–1 would alleviate the difficulty 

in obtaining information from the trusts. 

Two commenters asserted that the 

proposed rule did not offer a reasoned 

basis for the removal of the $10,000 

labor organization contribution 

threshold. The commenters further 

noted that there has been no evidence 

of changed facts or circumstances that 

would warrant the departure from the 

threshold requirements of previous 

proposed Form T–1 rules. 

As noted in the NPRM the $10,000 

contribution threshold was included in 

the 2003 and 2006 final rules in 

response to concerns about a labor 

organization’s ability to obtain the 

required information from trusts in 

which they did not have a substantial 

stake. The Department believes that 

limiting the trust reporting requirement 

to trusts in which a labor organization 

exercises management control or 

financial dominance, as discussed above 

in section A, addresses this concern. 

Moreover, the Department believes that 

under the LMRDA labor organization 

members have an interest in financial 

transparency related to trusts to which 

their labor organizations contribute 

regardless of the amount of the 

contribution. 

The recordkeeping and reporting 

burdens correspond to the size of the 

trust. Smaller trusts have smaller 

burdens in these areas than do large 

trusts. A member’s interest in knowing 

the details of financial dealings is not 

diminished simply because the trust is 

smaller. Even in smaller trusts, members 

are likely to be interested in the nature 

and purpose of the trust, the spending 

decisions of the trust, the money 

directed to the trust as compared to the 

wages or wealth of the members, and 

the extent of the labor organization’s 

control and domination of the trust. The 

Department’s proposal to require 

reporting by labor organizations with 

annual receipts of at least $250,000 

tracks the mandatory filing threshold for 

the Form LM–2. Requiring the filing of 

a Form T–1 on the same basis as the 

filing of the Form LM–2 ensures that 

labor organizations required to file Form 

T–1 will be better prepared to meet the 

recordkeeping burden having had 

experience with the recordkeeping and 

reporting software utilized for filing the 

Form LM–2. 

The Department was persuaded to 

change to a filing requirement based on 

the size of the labor organization rather 

than amount of contribution to a trust 

by comments in connection with the 

2002 NPRM. Many commenters during 

the 2002 rulemaking expressed the view 

that the relative size of a labor 

organization, as measured by its overall 

finances, would affect its ability to 

comply with the proposed Form T–1 

reporting requirements. 

In proposing to eliminate the 

$250,000 receipts threshold for trusts, 

the NPRM noted that the Department’s 

review of section 3(l) trusts revealed 

that a number of trusts do not have 

substantial annual receipts yet still hold 

large amounts of labor organization 

derived money. One building trust held 

$802,323 in assets, yet had less than 

$200 in receipts. Another trust reported 

$434,501 in assets, only $45,285 in 

receipts, and rental expenses of $75,483 

resulting in net receipts of ¥$29,198. 

Removing the $250,000 annual receipts 

threshold provides for the disclosure of 

significant financial information. As 

noted in the NPRM, by not including a 

receipts threshold for trusts labor 

organization, members will have greater 

transparency and access to information 

relating to trusts that hold large amounts 

of labor organization derived money yet 

do not receive a significant amount of 

annual receipts. 

Commenters objected to the removal 

of the $250,000 receipts threshold for 

trusts because they argued that it may 

result in Form T–1 reporting of trusts 

with insubstantial receipts or assets and 

result in a burden that may outweigh 

the benefit of disclosure. Commenters 

also stated that the proposed rule did 

not offer enough evidence or a reasoned 

basis for the removal of the $250,000 

threshold. Specifically, a commenter 

questioned the Department’s examples 

of building trusts that have significant 

labor organization derived assets but do 

not receive significant receipts. A 

commenter further noted that there has 

been no evidence of changed facts or 

circumstances that would warrant the 

departure from the threshold 

requirements of previous proposed 

Form T–1 rules. A labor organization 

commented that the $250,000 receipts 

threshold limited Form T–1 reporting to 

significant trusts. The commenter 

asserted that the occurrence of a trust 

with significant assets but no significant 

receipts was rare and that the benefits 

of including such trusts were 

outweighed by the burden of filing 

reports on trusts that are insignificant. 

After considering the comments in 

opposition, the Department has 

concluded that the final rule will not 

include the $250,000 receipts threshold 

for trusts. Eliminating the $250,000 in 

annual receipts threshold for the trust 

operates to provide information about 

trusts to labor organization members 

whose labor organizations have a 

substantial investment in a trust 

notwithstanding the absence of 

significant annual receipts by the trust 

during the reporting period. The two 

examples of such trusts provided in the 

NPRM are illustrative of the problem 

and were not intended to be an 

exhaustive list. Like all the examples in 

the NPRM, they point to the need for 

disclosure. 

The removal of the reporting 

thresholds will substantially increase 

labor organization financial 

transparency and decrease the evasion 

and circumvention of the LMRDA 

requirements. Due to the application of 

the management control and financial 

dominance thresholds set forth in this 

rulemaking, the Department believes 

that the $10,000 contribution threshold 

and the $250,000 annual receipts 

threshold are unnecessary. 

The Department also sought 

comments on whether it would be 

appropriate to establish a threshold 

based on the amount of assets held by 

a trust, and if so, what amount would 

be appropriate. Only one comment 

responded to the Department’s question. 

A labor organization proposed creating 

such a threshold and setting the 

threshold at no less than $250,000 for 

trust assets, in order to minimize the 

burden on small trusts. In the absence 

of significant comment on this point 

and the Department’s further 

consideration of this alternative 

proposal, the Department believes the 

better approach is to continue without 

an asset threshold. The Department 

believes that a member’s interest in the 

details of the labor organization’s 

financial dealings is not diminished by 

the amount of trust assets. A member’s 

interest is more likely to be based on the 

nature and purpose of the trust, the 

spending decisions of the trust, the 

money directed to the trust as compared 

to the wages or wealth of the members, 

and the extent of the labor 

organization’s control and domination 

of the trust. Based on these factors, in 

this final rule the Department has not 

established a reporting threshold based 

on assets held by a trust. 

D. Itemization of Receipts and 

Disbursements 

The Department proposed that the 

Form T–1 include two itemized 

schedules for ‘‘major’’ transactions: 

Schedule 1, which would separately 

identify any individual or entity from 


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which the trust received ‘‘major 

receipts’’ of $10,000 or more, 

individually or in the aggregate, during 

the reporting period; and Schedule 2, 

which would separately identify any 

entity or individual that received ‘‘major 

disbursements’’ of $10,000 or more, 

individually or in the aggregate, from 

the trust during the reporting period. 

The final rule retains the itemization 

and aggregation requirements, but no 

longer requires the itemization of 

receipts by a trust made pursuant to a 

collective bargaining agreement or 

benefit payments made by the trust 

pursuant to a written agreement 

specifying the detailed basis on which 

such payments are to be made. By 

exempting labor organizations from 

filing a Form T–1 for those trusts 

required to file the Form 5500, as 

discussed below, the Department has 

substantially reduced the burden 

associated with this aspect of the rule. 

Additionally, the Department has 

clarified some particular reporting 

requirements, as suggested by 

commenters. 

As stated in the NPRM: 

Itemization is an essential component of 

Form LM–2 and also is integral to Form T– 

1 as a means to prevent circumvention or 

evasion of the reporting obligations imposed 

on labor organizations and labor organization 

officials. Itemization not only provides 

members with information pertinent to the 

trusts, but allows them to better monitor the 

other reporting obligations of their labor 

organization and its officials under the 

LMRDA and to detect and thereby help 

prevent circumvention or evasion of the 

LMRDA’s reporting requirements. Among 

other requirements under this proposal, Form 

T–1 requires a labor organization to identify: 

• The names of all the trust’s officers and 

all employees making more than $10,000 in 

salary and allowances and all direct and 

indirect disbursements to them; 

• Disbursements to any individual or 

entity that aggregate to $10,000 or more 

during a reporting period and provide for 

each individual or entity their name, 

business address, type of business or job 

classification, and the purpose and date of 

each individual disbursement of $10,000 or 

more; and 

• Any loans made at favorable terms by the 

trust to the labor organization’s officers or 

employees, the amount of the loan, and the 

terms of repayment. 

73 FR 11763. Where certain payments 

from a business that buys, sells or 

otherwise deals with a trust in which a 

labor organization is interested are made 

to a labor organization officer or 

employee or his or her spouse, or minor 

child, the LMRDA imposes on the labor 

organization officer or employee a 

separate obligation to report such 

payments (Form LM–30, as required by 

29 U.S.C. 432). Thus, the Form T–1 

operates to deter a labor organization 

official from evading this reporting 

obligation. 

The proposed $10,000 figure is an 

outgrowth of the earlier rulemaking 

efforts and is shaped by the concerns 

there expressed and the Department’s 

accommodation to those concerns. This 

amount is a higher amount than the 

itemization threshold provided for the 

Form LM–2 ($5,000). The Department 

will continue to monitor this threshold, 

as well as all other thresholds 

established by this rule, in order to 

ensure that the information reported is 

meaningful. See 68 FR at 58389. 

The Form T–1 will identify the trust’s 

significant vendors and service 

providers, i.e., those who make or 

receive payments of $10,000 or greater 

during the one-year reporting period. 

Labor organization members will be able 

to utilize the advantages of computer 

technology to review Form T–1s (and 

other documents required to be filed 

under the LMRDA). Electronic filing 

permits the reviewer to use a search 

engine to guide the inquiry, allowing 

review of a potentially large number of 

itemization reports with relative ease 

compared to review of the same 

documents in hard copy. Among other 

uses, a labor organization member who 

is aware that a labor organization 

official has a financial relationship with 

one or more of these businesses will be 

able to determine whether the business 

and the labor organization official have 

filed the required reports (concerning 

their relationship as required by 

sections 202 and 203 of the LMRDA, 29 

U.S.C. 432 and 433). 

The Department proposed that the 

itemization threshold for major receipts 

and disbursements be set at $10,000 in 

the aggregate. No exceptions were 

proposed; however, a special procedure 

was provided for reporting sensitive 

information. Therefore, filers would 

report all trust receipts from any source 

that aggregate to $10,000 or more, as 

well as any disbursements from the trust 

to any source that aggregate to $10,000 

or more during the trust’s fiscal year. 

One commenter urged the Department 

to increase the threshold for larger 

employee benefit plans, and instead 

base it upon a percentage of assets at the 

beginning of the year. This commenter 

also urged the entire elimination of 

itemization of disbursements for benefit 

payments, because of the many 

participants who receive in excess of 

$10,000. This commenter also 

questioned the value of requiring the 

reporting of disbursements to service 

providers and payments to parties-ininterest, which are both reported on the 

Form 5500. Others opposed the 

proposed threshold as being too high, 

and instead would lower it to $5,000, 

which, in their view, would increase 

transparency and align the Form T–1 

with the Form LM–2. 

The Department adopts the $10,000 

threshold requirement for itemization in 

Schedules 1 and 2. This amount, in the 

Department’s view, represents a 

substantial transaction that would be of 

interest to labor organization members. 

For that same reason, a percentage 

threshold would be inappropriate, as it 

would deny information about 

substantial transactions to members of 

labor organizations with considerable 

assets, information about transactions 

that might have a significant impact on 

the labor organization’s finances. A 

percentage-based threshold that is 

subject to annual fluctuation would lack 

predictability and complicate a year-toyear comparison of reports. If a 

percentage test was used based upon a 

percentage of assets at the beginning of 

the year, information concerning large 

trusts would be disclosed in much 

higher dollar amounts and information 

from smaller trusts would be reported in 

smaller amounts. For example, if there 

are two trusts, one with $100,000 in 

assets at the beginning of its fiscal year 

and the other with $10,000,000 at the 

beginning of its fiscal year and the 

itemization threshold was 1 percent, 

then the first trust would report any 

receipts and disbursements that 

aggregate to $1,000 or more while the 

second trust would only report receipts 

and disbursements that aggregate to 

$100,000 or more. 

Because knowledge about significant 

transactions by the trust is an essential 

element of transparency, the size of the 

trust should not affect the members’ 

ability to obtain this information. 

Therefore, the Department adopts a flat 

dollar threshold of $10,000 for 

itemization purposes in order to ensure 

a uniform level of disclosure regardless 

of the size of the trust. Additionally, in 

the Department’s view, the difference 

between the reporting threshold for 

itemized transactions under the Form 

LM–2 ($5,000) and the threshold under 

Form T–1 ($10,000) is appropriate 

because it reduces the reporting burden 

and because the finances of a trust are 

less likely to directly impact labor 

organization members than the 

expenditures by the labor organization 

itself. Finally, as the Department said in 

the NPRM (See 73 FR at 11763–64), the 

Department will continue to monitor 

this threshold and may make future 

adjustments based on experience and 

economic conditions. 

For itemization and reporting 

purposes, the Department proposed that 


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a labor organization aggregate the trust’s 

receipts from, or disbursements to, a 

particular entity or individual during 

the reporting period. The Department 

explained that aggregation provides a 

more accurate picture of a trust’s 

receipts and disbursements because it 

focuses on the total amount of money 

received from or paid to an entity or 

individual, rather than only on 

individual receipts or disbursements. 

The Department further explained its 

view that insofar as such payments are 

of interest to a labor organization 

member, there is no difference between 

a single $10,000 (or more) receipt or 

disbursement from one source and 

several receipts or disbursements from 

one source totaling $10,000 or more. 

Furthermore, aggregation reduces the 

incentive to break up a ‘‘major’’ 

disbursement to a single entity or 

individual in order to avoid itemizing 

the payment and thereby circumvent the 

Form T–1 reporting requirements. 

Several commenters objected to the 

aggregation requirement. One 

commenter suggested that the 

Department remove this requirement 

because it requires labor organizations 

and trusts to tally relatively small 

amounts with no additional benefit. 

After considering the comments, the 

Department has decided to retain the 

‘‘aggregation’’ standard for itemization 

on Schedules 1 and 2. The Department 

believes that multiple payments to or 

from the same individual or entity that, 

combined, surpass $10,000 in any single 

reporting year, require separate 

identification as much as one payment 

of such amount. The benefit of such 

‘‘aggregation’’ is that the labor 

organization member or other viewer of 

the Form T–1 will receive a more 

accurate picture of the financial activity 

of the trust. The additional burden 

imposed on the trust and labor 

organization in tracking these multiple 

payments is offset by the increased 

transparency that enables members to 

know that the trust has made ‘‘major’’ 

disbursements or has received ‘‘major’’ 

receipts, whether in the aggregate or in 

a single instance. 

Several commenters opposed the 

itemization of a trust’s receipts. They 

asserted that it imposed unnecessary 

administrative burden on the trust 

without corresponding benefit of 

disclosure to the labor organization 

members and the public. Others 

expressed concerns over potential 

business competition problems caused 

by labor organization reporting 

individual employer contributions to 

trusts, such as disclosure of detailed 

manpower information and other 

business information. Some commenters 

opposed itemization of certain kinds of 

transactions such as receipts of pension 

funds or the sale of investments because 

they provided no information of value 

to members, plan participants, or the 

public. 

Several commenters opposed 

itemization of disbursements by trusts. 

They asserted that it imposed 

unnecessary administrative burden on 

the trust without corresponding benefit 

of the disclosure to the labor 

organization members and the public. 

Several commenters also opposed 

itemization of particular types of 

transactions, as they argued that this 

reporting would offer nothing of value 

to members and the public. In their 

view, the Department should exclude, 

among other items, the purchase of 

investments and benefit payments, 

particularly pension benefits from 

Internal Revenue Service (IRS) tax 

qualified plans. 

After carefully considering the 

comments, the Department continues to 

believe that Form T–1 should separately 

identify major receipts and 

disbursements of the trust. Based on the 

comments received, however, the 

Department has made a number of 

changes to the rule that should 

ameliorate, if not eliminate altogether, 

many of the concerns identified by the 

commenters. 

First, the Department agrees with 

those commenters who questioned the 

advantages of reporting customary, bona 

fide contributions to and payments from 

pension funds and other benefit plans to 

participants and their beneficiaries. 

Thus, the Department has changed the 

instructions to except such 

contributions and payments from 

itemization, if made pursuant to a 

collective bargaining agreement or 

pursuant to a written agreement 

specifying the detailed basis on which 

such payments are to be made, as 

explained in more detail below. The 

Department believes that information 

about these transactions that are 

constrained by basic governing 

documents of the trust—collective 

bargaining agreements and written 

agreements specifying the detailed basis 

on which such payments are to be 

made—is unnecessary for members to 

monitor the operation of the trust. As a 

result, labor organizations are only 

required to report such plan 

contributions made pursuant to a 

collective bargaining agreement and 

beneficiary payments made pursuant to 

a written agreement specifying the 

detailed basis on which such payments 

are made in the aggregate as part of 

Items 23 and 24. 

Second, the Department has made 

several other changes that it believes 

will reduce the burden of reporting 

itemized receipts and disbursements: 

the reinstatement of a modified Form 

5500 exemption; the clarification that 

investments that are promptly 

reinvested are not receipts and 

disbursements for itemization purposes; 

the explicit recognition that payments 

related to the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) are confidential 

information not to be reported; and the 

explanation that filers do not have to 

itemize benefit payments made to 

officers and employees of the trust on 

Schedule 3 of the Form T–1. These 

changes are discussed in more detail 

below. 

Several commenters opposed the 

itemization of the sale of investments as 

a burden on the trust and filer. The 

Department concludes that excluding 

proceeds from the sale of investments 

that are promptly reinvested from 

individually identified receipts will 

alleviate much of this burden. The 

clarification regarding the reporting of 

‘‘rolled over’’ investments will reduce 

many of these receipts below the 

$10,000 threshold. This will reduce 

burden on the trust and the labor 

organization. 

The reinstatement of the Form 5500 

exemption has significantly reduced the 

number of section 3(l) trusts that will 

file the Form T–1. As discussed in 

section G(3) of this preamble, labor 

organizations are not required to file a 

Form T–1 for their section 3(l) trusts 

that are required to file the Form 5500. 

The remaining trusts for which a Form 

T–1 must be filed, i.e., those trusts that 

are not required to file a Form 5500, will 

primarily consist of building trusts, 

strike funds, and apprenticeship and 

training funds. Unlike pension and 

health plans, many of these trusts will 

have comparatively fewer 

disbursements, receipts, officers, and 

employees. For example, strike funds 

are likely to have few, if any, 

disbursements unless the labor 

organization’s members are on strike. 

The Department believes that there is 

significant benefit to disclosure to labor 

organization members of the receipts 

and disbursements remaining within the 

scope of the itemization requirement. 

Specifically, information related to the 

nature and purpose of transactions in 

which a trust engages will enable 

members to actively participate in the 

governance of their labor organization. 

Without itemization, members would be 

denied information critical to 

monitoring the trust’s finances. For 

example, without itemization, members 


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would be unable to know the value of 

the final sale and initial purchase of 

investments by the trust, as well as the 

service providers it hires to perform 

functions of the trust. This separately 

identified information is important to 

labor organization members, in part, 

because they elect the officers who run 

their labor organization, who in turn 

will affect the labor organization’s 

funding and operations of the trust over 

which the labor organization has 

management control or financial 

dominance. The financing of these 

trusts can be used to circumvent or 

evade the labor organization’s reporting 

requirement and this specified 

information will empower members to 

monitor whether or not the trusts are 

properly investing their money and 

fulfilling their goals. 

Trusts are already tracking most 

receipts, disbursements, and payments 

to officials and employees in the regular 

course of business. However, they may 

not be currently tracking the 

information in the detail or structure 

required by Form T–1 reporting. 

Therefore, covered section 3(l) trusts 

may opt to make changes to their 

accounting systems to track the relevant 

information in a format that can be 

provided to the interested labor 

organization(s) to complete the Form T– 

1. The Department is not requiring 

trusts to establish a particular 

accounting or other system to 

accomplish this goal. As indicated 

elsewhere in the document, the labor 

organization may need to request access 

to the trust’s books and records in order 

to obtain the information necessary to 

report information on the Form T–1 in 

the required detail and structure. 

Further, as also indicated elsewhere in 

this document, the Department’s 

Employee Benefits Security 

Administration (EBSA) advised that it 

would not consider a plan fiduciary to 

have violated ERISA’s fiduciary duty or 

prohibited transaction provisions by 

providing officials of a sponsoring labor 

organization with financial and other 

information from the plan’s books and 

records as needed to complete the Form 

T–1, provided the plan is reimbursed for 

any material costs incurred in collecting 

and providing the information to the 

labor organization officials. Consistent 

with that conclusion, EBSA further 

advised that fiduciaries may be able to 

prudently conclude that it is more 

efficient and less disruptive of normal 

plan operations to make adjustments to 

the plan’s information management or 

accounting software so that the plan can 

provide information contained in its 

books and records at a particular level 

of detail or in a particular structure, 

provided the labor organization 

reimburses the plan for any material 

costs incurred in making such 

adjustments. Although some section 3(l) 

trusts may need to contact their third 

party recordkeepers to collect 

information requested by labor 

organizations for the schedules, this 

burden should be ameliorated as much 

of required information will already be 

kept in the normal course of their 

businesses. And, for labor organizations 

whose section 3(l) trusts are required to 

file the Form 5500, there is no Form T– 

1 to be filed and therefore no LMRDA 

reporting burden whatsoever. 

E. Disbursements to Officers and 

Employees 

The Department proposed that labor 

organizations would disclose on 

Schedule 3 of the Form T–1 the names 

and titles of all officers of the trust and 

report all direct and indirect 

disbursements to them as well as to all 

employees of the trust who received 

$10,000 or more during the reporting 

period. The Department adopts 

Schedule 3 as proposed with 

clarifications discussed below. 

Commenters asked the Department to 

clarify the meaning of the terms ‘‘trust 

officer’’ and ‘‘trust employee,’’ 

including whether the trustees are 

considered ‘‘officers’’ of the trust, and 

how the terms will be applied to the 

trust administrator and individuals 

working under his or her control who 

might be employed by an entity other 

than the trust. 

The Department has added 

clarifications to the definitions of ‘‘trust 

officer’’ and ‘‘trust employee’’ on the 

Form T–1 Instructions for Schedule 3. 

The definition of trust officer is adapted 

from the LMRDA’s definition of 

‘‘officer.’’ Section 3(n) of the LMRDA 

states in pertinent part: ‘‘ ‘Officer’ means 

any constitutional officer [of and], any 

person authorized to perform the * * * 

executive functions * * * of a labor 

organization, and any member of its 

executive board or similar governing 

body.’’ 29 U.S.C. 402(n). The 

instructions to the Form T–1 now 

provide that for Form T–1 purposes, a 

‘‘trust officer’’ means ‘‘any person 

designated as an officer in the trust’s 

governing documents, any person 

authorized to perform the * * * 

executive functions * * * of the trust, 

and any member of its executive board 

or similar governing body.’’ The 

language is purposefully broad so that it 

will include the officials of each trust’s 

governing board, and any other 

individuals conferred with executive 

authority under the trust’s governing 

documents. Typically, this will include 

the trustees of each trust, and, 

depending upon the particular trust, 

may include the trust administrator and 

other individuals. 

Similarly, the definition of a ‘‘trust 

employee’’ is adapted from the 

LMRDA’s definition of this term. 

Section 3(f) states that ‘‘ ‘[e]mployee’ 

means any individual employed by an 

employer.’’ 29 U.S.C. 402(f). Thus, for 

Form T–1 purposes, an ‘‘employee’’ 

means ‘‘any individual employed by an 

employer’’ that constitutes a section 3(l) 

trust. These definitions will require a 

fact-specific inquiry by filers to 

determine whether trustees, the trust 

administrator, and other individuals 

performing service to the trust under its 

control or the trust’s administrator’s 

control are officers or employees of the 

trust. In most instances, the 

determination will be resolved without 

any significant difficulty. Where such 

individuals are trust officers, or trust 

employees who received more than 

$10,000 from the trust during the 

reporting period, payments to them, 

unless otherwise exempted, are required 

to be reported in the aggregate in Item 

24 and by their names in Schedule 3. 

Where such individuals are not officers 

or employees, payments to them, unless 

otherwise exempted, must be reported 

in the aggregate in Item 24 and 

separately itemized in Schedule 2 if 

they aggregate to $10,000 or more. 

Two commenters expressed concern 

over the heavy burden of reporting 

disbursements to their trusts’ officers 

and employees. Commenters said that 

this information is disclosed on the 

Form 5500. The Department notes that 

no Form T–1 will be required on behalf 

of trusts that are required to file a Form 

5500. The Department acknowledges 

that this requirement may impose some 

increased burden on labor organizations 

and, where requested by the labor 

organization, on the remaining section 

3(l) trusts, but the Department believes 

that modern developments in electronic 

recordkeeping (such as software that 

assists in tracking financial transactions 

rather than the costly and timeconsuming paper records used in the 

past) have greatly reduced the burden 

on labor organizations and trusts in 

terms of overall reporting and 

disclosure, and that trusts already keep 

records on their officers and employees 

for purposes of reporting under other 

statutes and for internal purposes. 

Furthermore, labor organization 

members could benefit from this 

information to ensure that their labor 

organization is not, for example, 

providing undisclosed additional 


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compensation to labor organization 

officials. 

Commenters also asked the 

Department to clarify how to report 

‘‘indirect’’ disbursements to health care 

providers, such as hospital and surgery 

costs, on behalf of trust officers or 

employees. 

The Department has amended the 

Instructions for Schedule 3, Column (E), 

Other Disbursements, as well as the 

definition of ‘‘indirect disbursement,’’ to 

clarify that benefits payments to the 

trust officers and employees are not of 

the type required to be reported in 

Schedule 3 if made pursuant to a 

written agreement specifying the 

detailed basis on which such payments 

are to be made. Rather, these payments 

should be reported in Item 24, and in 

Schedule 2 to the extent that all trust 

payments to a particular source, in the 

aggregate, must be separately identified. 

For example, if a trust makes, in the 

aggregate, $10,000 in payments to a 

particular health care provider on behalf 

of all of its officers and employees, then 

the filer would report this aggregate 

amount separately in Schedule 2 and 

include it within the disbursement total 

in Item 24. This clarification should 

eliminate any concerns related to the 

potential misleading nature of Column 

(E), particularly as it relates to 

protecting the confidentiality under 

HIPAA of health care provider 

payments. 

F. Protection of Sensitive Information 

In proposing this rule, the Department 

recognized the need to balance the 

legitimate privacy interests of 

individuals receiving payments from 

section 3(l) trusts and the right of labor 

organization members to transparency 

in the financial operations of such 

trusts. See 73 FR 11764. The 

Department was particularly concerned 

about protecting the identity of 

individuals receiving payments for 

medical-related and similar expenses of 

a highly personal nature. The final rule 

strengthens these protections by 

eliminating the need to itemize any 

payments—medical or otherwise— 

customarily made under and in 

accordance with the trust’s governing 

documents. This point is addressed in 

the instructions to the Form T–1 and the 

regulatory text (revising 29 CFR 403.8). 

This reporting exclusion, coupled with 

the availability of the rule’s reporting 

exemption for those trusts that are 

required to file the Form 5500 (which 

does not require such itemization), 

substantially reduces the disclosure of 

individual-specific information on the 

Form T–1. 

Many commenters expressed 

concerns relating to the itemization of 

disbursements, most on privacy or 

security grounds, or both. Some 

expressed concern that the posting of 

such information on the Department’s 

Web site would be intrusive and 

heighten the possibility of identity theft. 

They asserted that plan participants and 

beneficiaries have an ‘‘expectation of 

privacy’’ and that the trustees of benefit 

and pension plans are obliged to protect 

their privacy under ERISA and other 

state and federal laws. Several 

commenters referred to the regulations 

issued by the Department of Health and 

Human Services (45 CFR 160–164) 

pursuant to HIPAA, prohibiting the 

disclosure of ‘‘Protected Health 

Information.’’ Other commenters argued 

for an exemption of all payments made 

pursuant to the terms of an employee 

benefit plan. Another suggested that the 

Department include in the final rule an 

exception akin to that provided in the 

Department’s Form LM–30 rule. The 

commenter noted that the Form LM–30 

excepts from reporting benefit payments 

to officers and employees from a trust 

that are provided pursuant to a specific 

written agreement covering such 

payments. Others expressed doubt about 

the value of requiring the reporting of 

routine payments to or by section 3(l) 

trusts, especially given the voluminous 

number of such payments by large 

trusts, notwithstanding the $10,000 

threshold for itemization. Some 

commenters expressed concern that 

reporting of employer contributions to 

trusts could reveal the extent of its 

business operations to competitors and 

unnecessarily affect its business 

interests. 

The Department has carefully 

considered these comments. As noted, 

the Department crafted the proposed 

rule with an eye toward protecting the 

privacy interests of plan participants. 

The Department has been persuaded 

that additional protections are 

appropriate. As discussed in the 

preamble section relating to itemization, 

the Department has established a broad 

exemption for reporting customary 

payments to and by the trust made in 

accord with a collective bargaining 

agreement in the case of payments to the 

trust or the trust’s governing documents 

in the case of benefits payments by the 

trust. Thus, for purposes of Schedule 1, 

Individually Identified Receipts, labor 

organizations are not required to 

separately identify any individual or 

entity from which the trust receives 

receipts of $10,000 or more, 

individually or in the aggregate, during 

the reporting period, if the receipts 

derived from pension, health, or other 

benefit contributions are provided 

pursuant to a collective bargaining 

agreement covering such contributions. 

Similarly, for purposes of Schedule 2, 

Individually Identified Disbursements, 

the labor organization is not required to 

itemize benefit payments from the trust 

to an individual plan participant or 

beneficiary, if ‘‘the detailed basis on 

which such payments are to be made is 

specified in a written agreement.’’ See 

29 U.S.C. 186(c). These exceptions 

apply to all section 3(l) trusts, whether 

jointly administered or not. This will 

ameliorate concerns about the adverse 

impact on an employer whose payments 

into a trust may reveal confidential 

business information. Where such 

payments to and by the trust are 

undertaken in conformance with 

governing documents, there is less 

opportunity for improper diversion of 

funds and evasion of the Act’s reporting 

requirements than where the trust’s 

discretion is less constrained such as 

approving the sale and purchase of 

investments, making payments to 

service providers, and arranging 

disbursements to parties-in-interest and 

other third parties. This is true of 

information regarding receipts as well, 

as there may be multiple employers who 

contribute to the trust pursuant to a 

collective bargaining agreement. 

Moreover, such information about 

transactions that are not made pursuant 

to a specific written agreement is not 

likely to pose the same danger of 

jeopardizing private and confidential 

information or violating laws designed 

to prevent such occurrence. As a result, 

labor organizations are only required to 

report such plan contributions made 

pursuant to a collective bargaining 

agreement and beneficiary payments 

pursuant to a written agreement 

specifying the detailed basis on which 

such payments are to be made, in the 

aggregate as part of Items 23 and 24. 

The Department believes that the 

addition of an exception pertaining to 

beneficiary payments made pursuant to 

a written agreement specifying the 

detailed basis on which such payments 

are to be made will also reduce the 

administrative burden on trusts and 

reporting labor organizations. Trusts 

will not have to compile information 

pertaining to the potentially thousands 

of beneficiaries, nor will it have as many 

complications with existing privacy and 

other state and federal laws. While the 

burdens of contacting service providers 

for those transactions not governed by 

such an agreement and of 

reprogramming computer systems to 

capture this data will still exist, the 

Department believes that many trusts 


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already have this information as a result 

of their normal business practices. 

As an additional protection, the 

Department has clarified the rule to 

ensure that information maintained by 

the trusts relating to HIPAA-protected 

payments, subject to a non-disclosure 

provision in a settlement agreement, 

specifically protected against disclosure 

by state or federal law, or that 

potentially endangers the health or 

safety of an individual is not available 

to labor organization members under the 

LMRDA’s ‘‘just cause provision.’’ See ; 

. Notwithstanding these exceptions, as 

explained in the instructions, the labor 

organization is required to describe 

generally the nature of any payments 

that have not been itemized, e.g., 

‘‘disbursement of payments on 

insurance claims,’’ in Item 25 of the 

Form T–1 (Additional Information) and 

to include the payments in the total 

amount reported in Item 23 (Receipts) or 

Item 24 (Disbursements) of the form. 

In the NPRM, the Department 

proposed to provide labor organizations 

the same reporting option available 

under the Form LM–2 for reporting 

certain major transactions in situations 

where a labor organization, acting in 

good faith and on reasonable grounds, 

believes that reporting the details of the 

transaction would divulge information 

relating to the labor organization’s 

prospective organizing strategy, the 

identification of individuals working as 

‘‘salts,’’ or its prospective negotiation 

strategy. The Department further sought 

comments on whether the 

confidentiality exception from the 

itemized reporting requirement should 

be narrowed, clarified, or removed from 

the Form T–1. Under the proposed 

special procedures, the labor 

organization could choose not to report 

the information in itemized form 

provided the filer identified in Item 25 

(Additional Information) the general 

types of information excluded. The 

Department outlined this procedure in 

the Form T–1 Instructions for Schedules 

1 and 2. 

As under the LM–2 instructions, the 

proposal in the NPRM recognized that a 

labor organization member has a 

statutory right ‘‘to examine any books, 

records, and accounts necessary to 

verify’’ the labor organization’s financial 

report if the member can establish ‘‘just 

cause’’ for access to the information. 29 

U.S.C. 431(c); 29 CFR 403.8. 

Aggregation of transactions by a labor 

organization under the Special 

Procedures for Confidential Information 

constitutes a per se demonstration of 

‘‘just cause for access to the 

information’’ and thus the information 

must be available to a member for 

inspection. 73 FR 11764. The 

Department invited comments on 

whether to narrow, clarify or remove 

this confidentiality exemption from the 

Form T–1 instructions. 

Several commenters specifically 

addressed the Special Procedure for 

Reporting Confidential Information, as 

set forth in the proposed rule and 

instruction. Two commenters opposed 

these procedures, arguing that agents 

(i.e., the labor organization and trust 

officials) cannot withhold ‘‘secret 

records’’ or engage in ‘‘secret 

transactions,’’ but rather the principals 

(i.e., the labor organization members) 

have a right to see this information. 

These commenters argued that the 

proposed procedure allowed labor 

organizations greater leeway in 

withholding information than is 

permitted under the discovery rules of 

federal civil procedure or the National 

Labor Relations Board (NLRB)’s 

application of those rules. One 

commenter raised concerns over the 

reporting of job targeting/market 

recovery fund disbursements, 

identifying instances where, in its view, 

unions were improperly using the 

special procedure to shield from 

disclosure any itemized disbursements 

relating to their job targeting program, 

not merely those that arguably would be 

covered by the special procedure. One 

commenter supported the confidential 

information exception because it 

protects organizing strategies. 

The Department’s review of Form 

LM–2 data has indicated that the 

confidentiality exception is not used by 

the majority of Form LM–2 filers. 

However, the Department has found that 

in some cases where the confidentiality 

exception is used, large portions of the 

labor organizations’ disbursements are 

not itemized. For example, one labor 

organization treated $360,308.00 in 

disbursements as confidential 

information and entered this amount on 

line 5 of Schedule 17. The $360,308.00 

accounted for 45% of the labor 

organization’s total disbursements. A 

midsized local labor organization 

treated $1,011,863.00 as confidential. 

This accounted for 49% of the labor 

organization’s total disbursements. 

Finally, a large local labor organization 

treated $5,931,513.00 as confidential. 

This accounted for 46% of the labor 

organization’s total disbursements. 

Thus, an undisciplined use of the 

special procedures in many cases could 

result in the non-itemization of 

disbursements of millions of dollars. 

The Department understands that 

labor organizations have an interest in 

maintaining confidentiality in situations 

where disclosure would expose an 

ongoing or planned organizing or 

representational campaign. However, 

this interest must be balanced with the 

LMRDA’s general reporting 

requirements. Depriving members of 

information about almost half of their 

labor organization’s disbursements does 

not promote transparency. 

In the 2003 final rule promulgating 

the Form T–1, the Department 

recognized that the commenters 

believed that a confidentiality 

exemption was needed to protect 

information on certain transactions from 

immediate public disclosure. Thus the 

Department provided an exemption 

from the normal itemization 

requirement for reporting of information 

that would harm an organizing drive or 

contract negotiation and also provided 

that, absent unusual circumstances, this 

exemption should not be applied to 

information related to transactions for 

past organizing campaigns or 

negotiations. The Department in this 

final rule is not changing the decision 

that a labor organization should not be 

required to disclose information that 

would harm the organization’s 

prospective organizing campaigns or 

negotiations, by disclosing strategy that 

would otherwise be confidential. 

However, the Department reiterates that 

labor organizations may not shield such 

information from full disclosure after 

the organizing or negotiations have 

concluded. Thus, the final instructions 

for the Form LM–2, and the instructions 

for the Form T–1, provide that ‘‘[a]bsent 

unusual circumstances information 

about past organizing drives should not 

be treated as confidential.’’ 

For the reasons discussed, the 

Department adopts the Special 

Procedures for Reporting Confidential 

Information as presented in the NPRM, 

but reiterates that the procedures 

require itemized reporting of 

transactions related to organizing 

campaigns and negotiations after the 

confidentiality interest giving rise to the 

exemption from itemized reporting in 

these categories has ended. Labor 

organizations will continue to be able to 

use the confidentiality procedures to 

withhold itemized information ‘‘that 

would expose the reporting union’s 

prospective organizing strategy.’’ If the 

strategy becomes public, the 

confidentiality privilege no longer 

applies to the information. Once the 

organizing campaign or negotiations 

have concluded, the confidentiality 

privilege is lifted absent unusual 

circumstances where disclosure of 

itemized information would harm an 

ongoing or prospective organizing 

campaign or negotiations. As provided, 

in part, in the Form LM–2 instructions, 


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under the proposal, labor organizations 

are permitted to withhold from 

itemization information that would 

‘‘expose the reporting union’s 

prospective organizing strategy’’ or 

would ‘‘provide a tactical advantage to 

parties with whom the reporting union 

or an affiliate union is engaged or will 

be engaged in contract negotiations.’’ 

The instructions direct that information 

should be disclosed unless the labor 

organization could demonstrate that its 

disclosure would cause harm to the 

organizing drive or contract 

negotiations; the instructions also 

advise that absent unusual 

circumstances information about past 

organizing drives or contract 

negotiations should not be treated as 

confidential. 

The Department has considered the 

suggestion by some commenters that the 

proposed procedure should be 

eliminated because of its perceived 

misuse by some Form LM–2 filers. The 

commenter’s examples indicate that 

some labor organizations may have 

used, or will be tempted to use, the 

special procedure to hide disbursements 

that—either at the time they occurred or 

at the time that the Form LM–2 was 

filed—posed no danger to the labor 

organization’s organizing or negotiating 

strategies. 

The Department believes that there is 

reason to be concerned that the 

procedures may be misused by some 

labor organizations. Thus, although, the 

Department is retaining the Special 

Procedure for Reporting Confidential 

Information, the Department 

reemphasizes that this procedure is to 

be used sparingly and only in the 

limited circumstances for which it is 

provided. The Department will continue 

to review and monitor the use of the 

Special Procedures for Reporting 

Confidential Information. Because of the 

substantial interest in financial 

transparency that is compromised if 

certain information that should be 

disclosed is kept confidential, the 

Department will give priority in 

investigations of violations of the trust 

reporting rules to those reports in which 

the exemption is claimed. This will be 

done to insure that the exemption is not 

abused. The Department will continue 

to examine the use of the Special 

Procedure and, if evidence and 

experience indicate that it is being 

abused, may propose to eliminate or 

narrow it. The Department further notes 

that the provision of a confidentiality 

exemption for the Form T–1 does not 

affect other reporting duties under the 

LMRDA or other laws. 

G. Exemptions and Alternative Means of 

Compliance 

The Department proposed an 

exemption from the Form T–1 reporting 

requirement for a trust established as a 

political action committee (PAC) or an 

organization established pursuant to 

Internal Revenue Code section 527 

provided that the trust files timely, 

complete and publicly available reports 

with federal or state agencies, as 

required by federal or state law. The 

Department also proposed a partial 

exemption where an independent audit 

of the trust has been conducted in 

accordance with proposed standards 

discussed below and the audit is filed 

with the Department along with a fully 

completed page 1 of Form T–1. Each of 

these alternative methods for meeting 

the labor organization’s Form T–1 

obligation provides significant, timely 

financial information about the trust 

that is updated on a regular basis (for 

PAC and section 527 reports, typically 

more frequently than the Form T–1) and 

requires the itemization of receipts and 

expenditures. The proposed rule did not 

include an exemption for trusts that 

filed timely and complete Form 5500 

reports under ERISA; the Department 

explained that the information reported 

on the Form 5500 was not designed to 

capture information for LMRDA 

purposes and that many section 3(l) 

trusts were not subject to ERISA or its 

reporting requirements. 

This final rule, like the proposal, 

includes the exemptions for trusts that 

constitute a PAC or a section 527 

organization provided that the trusts file 

timely, complete and publicly available 

reports as required by federal and state 

law and includes the partial exemption 

for those trusts where an independent 

audit has been conducted as set forth in 

the instructions. This final rule, unlike 

the proposal, contains an exemption for 

those trusts required to file a Form 5500 

report, as defined in this rule. 

1. Exemption for PAC and 527 Funds 

In proposing to exempt labor 

organizations from filing a Form T–1 for 

trusts that constitute a PAC or a section 

527 organization, the Department 

explained that the purpose of limiting 

the filing requirements in this way was 

to minimize any overlapping obligations 

that apply to such entities where other 

statutes required the filing of publicly 

available reports that contain 

information roughly comparable to that 

required by the Form T–1. The 

Department received no comments on 

the proposed exemption for a trust 

established as a PAC or established 

under section 527 of the Internal 

Revenue Code. Thus, the final rule 

retains the exemption for a trust 

established as a PAC or an organization 

exempt under Internal Revenue Code 

section 527, provided that the trust files 

timely, complete and publicly available 

reports with federal or state agencies, as 

required by federal or state law. 

2. Audit Exemption 

Under this final rule, a labor 

organization may use the audit 

exemption provided the audit meets the 

requirements described in the Form T– 

1 Instructions. The audit requirement in 

this exemption is modeled after section 

103 of ERISA, 29 U.S.C. 1023 and 29 

CFR 2520.103–1 (relating to annual 

reports and financial statements 

required to be filed under ERISA). As 

noted in the NPRM, the Department 

recognizes that the audit option may not 

provide the same level of detail required 

by the Form T–1. The Department 

nonetheless believes that this approach 

is an acceptable trade-off for reducing 

the overall reporting burden on the 

labor organization and the section 3(l) 

trust. Under the audit alternative, a 

labor organization need only complete 

the first page of the Form T–1 (Items 1– 

15 and the signatures of the 

organizations’ officers) and submit a 

copy of an audit of the trust that meets 

all the following standards: 

• The audit is performed by an 

independent qualified public 

accountant, who after examining the 

financial statements and other books 

and records of the trust, as the 

accountant deems necessary, certifies 

that the trust’s financial statements are 

presented fairly in conformity with 

Generally Accepted Accounting 

Principles or Other Comprehensive 

Basis of Accounting. 

• The audit includes notes to the 

financial statements that disclose: 

■ Losses, shortages, or other 

discrepancies in the trust’s finances; 

■ The acquisition or disposition of 

assets, other than by purchase or sale; 

■ Liabilities and loans liquidated, 

reduced, or written off without the 

disbursement of cash; 

■ Loans made to labor organization 

officers or employees that were granted 

at more favorable terms than were 

available to others; and 

■ Loans made to officers and 

employees that were liquidated, 

reduced, or written off. 

• The audit is accompanied by 

schedules that disclose: 

■ A statement of the assets and 

liabilities of the trust, aggregated by 

categories and valued at current value, 

and the same data displayed in 


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6The Form 5500 and governing regulations 

applicable beginning with plan years beginning in 

2009 were modified on November 16, 2007. 72 FR 

64710 (final rule); 72 FR 64731 (notice of adoption 

of revisions to annual return/report forms). The 

final rule adopted changes to the Form 5500 and 

created the Form 5500–SF. 

comparative form for the end of the 

previous fiscal year of the trust; and 

■ A statement of trust receipts and 

disbursements aggregated by general 

sources and applications, which must 

include the names of the parties with 

which the trust engaged in $10,000 or 

more of commerce and the total of the 

transactions with each party. 

The Department invited comments on 

the utility and workability of the 

proposed audit exemption. As with 

many other aspects of the proposed rule, 

most of the comments on this issue 

came from Taft-Hartley trusts. These 

commenters generally opposed the 90- 

day filing deadline for the audit 

exemption because the deadline in most 

instances would expire before they 

completed the audits that they are 

required to perform in order to satisfy 

their ERISA reporting requirements to 

file a Form 5500. Under ERISA the 

annual reports are generally not due 

until at least 210 days after the close of 

the ERISA plan year. One commenter 

stated that because of the complexity of 

any audit required of trust funds, only 

in the rarest of instances would an 

auditor be able to timely satisfy the 

requirements of the proposed alternative 

to file the Form T–1. Commenters also 

stated that the proposal failed to reduce 

the overall reporting and recordkeeping 

burden because the Form T–1 

itemization requirements are not 

normally part of audits prepared for 

these funds. 

The Department has partially resolved 

these concerns by exempting labor 

organizations from any Form T–1 

responsibilities for trusts that are 

required to file an annual report under 

ERISA, as discussed below. The 

availability of this exemption means 

that most of the commenters will not be 

obliged to provide information 

necessary to complete the Form T–1 and 

thus will be unaffected by the audit 

requirements that otherwise would 

remain a concern. For those trusts that 

are not required to file the Form 5500, 

the Department has decided to retain 

this filing exemption as an alternative 

means of compliance with the rule. The 

remaining types of entities that will be 

required to file a Form T–1 under this 

rule are typically less complex than the 

trusts required to file a Form 5500 and 

will have fewer transactions to itemize. 

Further, the concerns about the 

itemization burden are addressed 

because this final rule excepts from the 

itemization requirement any receipts by 

a trust made pursuant to a collective 

bargaining agreement and any benefit 

payments where a written agreement 

specifies the detailed basis on which 

such payments are to be made. As such, 

the Department anticipates that the 

burden imposed by using this filing 

exemption, while similar to that 

required for filing the full Form T–1, 

will nonetheless provide a less 

burdensome alternative for some filers. 

This audit exemption is not meant to be 

the primary means of compliance with 

the final rule, but rather, is meant as an 

alternative for those entities that have 

an audit performed that meets the 

standards set forth in this final rule. For 

these reasons, the Department’s final 

rule adopts without change the audit 

exemption as proposed. 

3. ERISA Covered Plans Required To 

File a Form 5500 

Under the 2003 and 2006 Form T–1 

final rules, a labor organization was not 

required to file a Form T–1 for a section 

3(l) trust if the trust was an employee 

benefit plan that filed a complete and 

timely annual report pursuant to ERISA. 

These rules also stated that ‘‘a notice 

filed with the Secretary of Labor 

pursuant to an exemption from 

reporting and disclosure does not 

constitute a complete annual financial 

report.’’ 

The Department proposed to remove 

this exemption in the NPRM. The 

proposal noted that the focus of the 

financial reporting required on the Form 

T–1 and the Form 5500 are not identical 

and therefore the Form 5500 was an 

unsatisfactory substitute for the 

reporting required under the LMRDA. 

The NPRM noted that not all section 3(l) 

trusts are subject to ERISA and thus, 

under the exemption as provided in the 

2003 and 2006 final rules, labor 

organizations, the public and OLMS 

investigators would have to spend 

considerable time and resources to 

determine whether a section 3(l) trust 

complied and timely filed the Form 

5500. 73 FR 11765. The Department also 

cited the difference in who was required 

to sign the Form T–1 and the Form 5500 

and the difference in the timing for 

filing as reason to omit the exemption. 

73 FR 11766. The NPRM invited 

comments on a number of questions 

related to the removal of the Form 5500 

exemption. 

The Department received a significant 

number of comments concerning the 

Form 5500 and whether the Department 

should allow an exemption where a 

section 3(l) trust files a Form 5500. 

Several commenters asserted that the 

Form T–1 is duplicative of information 

already available to labor organization 

members on the Form 5500. 

After consideration of the comments, 

the Department has decided to include 

a Form 5500 exemption in the final rule. 

The Department recognizes that the 

Form 5500 may not provide certain 

details required by the Form T–1. In an 

effort to respond to concerns of 

commenters and to meet the objectives 

of the LMRDA, the Department has 

fashioned an exemption that differs in 

some respects from the exemption set 

forth in the 2003 and 2006 rules. The 

ERISA annual reporting requirements 

for a section 3(l) trust that is an ERISAcovered plan are generally satisfied 

where the section 3(l) trust files the 

Form 5500 Annual Return/Report of 

Employee Benefit Plan and any required 

attachments.6 Under this final rule, 

labor organizations will not file a Form 

T–1 for any section 3(l) trust that is 

required under ERISA and applicable 

Departmental regulations to file a Form 

5500. 

For purposes of this Form T–1 

exemption only, a trust is ‘‘required to 

file a Form 5500’’ if a plan administrator 

is required to file an annual report on 

behalf of the trust under 29 U.S.C. 

sections 1021 and 1024. The Form T–1 

exemption, however, does not apply 

where an ERISA covered section 3(l) 

trust is eligible for an exemption from 

filing a Form 5500 or Form 5500–SF 

under Department of Labor regulations. 

This includes those section 3(l) trusts 

that may file a notice or statement with 

the Secretary of Labor in lieu of an 

annual report pursuant to an exemption 

from, or as an alternative method of 

complying with, the annual reporting 

obligation, even if it does file a Form 

5500 or Form 5500–SF. The following 

sections of title 29 of the Code of 

Federal Regulations identify the types of 

ERISA plans that under this final rule 

would be treated as not required to file 

a Form 5500 for purposes of the Form 

T–1 filing requirement: § 2520.104–20 

(small unfunded, insured, or 

combination welfare plans), § 2520.104– 

22 (apprenticeship and training plans), 

§ 2520.104–23 (unfunded or insured 

management and highly compensated 

employee pension plans), § 2520.104–24 

(unfunded or insured management and 

highly compensated employee welfare 

plans), § 2520.104–25 (day care center 

plans), § 2520.104–26 (unfunded dues 

financed welfare plans maintained by 

employee organizations), § 2520.104–27 

(unfunded dues financed pension plans 

maintained by employee organizations), 

§ 2520.104–43 (certain small welfare 

plans participating in group insurance 

arrangements), and § 2520.104–44 (large 


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7The Department does not agree that the Form T– 

1 is entirely duplicative of the information available 

on the Form 5500. While both forms seek financial 

information about trusts, among other differences, 

a Form 5500 does not include the itemization of 

disbursements or receipts required by the Form T– 

1 and the persons requires to sign the Form T–1 and 

Form 5500 are not identical. Under the Form T–1, 

the form must be signed by the president and 

treasurer, or corresponding principal officers, of the 

labor organization. By comparison, the Form 5500 

filed by a section 3(1) trust is signed by the plan’s 

‘‘administrator,’’ as defined in section 3(16) of 

ERISA. By requiring the labor organization’s 

principal officers to certify the accuracy of the 

financial report, individuals who may be in a 

position to use the trust to circumvent their union’s 

reporting requirements will be required to vouch 

under penalty of perjury to the accuracy of the trust 

report. The officers’ incentive to use the trust to 

circumvent the LMRDA filing requirements is 

thereby reduced. Notwithstanding these differences, 

however, the Department, for the reasons discussed 

in the text, has determined that the Form 5500 

exemption as set forth in the final rule is 

appropriate. 

unfunded, insured, or combination 

welfare plans; certain fully insured 

pension plans). Therefore, a labor 

organization must file a Form T–1 for 

any ERISA-covered section 3(l) trusts 

that are eligible under these regulations. 

All the labor organization and trust 

commenters objected to the 

Department’s decision to depart from 

the position it had taken in earlier Form 

T–1 rulemakings whereby a labor 

organization was not required to file a 

Form T–1 for a trust that filed a timely 

and complete Form 5500. The 

commenters raised the following points 

in support of their position: (1) Title II 

of the LMRDA is not intended to 

regulate employee benefit plans covered 

by ERISA; (2) information reported on 

the Form T–1 is already available on the 

Form 5500; (3) the benefit of Form T– 

1 reporting does not exceed the burden 

it places on labor organizations and 

trusts; and (4) the Department has failed 

to show how entities that file the Form 

5500 have used these trusts to 

circumvent LMRDA reporting. A 

number of the commenters offered 

alternatives to the complete exclusion of 

the Form 5500 exemption. 

Commenters reviewed the history of 

legislation governing employee benefit 

plans, stating their view that Congress 

never intended to apply the LMRDA’s 

reporting and disclosure requirements 

to employee benefit plans. They cited 

section 302 of the LMRA in support of 

their contention that employee benefit 

plans are insulated from labor 

organization control. As related by these 

commenters, section 302 permits 

employer payments to an employee 

benefit plan only if: (1) Such payments 

are made to a separate trust fund 

established for the purpose of providing 

medical or hospital care, pension or 

retirement benefits, insurance, or for 

other enumerated purposes; (2) such 

payments are held in trust for the sole 

and exclusive benefit of employees; (3) 

the detailed basis for such payments is 

set forth in a written agreement with the 

employer; (4) management and labor are 

equally represented in the trust’s 

administration; and (5) an annual audit 

of the fund’s assets is conducted by an 

independent auditor. 

Commenters also noted that Congress 

saw no need to include the transactional 

details that the proposed Form T–1 

requires because it did not include them 

in the recent Pension Protection Act of 

2006 which substantially amended 

ERISA. A number of commenters 

suggested that the Department drop the 

Form T–1 and work with the IRS and 

the Employee Benefits Security 

Administration (EBSA) to revise the 

Form 5500 as necessary to address any 

concerns. 

The Department has reviewed and 

considered the concerns expressed 

about the relationship between the 

LMRDA reporting requirements and 

ERISA. By adopting an exemption for 

section 3(l) trusts that are required to 

file a Form 5500 the Department has 

recognized that ERISA is the primary 

statute for regulating section 3(l) trusts 

that are covered under that statute. The 

Form 5500 helps ensure that employee 

benefit plans are operated and managed 

in accordance with certain prescribed 

standards and that participants and 

beneficiaries, as well as regulators, have 

sufficient information to protect the 

rights and benefits of participants and 

beneficiaries. While not identical in 

purpose to the Form T–1, the Form 5500 

provides information on assets, 

liabilities, losses or shortages of funds or 

other property, acquisition or disposal 

of goods or property in a manner other 

than purchase or sale, liquidations, 

reductions, and write-offs.7 More 

importantly, the general ERISA 

regulatory and enforcement regime, 

through its civil and criminal 

provisions, reduces (although it does 

not eliminate the risk entirely) the 

ability of labor organizations to use 

employee welfare or pension plans to 

circumvent their LMRDA reporting 

obligations. 

This is a change from the 2003 and 

2006 Form T–1 final rules which 

allowed for an exemption so long as the 

trust had filed a complete and timely 

annual report pursuant to ERISA. 

However, framing the exemption as was 

done in 2003 and 2006 puts the burden 

on OLMS to determine whether the 

Form 5500 is complete and timely in 

order to determine whether the labor 

organization has complied with the 

Form T–1 requirement. 

The Department has not extended the 

Form 5500 exemption to all trusts that 

are required to file an annual report 

under ERISA. Rather, the Form T–1 

5500 filing exemption will be available 

to only those section 3(l) trusts that are 

required to file the Form 5500. Thus, 

where ERISA or Department of Labor 

regulations exempt or allow the plan 

administrator to take an exemption from 

filing a Form 5500 or 5500–SF, the labor 

organization would need to file a Form 

T–1 for that trust. A Form T–1 would be 

required even if the plan administrator 

of such a fund does not take advantage 

of the opportunity to obtain an 

exemption, and does, in fact, file a Form 

5500 or Form 5500–SF. 

The Department believes that the 

Form 5500 exemption as set forth in this 

final rule balances the concerns of 

commenters about burden and 

duplication between the Form 5500 and 

the Form T–1 with the Department’s 

concerns regarding the enforcement 

difficulties associated with the Form 

5500 exemption as set forth in the 2003 

and 2006 Form T–1 final rules. An 

exemption that is available to trusts that 

can choose, year-by-year, whether to file 

a Form 5500 creates significant 

enforcement burdens for the 

Department. Because of differing 

deadlines for filing the forms, it may be 

difficult for the Department to 

determine whether a trust that is not 

required to file a Form 5500 has, in fact, 

determined that it will file one for the 

relevant time period. Moreover, the 

Department would be required not only 

to determine whether the relevant trust 

may be exempt from the Form 5500 

requirement, but also would be required 

to determine whether such trust, in fact, 

filed anyway before determining 

whether the labor organization was 

required to file a Form T–1. In contrast, 

an exemption that covers only trusts 

that are required to file a Form 5500 is 

relatively easy to enforce. The obligation 

to file a Form 5500 depends on the 

characteristics of the trust, which can be 

objectively determined. As such, it is a 

relatively easy matter to determine 

whether a trust is required to file a Form 

5500. Both OLMS and EBSA would 

have an interest in correctly identifying 

trusts required to file a Form 5500, and 

EBSA has considerable expertise in this 

area. 

In contrast, a trust that may elect to 

exempt itself from the Form 5500 filing 

requirements creates an entirely 

different problem. Only the trust will 

know whether it will file a Form 5500. 

Until it files a notice that it is taking the 

Form 5500 exemption, or its time for 


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doing so has expired, there are no 

objective measurements to determine 

whether a Form 5500 will be filed. As 

an enforcement matter, therefore, OLMS 

will regularly be unable to predict by 

objectively determinable measures 

whether such a trust will be reported on 

a Form T–1 or not. This creates 

difficulty in providing compliance 

assistance to labor organizations and 

trusts, and, more significantly, 

responding to questions and requests 

from labor organization members about 

trust reporting. Similarly, labor 

organizations will not be faced with 

uncertainty about those trusts for which 

they must file the Form T–1. The labor 

organizations’ reporting obligation will 

not be contingent on the choice a plan 

administrator makes about filing a Form 

5500. Under the Form 5500 exemption 

as adopted by the Department in this 

final rule, a labor organization will be 

able at the beginning of its fiscal year to 

know with certainty whether it should 

prepare to file the Form T–1 for a 

particular trust. 

The Form T–1 filing exemption for 

filers who are required to file a Form 

5500 responds to concerns about 

duplication of effort, redundant filing 

requirements, increased burden, and the 

discrete roles of the LMRDA and ERISA. 

The Form 5500 filing exemption 

adopted in this final rule comports with 

ERISA, properly takes into account the 

complimentary roles served by each 

statute, and reduces reporting burden 

while providing labor organization 

members and the public with core 

information that will help to prevent the 

circumvention or evasion of the 

LMRDA’s reporting requirements. 

H. Public Sector Funded Trusts 

As discussed above this final rule 

requires Form T–1 reports to be filed by 

labor organizations with receipts of at 

least $250,000 that have an interest in 

a section 3(l) trust, and alone, or in 

combination with other labor 

organizations, (1) selects or appoints the 

majority of the members of the trust’s 

governing board, or (2) contributes more 

than 50 percent of the trust’s receipts 

during the annual reporting period; 

contributions made pursuant to a 

collective bargaining agreement shall be 

considered contributions by the labor 

organization. The Department’s NPRM 

provided no exemption from this 

reporting requirement for any specific 

type of section 3(l) trust, other than for 

political action committees and section 

527 trusts that file timely and complete 

reports with appropriate government 

agencies. As a result, the rule as detailed 

in the NPRM required that Form T–1 be 

filed by LMRDA-covered labor 

organizations with an interest in a 

section 3(l) trust that provides a benefit 

plan for the labor organizations’ 

members employed in the public sector, 

and which, in some cases, is also made 

available for wider participation by 

public sector employees who can join 

the labor organization and enroll in its 

benefit plan as a result of their public 

sector employment. Based on comments 

received in response to the proposed 

coverage of such plans, the Department 

has decided, for the reasons that follow, 

to provide a specific exemption to the 

Form T–1 reporting requirements for 

those labor organizations with a 

reportable interest in a section 3(l) trust 

that is covered by the FEHBA. However, 

as explained below, this exemption 

applies only to FEHBA-covered trusts, 

and does not extend to labor 

organization-sponsored benefit plans 

not otherwise regulated by the federal 

government in which state, county, 

special district or municipal employees 

may participate. 

Two commenters addressed the 

NPRM’s coverage of trusts established to 

provide employee benefits to public 

sector employees. The first comment is 

from a national labor organization 

representing primarily federal sector 

postal employees, which sponsors a 

health benefit plan that is established, 

administered, funded and maintained 

by contract between the labor 

organization and the federal 

government’s Office of Personnel 

Management (OPM) pursuant to 

FEHBA. Under FEHBA, the federal 

government makes an employer 

contribution to cover the majority of the 

premium costs of the plan, 5 U.S.C. 

8906, and the remainder is paid by 

employee contributions. The FEHBA 

health benefits plans offer hospital, 

medical, surgical and other health 

benefits to enrollees and their covered 

dependants. In accordance with FEHBA, 

only members of a labor organization 

may enroll in that labor organization’s 

health benefits plan. Therefore, the 

plan’s enrollees are federal employees 

who are members of the labor 

organization or associate members who 

have become members of the labor 

organization in order to enroll in the 

health benefit plan sponsored by the 

labor organization. 

The labor organization with a FEHBAgoverned plan argues that an exception 

to coverage under this rule is warranted 

because FEHBA plans are already 

subject to significant federal oversight 

and reporting requirements. In 

particular, the commenter argues, the 

oversight is equivalent to, and perhaps 

more than, the federal reporting 

requirements, oversight, and 

government regulations than are 

applicable to other entities, such as 

political action committees or section 

527 organizations, that were specifically 

exempt from compliance in the 

proposed rule. According to the 

commenter, FEHBA plans are subject to 

stringent requirements contained in the 

contracts with OPM, which are 

reviewed and approval on an annual 

basis. In addition, FEHBA plans must 

file detailed financial reports with OPM 

on a quarterly and annual basis, and are 

subject to annual auditing requirements 

as well as periodic audits by OPM and 

the OPM Office of the Inspector General 

in order to ensure the plan’s compliance 

with contract requirements and federal 

law. 

The Department finds persuasive 

these reasons offered by the first 

commenter for an exception to 

compliance with this rule for FEHBAcovered plans. The Department 

concludes that the interest of members 

of labor organizations in having access 

to meaningful information regarding the 

trusts in which their labor organization 

has an interest is served by the rigorous 

federal oversight already in place under 

FEHBA, without need for additional 

compliance with this rule. So long as 

the interests of labor organization 

members who want to be familiar with 

the investments and expenditures of 

their labor organization’s trust is 

satisfied, the Department may reduce 

the potentially overlapping regulatory 

burden to covered entities by creating 

this exception for FEHBA-covered 

plans. The exception is noted both in 

the instructions for filing the Form T– 

1 and the regulatory text (revising 29 

CFR 403.8). 

The second comment received on this 

subject was from a local labor 

organization that represents municipal 

employees employed by the City of New 

York. This labor organization sponsors 

several supplemental employee benefits 

plans, which were established over the 

course of several decades pursuant to 

collective bargaining agreements with 

the municipal employers. Although the 

commenting labor organization 

represents a small number of employees 

employed in the private sector, the 

participants of the labor organization’s 

employee benefits funds are only 

employees of the municipal employers. 

Like the first commenter, the local 

labor organization indicates that its 

employee benefit funds in which New 

York City municipal employees 

participate are already subject to 

extensive government oversight and 

control by the Comptroller of the City of 

New York. Also like the first 

commenter, this local labor organization 


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argues that this existing oversight 

scheme established under local law, 

including annual audits of which a 

condensed version is transmitted to the 

membership of the funds, is sufficient to 

accommodate any party interested in 

gathering financial information about 

the labor organization’s employee 

benefits trusts. However, the 

Department notes that the information 

required by local law appears only to be 

required to be distributed to plan 

participants, and not labor organization 

members who belong to the labor 

organization sponsoring the plans and 

whose interests are at the heart of this 

rule. In addition, although the 

commenter’s benefit plans are clearly 

subject to some governmental oversight, 

it is infeasible for the Department to 

examine every state or local oversight 

scheme to determine whether it requires 

the reporting and distribution of 

information sufficient to satisfy the 

Department’s purpose in protecting the 

members of labor organizations 

sponsoring such plans. Because each 

state or municipality may establish 

differing oversight schemes with 

differing reporting requirements, which 

are subject to periodic revision by those 

state and local governments, it is 

impracticable for the Department to 

review this patchwork of regulation to 

assure the continued protection of the 

interests of labor organization members. 

For these reasons, the Department 

declines to create a broader exception to 

this rule, beyond the exception noted 

above for FEHBA plans, for employee 

benefit plans sponsored by labor 

organizations for the benefit of public 

sector employees. 

I. Applicability to Multiple Labor 

Organizations Participating in a Single 

Section 3(l) Trust 

The Department proposed that each 

labor organization meeting the reporting 

threshold will have to submit a Form T– 

1 to the Department, even though the 

labor organization’s interest in the trust 

may represent only a relatively small 

portion of the total contributions made 

to the trust by labor organizations. The 

Department received no comments on 

this aspect of the rule, which is set forth 

in this final rule without change. 

In the NPRM, the Department 

explained that it had received 

comments on its 2002 proposal to 

establish a Form T–1 relating to the 

participation by multiple labor 

organizations in a single trust. In 

response to the 2002 proposal, an 

international labor organization 

explained that it was not uncommon for 

several locals to participate in an 

apprenticeship and training fund that 

would be funded by payments from 

employers pursuant to negotiated 

agreements providing for ‘‘a-cents-perhour’’ contribution for hours worked by 

each of their employees. As an example, 

the labor organization discussed a fund 

with annual contributions over 

$300,000 in which seven locals 

participated. The contributions from, or 

on behalf of, each local ranged from 

about $10,000 to about $100,000. The 

fund had four employer and four labor 

trustees; three from different locals 

contributing to the trust and a fourth 

from the labor organizations’ parent 

organization. 

The labor organization also explained 

that it was common for local labor 

organizations in different crafts 

(affiliated with different parent bodies) 

to participate in a fund. It explained that 

in these instances, it would be unusual 

for a single craft or local to represent a 

majority of the labor organization 

trustees. It stated that in such 

circumstances it is unrealistic to suggest 

that any single labor organization or 

craft controls the trust. It has also been 

the Department’s experience that is not 

uncommon for multiple labor 

organizations to participate in a section 

3(l) trust without any single labor 

organization contributing a majority of 

the trust’s revenues. In some trusts, such 

as strike funds, labor organizations may 

be the sole contributors to the fund; in 

others, such as Taft-Hartley trusts, the 

trust will be funded by employers, but 

such funds are established through 

collective bargaining agreements, and 

the employer contributions are made for 

the benefit of the employees working 

within the bargaining units represented 

by the participating labor organizations 

or the employees’ beneficiaries. 

Working from this understanding, the 

Department crafted its 2003 and 2006 

Form T–1 final rules and the proposal 

set forth in the NPRM to require each 

labor organization participating in the 

trust (i.e., those meeting the reporting 

thresholds) to submit a report on the 

trust’s financial operations. 

As noted, the contributions to trusts 

in which several labor organizations 

participate typically will consist solely 

of funds that are contributed on behalf 

of their members. In other situations, 

the funds will be contributed by 

employers on behalf of employees 

working for these employers who are 

represented by the participating labor 

organizations. In many instances, none 

of the participating labor organizations, 

by themselves or by virtue of the 

employers’ contributions pursuant to a 

collective bargaining agreement, 

contributes a majority of the trust’s 

receipts during a reporting period. As 

the Department explained in the NPRM, 

unless a reporting obligation is imposed 

on one or more of the labor 

organizations on some basis other than 

majority contributions, no labor 

organization members would receive 

information on the trust’s finances. In 

its 2002 proposal, the Department 

illustrated the need for reporting on 

section 3(l) trusts with four examples in 

which labor organizations had evaded 

their reporting obligations through their 

involvement with such trusts. One of 

these examples involved the improper 

diversion of money from a strike fund 

in which no single labor organization 

held a controlling interest. The absence 

of any reporting obligation facilitated 

the improper disposition of thousands 

of dollars (over $60,000 per month) from 

the strike fund. As this example also 

demonstrates, disbursements from a 

trust of pooled labor organization funds 

affects the contributing labor 

organizations’ financial conditions and 

operations as clearly as disbursements 

from a trust funded by a single labor 

organization. A rule directed to 

preventing a single labor organization 

from circumventing or evading the law 

should not permit the same conduct 

when it is undertaken by more than one 

labor organization. 

In fashioning this rule, the 

Department considered two alternatives: 

fixing the obligation on the labor 

organization with the greatest stake in 

the trust; or allowing one of the 

participating labor organizations to 

voluntarily take on this responsibility. 

Either of these approaches would create 

difficulties in enforcement. As the 

Department explained in the NPRM, 

determining which labor organization 

has the greatest stake in a trust is an 

uncertain inquiry. There are several 

ways that this could be calculated, such 

as percentage of contributions, gross 

amount of contributions over the life of 

the trust, number of members receiving 

benefits, etc. Further, a rule allowing 

one labor organization to volunteer to 

file the form (and thus the others to file 

nothing) would complicate the 

Department’s ability to enforce the 

reporting requirement when no labor 

organization has filed a report. In 

addition, the reporting labor 

organization may not be the labor 

organization that is, in fact, using the 

trust to circumvent or evade its 

reporting requirement. Finally, this 

reporting gap could allow some labor 

organizations and individuals to evade 

their reporting obligations under the 

LMRDA. 

For these reasons, the Department has 

determined that where multiple labor 

organizations appoint a majority of the 


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members of the trust’s governing board, 

or their contributions constitute greater 

than 50 percent of the trust’s annual 

receipts, each will be required to file a 

Form T–1. In making this 

determination, the Department 

recognizes that the section 3(l) trust, not 

the reporting labor organizations, will 

be the source of most of the necessary 

information and that this information, 

in large part, will be identical for each 

participating labor organization. This 

will allow for allocation of information 

collection costs among the labor 

organizations, as determined by the 

trust, and will keep all of the reporting 

labor organization’s total costs only 

marginally higher than if a Form T–1 

were required to be filed by only one of 

the participating labor organizations. 

J. Labor Organization’s Ability To 

Obtain Information From Trusts To File 

the Form T–1 

Under this final rule, a labor 

organization is required to file a Form 

T–1 if it alone or in combination with 

other labor organizations (1) selects or 

appoints the majority of the members of 

the section 3(l) trust’s governing board, 

or (2) contributes more than 50 percent 

of the section 3(l) trust’s receipts during 

the annual reporting period. 

A number of comments were received 

expressing concern that it would be 

difficult for labor organizations to obtain 

the information necessary to complete 

the Form T–1 from the section 3(l) trust. 

One commenter recommended that the 

Department include a safe harbor 

provision in the final rule providing that 

if a labor organization made a demand 

in writing to the trust for the Form T– 

1 information and the trust failed to 

provide the information this would 

relieve the labor organization of the 

obligation to file the Form T–1. The 

Department believes that limiting the 

Form T–1 reporting requirement to 

those trusts over which the labor 

organization has managerial control or 

financial dominance, as defined in this 

rule, makes it unlikely that any 

participating labor organization will 

have difficulty in obtaining from the 

trust the information needed to 

complete the Form T–1. As a result, the 

Department does not believe a general 

safe harbor provision is necessary. 

However, to address those rare 

instances where a section 3(l) trust balks 

at providing the necessary information, 

which was expressed in many 

comments, the labor organization may 

request that the Department use its 

available investigatory authority to 

assist the reporting labor organization to 

obtain information necessary to 

complete the Form T–1. 

The Department expects that labor 

organizations and labor organization 

officials will take timely, reasonable, 

and good faith actions to obtain the 

necessary information from section 3(l) 

trusts and, where they have done so, the 

Department will not assert a willful and 

knowing violation of the filing 

requirement against the labor 

organization, its president, or its 

treasurer. 

Many section 3(l) trusts and labor 

organizations commented that providing 

the information required for labor 

organizations to complete the Form T– 

1 raised significant concerns regarding a 

breach of the trust’s fiduciary duties 

owed to participants and beneficiaries, 

including concerns that individual 

privacy rights may be violated. With 

regard to privacy concerns, a pension 

fund commenter was particularly 

concerned about the required disclosure 

of individual benefit recipients by name 

and address and the subsequent listing 

of those individuals online. The 

commenter believed it would be 

inconsistent with ERISA section 404, 29 

U.S.C. 1104, to provide this information 

to the labor organization so that the 

labor organization could forward it to 

the Department for posting on the 

Internet. A second commenter added 

concerns that this information could be 

used for identity theft. As noted above 

in section D, in this final rule the 

Department has modified the 

instructions to the Form T–1 so that 

itemization is no longer required for 

benefits disbursements made pursuant 

to a written agreement specifying the 

detailed basis for making the payments. 

The Department believes that this will 

alleviate the concerns about privacy and 

identity theft. 

A labor organization commenter 

addressed the potential breach of the 

trust’s fiduciary duties, stating that 

under ERISA section 404(a)(1)(A), 29 

U.S.C. 1104(a)(1)(A), a fiduciary is 

required to discharge his duties with 

respect to an ERISA plan solely in the 

interest of the participants and 

beneficiaries and ‘‘for the exclusive 

purpose of providing benefits to 

participants and their beneficiaries; and 

defraying reasonable expenses of 

administering the [ERISA] plan.’’ The 

commenter indicated that having ERISA 

plans prepare information for labor 

organizations so that labor organizations 

can meet their reporting obligations 

raises concerns as to whether the 

fiduciary is using ERISA plan assets 

exclusively for the benefit of 

participants and whether preparing this 

information actually would interfere 

with the normal operations and 

administration of such ERISA plans. 

In addition to the ERISA section 404 

concerns, a number of comments also 

pointed out that ERISA section 406(b), 

29 U.S.C. 1106(b), prohibits a fiduciary 

and a labor organization trustee who is 

a labor organization official from acting 

in an ERISA plan transaction, including 

providing services, involving his or her 

labor organization. Further, they noted 

that a labor organization participating in 

an ERISA trust fund is a party-ininterest to that plan under ERISA. The 

commenters agreed that ERISA plans 

may enter into certain transactions with 

a party-in-interest if the transaction is 

necessary for the operation or 

administration of the ERISA plan and 

does not involve fiduciary self-dealing. 

However, they believed it unlikely that 

most ERISA plan fiduciaries would 

conclude that gathering and furnishing 

the type of information necessary for a 

labor organization to complete a Form 

T–1 would be necessary to operate or 

administer the ERISA plan. Some 

commenters suggested that the 

prohibited transaction issue could be 

avoided by requiring the labor 

organization to reimburse the ERISA 

plan for all expenses connected with the 

gathering of Form T–1 information but 

commented that reimbursing the ERISA 

plan for the Form T–1 expenses would 

not eliminate the concerns relating to a 

violation of ERISA section 404. 

As a means of resolving these 

concerns, the Department presents two 

safeguards. First, in this final rule the 

Department has included a Form 5500 

exemption for those ERISA plans 

required to file a Form 5500 (Form 5500 

T–1 exemption), as discussed in section 

G(2) above. The Department’s inclusion 

of the Form 5500 T–1 exemption means 

that most of the commenters who raised 

concerns about sections 404 and 406 of 

ERISA will not be required to file a 

Form T–1, dramatically reducing the 

number of trusts from which labor 

organizations will need information. 

Second, EBSA has reviewed this rule 

and specifically advises that it would 

not consider a plan fiduciary to have 

violated ERISA’s fiduciary duty or 

prohibited transaction provisions by 

providing officials of a sponsoring labor 

organization with financial and other 

information from the plan’s books and 

records as needed to complete the Form 

T–1, provided the plan is reimbursed for 

any material costs incurred in collecting 

and providing the information to the 

labor organization officials. EBSA 

explained that the sharing of 

information in this manner is consistent 

with ERISA’s text and purposes, and a 

contrary construction is disfavored 

because it would impede compliance 


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with the LMRDA and the achievement 

of its purposes. The Department expects 

that trusts will routinely and voluntarily 

comply in providing such information 

to reporting labor organizations. 

K. Scope of LMRDA Section 3(l) in 

General 

The Department received a few 

comments that requested a clarification 

of the scope of section 3(l) of the 

LMRDA. One commenter requested that 

the Department clarify that section 3(l) 

trusts must be limited to ‘‘trusts that are 

established for the primary purpose of 

providing benefits to members of such 

labor organization or their beneficiaries 

(for example, strike funds, credit 

unions, building funds or trust funds 

established pursuant to a labor 

organization’s constitution to provide 

death benefits to members).’’ This 

comment suggested that a review of the 

documents that establish each trust 

would help to determine whether the 

trust was established to benefit the 

members of a labor organization or to 

benefit the employees. The comment 

requested that the Department exclude 

from the coverage of section 3(l) all 

trusts, even if funded pursuant to a 

collective bargaining agreement, that in 

the documents creating the trust, 

specifically note that the trust is created 

for the benefit of employees. 

Section 3(l) provides that a ‘‘trust in 

which a labor organization is 

interested’’ is a trust: 

(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. 

29 U.S.C. 402(l). The Department 

agrees that trust documents are critical 

to making a determination regarding a 

trust’s status as a section 3(l) trust. 

These documents must be considered 

along with the actual operation of the 

trust in determining whether they will 

give rise to a Form T–1 reporting 

obligation. Each labor organization must 

consider the particular circumstances of 

a trust in evaluating whether the trust 

satisfies the definition of a section 3(l) 

trust and then must determine whether 

the labor organization is required to file 

a Form T–1 pursuant to this rulemaking. 

Though the Department is prepared to 

offer compliance assistance to labor 

organizations, a thorough review by the 

Department of all documents that may 

create a section 3(l) trust is 

impracticable. Therefore, the 

Department declines to adopt this 

suggestion. 

With regard to the commenter’s 

implicit conclusion that a trust 

document stating that the trust is 

created for the benefit of employees 

would require the conclusion that the 

trust would not be a section 3(l) trust, 

it is the Department’s view that such a 

statement alone would not resolve the 

question. Section 3(l) requires an 

inquiry as to whether ‘‘a primary 

purpose * * * is to provide benefits for 

the members of [a] labor organization or 

their beneficiaries.’’ Thus, a trust may 

have more than one primary purpose. 

The commenter’s statement does not 

provide sufficient information to either 

determine whether the trust in question 

is a section 3(l) trust under the LMRDA 

or whether a trust created by the labor 

organization for the benefit of 

employees of an employer would fall 

outside the scope of section 3(l). 

Although the Department does not 

resolve this question, the statement that 

a trust is created for the benefit of 

employees by itself would not deny 

section 3(l) status to the entity in 

question. Therefore, the Department 

declines to adopt this suggestion. 

A bank submitted comprehensive 

comments, arguing, in part, that (1) it 

does not come within the scope of 

section 3(l) because, in its view, section 

3(l) is limited to ‘‘health benefits, 

pension benefits, life-insurance benefits 

or other similar kinds of concrete and 

individual benefits, and * * * not to 

* * * intangible collective benefits,’’ as 

it characterizes the benefits it provides 

to the labor organizations creating the 

bank; and (2) requiring labor 

organizations to submit a Form T–1 

regarding the bank’s financial 

operations would place an unfair 

burden on the bank relative to its 

competitors. The bank stated that it 

believes itself to be ‘‘the last union 

owned commercial bank in the United 

States,’’ explaining that it was 

established by a labor organization and 

that almost 60% of the voting common 

shares of the bank are owned by a 

national labor organization subject to 

the LMRDA. The bank markets itself as 

‘‘America’s Labor Bank’’ and provides a 

one percentage point discount on 

interest rates for loans to union 

members. It also explained that labor 

organizations are no longer permitted to 

own banks, but that its apparently 

unique status exists by virtue of a 

grandfather provision in the Bank 

Holding Act of 1956. See 12 U.S.C. 

1843. 

The Department is persuaded that the 

bank’s status is indeed unique and, for 

the reasons that follow, will except 

labor organizations from submitting a 

Form T–1 about the bank’s financial 

operations. The bank, apart from its 

status as a labor organization-created 

bank, differs in no material respect from 

other commercial, for profit banking 

institutions. Given the nature of its 

operations, it engages in a much larger 

number of potentially reportable 

transactions than all but a few, if any, 

section 3(l) trusts. Like other financial 

institutions, it is subject to strict state 

and federal regulation that tempers 

somewhat the need for reporting 

obligations. The bank’s commercial 

lending business is predominantly 

conducted with non-labor organization 

entities, a result of the bank’s 

competitive position in the marketplace. 

Similarly, the majority of the bank’s 

customers are not labor organization 

members. Credit unions often serve a 

narrower customer base, which, in the 

section 3(l) trust context, may consist 

predominantly of members of the 

sponsoring labor organization. While 

the bank does share some characteristics 

with other section 3(l) trusts, especially 

credit unions, the bank’s customer base 

is drawn from a broader market, and its 

investment portfolio is more varied and 

diverse than a typical credit union. For 

these reasons the bank’s operations are 

subject to greater market scrutiny than 

typically would be the case for a labor 

organization-established credit union. 

Moreover, as an employer, the bank is 

subject to the LMRDA’s reporting 

provision for employers, 29 U.S.C. 433, 

that require it to report any payments to 

labor organization officials other than 

those made in the regular course of 

business. Thus, the bank will be 

required to disclose on Form LM–10 the 

kinds of payments that would be of the 

greatest interest to labor organization 

members, notwithstanding that labor 

organizations participating in this trust 

are excepted from filing the Form T–1 

about the bank’s financial operations. In 

connection with this matter, two 

additional points must be noted. First, 

the Department is not persuaded by the 

bank’s argument that it does not 

constitute a section 3(l) trust, however, 

the Department does not reach this 

question in excepting labor 

organizations from reporting on the 

bank’s financial operations. Second, the 

bank stated in its comments that in 

addition to its regular banking 

commercial services, it ‘‘also engages in 

a large institutional trust business 

providing custody and investment 

management services to Taft Hartley 

and other employee benefit plans.’’ By 

not requiring labor organizations to file 

a Form T–1 about the bank’s financial 

operations, the Department does not 

modify in any way the filing obligations 


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of any labor organizations with section 

3(l) trusts that utilize the bank for 

services in administering such trusts. 

L. Format of the Form T–1, Schedules, 

and Instructions and Electronic 

Submission of the Form 

Form T–1, as proposed and adopted 

by this final rule, is shorter and requires 

less information than the Form LM–2, 

the annual financial report filed by labor 

organizations with at least $250,000 in 

annual receipts. It includes: 15 

questions on page 1 (Items 1–15) that 

basically identify the trust; five yes/no 

questions (Items 16–20) covering issues 

such as whether any loss or shortage of 

funds was discovered during the 

reporting year (Item 16), the disposition 

of property by other than market sale 

(Item 17), the liquidation of debts (Item 

18), and whether the trust made any 

loans to officers or employees of the 

labor organizations at terms below 

market rates (Item 19); and statements 

(Items 21–24) regarding the total amount 

of assets, liabilities, receipts and 

disbursements of the trust. Item 25 

requires additional detail if a filer 

checks ‘‘Yes’’ to any of the yes/no 

questions in Items 16 through 20. 

The Department proposed that filers 

submit the Form T–1 electronically to 

the Department using software provided 

by the Department and available on the 

OLMS Web site. As proposed, a Form 

T–1 filer will be able to file a report in 

paper format only if it applies for and 

is granted a continuing hardship 

exemption of up to one year, but a paper 

format copy may be submitted initially 

if the filer asserts a temporary hardship 

and files electronically within 10 days 

thereafter. The Department proposed a 

procedure in the Form T–1 Instructions 

for applying for a continuing hardship 

exemption, which was identical to that 

of the Form LM–2. The proposed 

procedure whereby forms must be 

submitted electronically with limited 

exceptions received no substantive 

comment and the Department adopts 

this procedure in this final rule. 

The Department received no 

comments about several specific items 

on the proposed form, schedules, and 

instructions. Thus, except as noted 

below, the final form, schedules, and 

instructions contain no substantive 

change from those published in the 

NPRM. The comments received on 

particular aspects of the form, 

schedules, and instructions are 

identified below. Some of these 

comments have been addressed in more 

detail in other sections of the preamble. 

In the NPRM, the Department 

specifically invited comments on 

whether the trust’s employer 

identification number (EIN) should be 

reported on the first page of the Form 

T–1. The Department stated that the 

number could be used by members to 

cross-check the information on the Form 

T–1 with other reports submitted by the 

trust, such as its filings with the IRS. As 

discussed below, the Department has 

decided to require this information, 

which will be reported in Item 11. As 

proposed, Item 11 required filers to 

report the tax status of the trust; this 

information need not be reported under 

the final rule. The Department has 

concluded that disclosure of the tax 

status of the trust is of less utility to 

members than is the EIN and as such is 

requiring disclosure of the EIN in place 

of tax status. 

Two commenters expressed support 

for requiring labor organizations to 

provide the trust’s EIN. In their view, 

this information will ‘‘facilitate better 

cross-referencing between reporting 

forms’’ increasing the form’s usefulness, 

and help ensure against fraud or 

mistake. One commenter opposed 

including the EIN, arguing that crossreferencing could lead to confusion if 

users were to compare Form T–1 

submissions with reports filed under 

ERISA by the same trusts. 

The Department adopts the 

requirement that the labor organization 

must supply the trust’s EIN. Item 11 of 

the form and the corresponding 

instructions have been modified 

accordingly. This modification imposes 

no additional burden on the trust or 

labor organization beyond what the 

proposal required, and it does not 

violate any privacy or confidentiality of 

the parties, plan participants, or their 

beneficiaries. Without the disclosure of 

the EIN on the Form T–1, labor 

organization members and the public 

could encounter difficulty finding this 

information, leaving them unable to 

easily cross-reference the Form T–1 

with other reporting and disclosure 

forms, thus reducing the form’s utility. 

The Department believes that users will 

recognize that the Form T–1 and any 

other reports filed by the trust, such as 

reports under the Internal Revenue Code 

(Form 990) do not report identical 

information. The Department expects 

that any potential confusion will be 

minimal and, in any event, is 

outweighed by the utility of comparing 

the information reported on the various 

forms. The ability to cross-reference the 

Form T–1 with the Form 990 and other 

disclosure forms, and check for any 

anomalies, will help reduce the ability 

of labor organization officials to use a 

trust to circumvent other LMRDA 

reporting requirements. 

Item 16 of the form requires a labor 

organization to report the trust’s losses, 

shortages, or other discrepancies in the 

trust’s finances. Three commenters 

opposed Item 16’s requirement of 

reporting whether the trust discovered a 

loss or shortage of funds or other 

property during the reporting period. 

One expressed concern over reporting 

delinquent contributions from 

employers as well as overpayment of 

benefits, such as payments to ineligible 

dependants, individuals who have 

coverage through a spouse, or when the 

fund does not know of a participant’s 

death. This commenter also argued that 

reporting a health fund’s losses would 

violate the fund’s privacy obligations 

under HIPAA, as well as require 

additional work by the fund’s staff. 

Additionally, this comment stated that 

the definition of ‘‘loss’’ in the 

instructions is too vague to know what 

information to send to the labor 

organization. Finally, a commenter also 

questioned the lack of an adequate 

definition of ‘‘loss’’ or ‘‘shortage’’ in the 

instructions, which may lead to 

excessive and irrelevant reporting of 

transactions. 

The Department has clarified Item 16, 

by defining ‘‘a loss or shortage of funds 

or other property.’’ The Department has 

defined the term to exclude delinquent 

contributions from employers, 

delinquent accounts receivable, losses 

from investment decisions, and 

overpayments of benefits. Financial 

transparency enables members to 

monitor the affairs of their labor 

organization and its officers, including 

the operations of a section 3(l) trust that 

is dominated by the labor organization. 

While a financial loss or shortage does 

not, by itself, indicate that the trust is 

mismanaged or that fraudulent activity 

is occurring, it provides useful 

information to members regarding the 

use of their labor organization’s assets 

and the actions of its officers. 

Item 17 of the form requires a labor 

organization to report the trust’s 

acquisition or disposition of assets. One 

commenter suggested that it could 

require tracking ‘‘thousands’’ of such 

transactions annually, including all 

write-offs of all fixed assets (with the 

basis of those assets), all settlements or 

write-offs of employer contribution 

obligations (even when de minimis 

interest obligations are waived or 

reduced), and would require 

maintaining every invoice for furniture 

or equipment until disposed. Although 

the Department believes that this claim 

may be overstated, it has clarified the 

instructions in a way that will largely 

alleviate any burden. The instructions 

have been revised to apprise filers that 


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they may group similar acquired or 

disposed assets together, in a larger 

category, as well as grouping multiple 

assets acquired from or disposed of to 

the same source, which will reduce the 

‘‘expansive’’ nature of this reporting 

requirement. For example, if a trust 

acquired various types of office 

equipment as a donation, these assets 

may be grouped together for purposes of 

the description in Item 25. 

Item 19 of the form requires a labor 

organization to report loans to labor 

organizations officers or employees 

made below market rates. No 

commenters objected to this provision 

and it is adopted as proposed. 

Items 23 and 24 of the form require 

a labor organization to report the trust’s 

total receipts and disbursements, 

respectively. Recognizing that these 

terms call for reporting on a cash rather 

than an accrual basis, in contrast to the 

manner in which some ERISA-regulated 

trusts prepare their financial statements, 

one commenter expressed concern that 

the Department was effectively 

requiring trusts to establish a second 

recordkeeping system. The Department 

is not requiring section 3(l) trusts to 

establish a cash basis accounting 

system. As is the case with the Form 

LM–2, the Department permits filers the 

choice of how to maintain their 

recordkeeping system. If section 3(l) 

trusts for which a labor organization 

files a Form T–1 choose to prepare their 

financial statements on an accrual basis, 

however, labor organizations may need 

to request access to the trust’s books and 

records in order to obtain the 

information necessary to report on the 

Form T–1 the amount of cash and 

liabilities on hand at the start and close 

of each reporting period. See 68 FR 

58374, 58380–81 (2003) (preamble to 

Form LM–2 final rule). The Department 

believes that it is easier for labor 

organization members to understand the 

trust’s finances if this basic information 

is provided for their labor organization’s 

section 3(l) trusts. In this regard, the 

Department notes that most ERISAregulated trusts will have no Form T–1 

reporting obligation where they submit 

the annual disclosure statements 

required of them under ERISA. 

One commenter sought clarification 

regarding the reporting of receipts and 

disbursements where employers submit 

contributions to related plans on a 

single check to one trust. The 

commenter explained that in such 

instances the trust typically acts as the 

depository and the contributions are 

promptly allocated to the other trusts 

based on each trust’s contribution rate. 

The Department requires Form T–1 to 

include the total receipts and 

disbursements of the trust during its 

fiscal year. Therefore, Item 23, Receipts, 

includes all funds received by the trust 

from any employer or any other source. 

If a trust acts as a depository and 

promptly reallocates these receipts to 

other trusts, then such reallocation must 

be reported in Item 24 as a 

disbursement. 

M. Effective Date and Reporting 

Deadlines 

The Department proposed that the 

final rule would take effect no less than 

30 days after its publication in the 

Federal Register. Thus, under the 

proposal no report would be due until 

15 months after the rule’s effective date. 

Although the Department proposed 

that the rule could take effect on the 

31st day after its publication, this final 

rule will take affect 90 days after its date 

of publication and it shall apply only to 

labor organizations whose fiscal years 

begin on or after January 1, 2009. The 

effect of this change is to provide a 

small amount of additional time over 

and above that provided under the 

proposal before the start of the fiscal 

year for which an initial report will be 

due. The Department believes that this 

lead time is sufficient for affected trusts 

and labor organizations to adapt to the 

proposed disclosure requirements and 

make any necessary adjustments to their 

recordkeeping and reporting systems. 

As proposed and as adopted in this 

final rule, the Form T–1 must be filed 

within 90 days after the end of the labor 

organization’s fiscal year and must 

cover the section 3(1) trust’s most recent 

completed fiscal year, i.e., the fiscal year 

ending on or before the closing date of 

the labor organization’s own fiscal year. 

This requirement is mandated by the 

LMRDA’s requirement that a labor 

organization file its financial reports 

within 90 days after the close of the 

labor organization’s fiscal year. 29 

U.S.C. 437(b). By permitting a labor 

organization to file the Form T–1 within 

90 days after the labor organization’s 

fiscal year ending date, rather than 

requiring it to be filed within 90 days 

after the trust’s fiscal year ending date, 

the Department has eased the reporting 

burden for both the trust and the labor 

organization. The instructions to Form 

T–1 provide examples of when the Form 

T–1 must be filed. 

Many labor organization expressed 

concern about their ability to file a Form 

T–1 within 90 days after the end of the 

labor organization’s fiscal year in those 

instances where the trust and the 

reporting labor organization had the 

same fiscal year. The trust community 

and labor organizations also expressed 

concern about their ability to timely 

provide information and submit the 

reports, respectively, under those time 

constraints. Most of the concerns were 

contingent on the Department’s 

proposal that only a relatively small 

number of section 3(l) trusts would be 

excluded from the reporting 

requirement. Other commenters 

expressed concern about the ability of 

multi-employer health and welfare 

plans to timely provide required 

information. They stated that insurance 

carriers and providers, not the trust, 

have the data needed for the Form T– 

1, which would complicate and delay 

the receipt of required information. 

Others stated that plans that have 

Medicare D coverage do not receive the 

Medicare reimbursement for 90 to 120 

days from the date a request for 

reimbursement is filed. Further, some 

commenters asserted that compiling 

information for the Form T–1 would 

interfere with and delay the completion 

of their duties under other statutes. 

The Department has carefully 

considered the comments, but it retains 

the view that the rule as proposed 

provides sufficient time for labor 

organizations to timely submit reports. 

The Department’s position is based in 

substantial part on the significant 

changes to the proposal. As discussed in 

preceding sections of the preamble, the 

Department has adopted a reporting 

exemption that will affect most TaftHartley trusts. Where the trust is 

required to file a Form 5500 under 

ERISA, labor organizations participating 

in the trust are not required to file a 

Form T–1. Additionally, as discussed 

earlier in this preamble, the Department 

has established an exception to the 

itemization requirement for any 

payments to a trust pursuant to a 

collective bargaining agreement and any 

benefits payments made by the trust 

pursuant to a written agreement 

specifying the detailed basis on which 

such payments are made. 

As a result of these changes, the 

number of trusts for which a Form T– 

1 must be filed has been substantially 

reduced as has the number of 

transactions for which itemization is 

required. Many of the largest trusts with 

potentially the greatest number of 

receipts and disbursement to itemize are 

unaffected by the Form T–1 

requirements. Additionally, trusts that 

were concerned that they would be 

faced with twice the reporting 

obligation (Form 5500 and Form T–1) 

no longer face this dual obligation. A 

trust that is required to file a Form 5500 

will seldom, if ever, be asked by a 

participating labor organization to 


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8The Department understands that plans that 

have Medicare D coverage will not receive the 

Medicare reimbursement until 90 to 120 days from 

the date a request for reimbursement is filed. Such 

trusts typically will not be asked to provide 

information to labor organizations because such are 

required to file a Form 5500, eliminating any Form 

T–1 reporting obligation by the labor organization. 

However, assuming for purposes of discussion that 

a trust had to compile information for this purpose, 

a filer would not have to delay the report for the 

receipt of the Medicare reimbursement because the 

Form T–1 requires the reporting of receipts and 

disbursement on a cash basis. Thus, it need report 

Medicare reimbursements received as of the close 

of the fiscal year. 

compile information for the submission 

of a Form T–1.8

A number of trusts (those with fiscal 

years that coincide with the labor 

organizations’ fiscal years) that are not 

required to file a Form 5500 or are 

eligible for a Form 5500 exemption, are 

required to generate and deliver 

financial information to the labor 

organization(s) in sufficient time for the 

labor organization to prepare and file 

the Form T–1 within 90 days after the 

close of the fiscal year. These trusts will 

not be faced with the time-consuming 

task of filing a Form 5500 and will have 

more resources to devote to providing 

Form T–1 data. Thus, the filing 

deadline, even for this small subset of 

trusts (those not required to file the 

Form 5500 and that have fiscal years 

coinciding with the labor 

organization’s), will be reasonable and 

will not interfere with the trust’s 

compliance with other non-LMRDA 

statutory and regulatory requirements. 

Further, the Department notes that the 

most complex and large labor 

organizations are required to compile, 

and have proven themselves capable of 

compiling, financial data for reporting 

within 90 days after the close of the 

fiscal year. The Form T–1 requires less 

information and information of less 

complexity than required of a large 

labor organization in filing the Form 

LM–2. 

Regulatory Procedures 

Executive Order 12866 

This rule has been drafted and 

reviewed in accordance with Executive 

Order 12866, section 1(b), Principles of 

Regulation. The Department has 

determined that this rule is not an 

‘‘economically significant’’ regulatory 

action under section 3(f)(1) of Executive 

Order 12866. Based on an analysis of 

the data, the rule is not likely to: (1) 

Have an annual effect on the economy 

of $100 million or more or adversely 

affect in a material way the economy, a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or state, local, or 

tribal governments or communities; (2) 

create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof, or (4) raise novel 

legal or policy issues. As a result, the 

Department has concluded that a full 

economic impact and cost/benefit 

analysis is not required for the rule 

under section 6(a)(3) of the Executive 

Order. However, because of its 

importance to the public, the rule was 

treated as a significant regulatory action 

and was reviewed by the Office of 

Management and Budget. 

Unfunded Mandates Reform 

For purposes of the Unfunded 

Mandates Reform Act of 1995, this rule 

does not include a federal mandate that 

might result in increased expenditures 

by state, local, and tribal governments, 

or increased expenditures by the private 

sector of more than $100 million in any 

one year, adjusted by the rate of 

inflation between 1995 and 2008 

($130.38 million) per 2 U.S.C. 1532(a). 

Executive Order 13132 (Federalism) 

The Department has reviewed this 

rule in accordance with Executive Order 

13132 regarding federalism and has 

determined that the proposed rule does 

not have federalism implications. 

Because the economic effects under the 

rule will not be substantial for the 

reasons noted above and because the 

rule has no direct effect on states or 

their relationship to the federal 

government, the rule does not have 

‘‘substantial direct effects on the States, 

on the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government.’’ 

Analysis of Costs for Paperwork 

Reduction Act and Regulatory 

Flexibility Act 

In order to meet the requirements of 

the Regulatory Flexibility Act (RFA), 5 

U.S.C. 601 et seq., Executive Order 

13272, and the Paperwork Reduction 

Act (PRA), 44 U.S.C. 3501 et seq., and 

the PRA’s implementing regulations, 5 

CFR Part 1320, the Department has 

undertaken an analysis of the financial 

burdens to covered labor organizations 

associated with complying with the 

requirements contained in this final 

rule. The focus of the RFA and 

Executive Order 13272 is to ensure that 

agencies ‘‘review rules to assess and 

take appropriate account of the potential 

impact on small businesses, small 

governmental jurisdictions, and small 

organizations, as provided by the 

[RFA].’’ Executive Order 13272, Sec. 1. 

The more specific focus of the PRA is 

‘‘to reduce, minimize and control 

burdens and maximize the practical 

utility and public benefit of the 

information created, collected, 

disclosed, maintained, used, shared and 

disseminated by or for the Federal 

government.’’ 5 CFR 1320.1. 

Compliance with the requirements of 

this rule involve essentially information 

recordkeeping and information 

reporting tasks, and the one-time, nonrecurring expenses associated with 

modifying information systems to 

capture and report the required 

information. Therefore, the overall 

impact to covered labor organizations, 

and in particular, to small labor 

organizations that are the focus of the 

RFA, is essentially equivalent to the 

financial impact to labor organizations 

assessed for the purposes of the PRA. As 

a result, the Department’s assessment of 

the compliance costs to covered labor 

organizations for the purposes of the 

PRA is used as a basis for the analysis 

of the impact of those compliance costs 

to small entities addressed by the RFA. 

The Department’s analysis of PRA costs, 

and the quantitative methods employed 

to reach conclusions regarding costs, are 

presented here first. The conclusions 

regarding compliance costs in the PRA 

analysis are then employed to assess the 

impact on small entities for the 

purposes of the RFA analysis, which 

follows. 

Paperwork Reduction Act 

This statement is prepared in 

accordance with the Paperwork 

Reduction Act of 1995, 44 U.S.C. 3501. 

As discussed in the preamble, this rule 

implements an information collection 

that meets the requirements of the PRA 

in that: (1) The information collection 

has practical utility to labor 

organizations, their members, other 

members of the public, and the 

Department; (2) the rule does not 

require the collection of information 

that is duplicative of other reasonably 

accessible information; (3) the 

provisions reduce to the extent 

practicable and appropriate the burden 

on labor organizations that must provide 

the information, including small labor 

organizations; (4) the form, instructions, 

and explanatory information in the 

preamble are written in plain language 

that will be understandable by reporting 

labor organizations; (5) the disclosure 

requirements are implemented in ways 

consistent and compatible, to the 

maximum extent practicable, with the 

existing reporting and recordkeeping 


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9The RFA requires that an agency’s final 

regulatory flexibility analysis include ‘‘a summary 

of the significant issues raised by the public 

comments in response to the initial regulatory 

flexibility analysis, a summary of the assessment of 

the agency of such issues, and a statement of any 

changes made in the proposed rule as a result of 

such comments.’’ 5 U.S.C. 604(a)(2). 

practices of labor organizations that 

must comply with them; (6) this 

preamble informs labor organizations of 

the reasons that the information will be 

collected, the way in which it will be 

used, the Department’s estimate of the 

average burden of compliance, the fact 

that reporting is mandatory, the fact that 

all information collected will be made 

public, and the fact that they need not 

respond unless the form displays a 

currently valid OMB control number; (7) 

the Department has explained its plans 

for the efficient and effective 

management and use of the information 

to be collected, to enhance its utility to 

the Department and the public; (8) the 

Department has explained why the 

method of collecting information is 

‘‘appropriate to the purpose for which 

the information is to be collected’’; and 

(9) the changes implemented by this 

rule make extensive, appropriate use of 

information technology ‘‘to reduce 

burden and improve data quality, 

agency efficiency and responsiveness to 

the public.’’ 5 CFR 1320.9; see also 44 

U.S.C. 3506(c). 

A. Issues Raised in Public Comments 

Related to the Department’s Cost 

Estimates 

As the Department has done with the 

final rule, the NPRM employed the cost 

conclusions derived in the PRA analysis 

in order to assess burdens to small labor 

organizations for the purposes of the 

RFA analysis. As a result, for the most 

part, the comments received by the 

Department on its costs analysis did not 

indicate whether they were specifically 

addressing the PRA analysis, the RFA, 

or both. Because of the interrelationship 

between the analyses, and because the 

RFA specifically requires the 

Department to address comments 

related to its burden analysis,9 the 

Department has construed all comments 

received regarding its assessment of 

costs to the regulated community as 

comments related to both the PRA and 

the RFA analysis. Therefore, the 

introduction to the PRA analysis below 

is a complete recitation of the 

significant issues raised by the 

comments, the Department’s response 

thereto, and changes made to both the 

PRA and RFA analyses as a result of 

those comments. 

As noted above, the Department 

received a number of comments related 

to its analysis of the financial costs to 

covered labor organizations associated 

with compliance with this rule. The vast 

majority of these comments raised 

generalized concerns regarding the 

Department’s conclusions relating to 

costs of compliance. Representative of 

these generalized comments is one from 

a representative of approximately 100 

jointly sponsored Taft-Hartley trusts 

asserting that ‘‘[t]he costs of compliance 

[stated in the NPRM] are grossly 

underestimated. Initially, review of the 

cost estimates is necessarily difficult 

due to the lack of sufficient detail 

regarding the reportable items. * * * 

The estimates * * * significantly under 

report the number of hours involved in 

these complex reporting obligations.’’ In 

addition to general criticism regarding 

the Department’s cost estimates, many 

comments on the subject of costs came 

from trusts asserting that the 

compliance costs will be borne by trusts 

rather than labor organizations, the 

entities with the legal obligation to file 

the Form T–1. Representative of these 

comments was a statement from a labor 

organization-sponsored multiemployer 

benefit fund, which noted its concern 

‘‘about the time and effort that would 

have to be put into preparing the 

information for the union’s T–1 filing. 

[The trusts] would have to reprogram 

[their] computer systems, and additional 

staff time would be required to complete 

many of the details. The hours of time 

[the Department] suggest[s] would be 

needed to perform these tasks [is] 

significantly underestimate[d].’’ A small 

number of cost-related comments 

challenged the rule based on an 

assessment of compliance costs as 

balanced against the benefits of the rule: 

‘‘Even a cursory review of the reporting 

requirements imposed by the Proposed 

Rule indicates that the compliance 

burden will be significantly greater. The 

Proposed Rule does not offer Fund 

participants and beneficiaries any 

increased value in terms of transparency 

or available information concerning the 

Funds beyond that which is already 

available to participants and 

beneficiaries.’’ 

In response to these general 

comments, the Department notes that 

the final cost analysis undertaken in this 

rule presents a more refined 

methodology than was performed in the 

NPRM, as noted in the discussion 

below, which has significantly 

improved the Department’s estimates of 

overall costs of compliance with this 

rule by covered labor organizations. In 

addition, in response to those comments 

that assert that the Department failed to 

account for costs borne by trusts in 

which a labor organization has a 

reporting obligation, the Department has 

indicated elsewhere in this rule that 

labor organizations must reimburse 

trusts for the trust’s costs for 

implementation and maintenance of 

recordkeeping and for information 

transmission. Thus, the Department’s 

analysis below expects that while some 

trusts may perform some of the 

recordkeeping and other tasks related to 

reporting required by the rule, those 

costs will ultimately be borne by labor 

organizations with the reporting 

obligations contained in this rule. 

Finally, in response to those comments 

that call for a more traditional costbenefit analysis of this rule, the 

Department notes that neither the PRA 

nor the RFA compels such a study. 

In addition to the general comments 

related to cost under-estimation and 

burdens on trusts, the Department 

received more specific comments 

containing alternate estimates suggested 

for inclusion in the Department’s 

assessment of the costs of compliance. 

For instance, a number of commenters 

stated that it would not be uncommon 

for even a modest-sized local labor 

organization to have multiple T–1 

Forms to file. In addition, comments 

from trusts and third-party 

administrators concurred that they 

would have to reprogram their reporting 

and recordkeeping systems to compile 

the necessary information for the Form 

T–1, and one administrator estimated 

that it would require approximately 300 

hours to compile the necessary 

information. A national pension fund 

estimated that its programmers would 

spend 55 hours reprogramming the 

current system and staff would spend 

120 hours compiling the necessary 

information. Two commenters estimated 

that it would cost, on average, anywhere 

from $15,000 to $18,147.81 per filer to 

comply with the Form T–1 reporting 

requirements. A third commenter 

concluded that compliance costs would 

fall in a range between $45,000 and 

$82,500. Most of the alternate 

calculations offered by commenters for 

various data points appeared to be 

approximations without much, or any, 

analysis to support the figures. 

One comment was much more 

substantial, however. This commenter 

challenged the methodology used by the 

Department to arrive at its conclusions 

regarding costs, and also offered 

alternate methodology. The 

commenter’s methodological objections 

were adopted by reference in several 

other comments. The commenter’s 

critique identifies four separate but 

interrelated steps in the Department’s 

analysis of compliance costs in the 


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10As indicated in the NPRM, the Department’s 

analysis segregated labor organizations into three 

‘‘tiers,’’ based on size of annual receipts. Tier I labor 

organizations are those with annual receipts 

between $250,000 and $499,999; Tier II labor 

organizations are those with annual receipts 

between $500,000 and $6.5 million; and Tier III 

labor organizations are those with annual receipts 

over $6.5 million. 

11The Department notes that it specifically cited 

the National Compensation Survey: Occupational 

Wages in the United States, June 2006 (BLS July 

2007, p. 5) in the NPRM. See 73 FR 11776 n.17. 

NPRM, and argues that each step 

contains methodological errors that 

result in serious underestimations of 

costs. According to the commenter, the 

first step—the identification of tasks 

needed to complete a Form T–1 and the 

amount of time each task takes to 

complete—is flawed because the 

Department failed to capture in 

sufficient detail all tasks that the Form 

LM–2 filer and a trust must complete, 

failed to specify which person or job 

classification would complete the 

identified tasks, and failed to provide a 

clear methodology for how it arrived at 

the time values needed to accomplish 

the identified tasks. In challenging the 

Department’s assumptions as to these 

data points, the commenter conducted 

an on-line survey of section 3(l) trusts, 

which was responded to by 40 

multiemployer plans. Among other 

things, the survey asked whether any 

information required by Form T–1 was 

currently tracked by plans, and the 

approximate number of receipts, 

disbursements and payments to officers 

and employees that would be reported. 

A number of plans indicated that they 

were not capable of providing the 

required information on receipts, 

disbursements, and payments to officers 

and employees because they could not 

track the name, address, or purpose of 

the receipt or disbursement. Of those 

plans currently capable of reporting the 

required Form T–1 information, on 

average they estimated that in the first 

year it would take 54.5 hours to generate 

receipt information, 56.0 hours to 

generate disbursement information, and 

26.1 hours to generate the required 

information on payments to officers and 

employees, for an overall total of 136.6 

hours to compile required reportable 

information. This figure is almost twice 

(71.7 hours) the amount of time the 

Department allocated to costs of 

reporting and recordkeeping in the first 

year. See NPRM, 73 FR 11775, Table 3. 

The commenter also found flaws with 

the Department’s data in the second part 

of the cost analysis—estimating the 

number of Form LM–2 filers that have 

one or more trusts to report. Regarding 

this piece of the analysis, the 

commenter criticized the Department’s 

estimates that 10% of Tier I filers, 25% 

of Tier II filers, and 100% of Tier III 

filers would have trusts to report, and 

instead relied on actual data contained 

in the Form LM–2 reports in the 

Department’s e.LORS database.10 Based 

on data contained in e.LORS databases 

from the 2006 Form LM–2 reports, the 

commenter claimed that 2,279 filers 

indicated that they had at least one 

reportable section 3(l) trust, whereas the 

Department’s estimates regarding 

percentages of filers with at least one 

reportable trust resulted in a number of 

filers less than half of the commenter’s 

figure. 

The third step in the analysis— 

estimating the average number of Form 

T–1s that would be filed by Form LM– 

2 filers indicating an interest in at least 

one trust—the commenter argued is 

flawed because the Department makes 

‘‘undocumented assumptions’’ about the 

number of trusts each Form LM–2 filer 

would need to report. The NPRM 

assumed that, on average, Tier I filers 

would need to file reports on one trust, 

Tier II filers would need to file reports 

on two trusts, and Tier III filers would 

file four reports. NPRM, 73 FR 11774. 

Rejecting those assumptions, the 

commenter instead randomly selected a 

subset of 118 Form LM–2 filers of the 

2,279 filers he found that indicated an 

interest in at least one trust based on a 

search of e.LORS data with 2006 Form 

LM–2 filing information. Of these 118 

randomly selected filers, the commenter 

calculated that, on average, Tier I filers 

actually reported an interest in two 

trusts, Tier II filers actually reported an 

interest in 3.5 trusts, and Tier III filers 

actually reported an interest in 5 trusts. 

Based on this sample, the commenter 

extrapolates the data to conclude that in 

2006, 2,279 Form LM–2 filers had an 

interest in 7,486 trusts, which is over 

three times as many Form T–1 trusts as 

the Department’s NPRM estimates. See 

NPRM, 73 FR 11774, Table 2. 

Finally, the commenter asserted that 

the fourth part of the Department’s 

analysis—estimating the total burden 

cost—is flawed for several reasons. 

First, in assigning a value to the hours 

undertaken to complete the Form T–1 

filing, the Department used only hourly 

wage rates and did not employ total 

compensation figures, which include 

costs associated with health insurance, 

pension contributions and other nonwage compensation and which increase 

wage rates by 30% generally. Second, 

the commenter contended that the 

Department’s analysis lacked specificity 

in stating which employees in which job 

categories would perform the tasks 

identified as necessary to file the Form 

T–1. Third, the commenter stated that 

the Department’s estimates do not 

consider the costs of equipment or data 

transfer, or amounts that trusts may 

charge labor organizations for preparing 

and supplying information required by 

the Form T–1. Finally, the commenter 

argued that the wage rates employed in 

the NPRM lack credibility, and he 

asserted that he was unable to confirm 

them because the Department did not 

indicate which National Compensation 

Survey was used in the analysis.11

The Department thoroughly analyzed 

the commenter’s critique of the methods 

used in the NPRM to assess costs 

associated with compliance with this 

rule. The commenter’s analysis 

employed several improvements in the 

methods used by the Department in the 

NPRM, and the analysis provided the 

Department with insights about 

revisions that could be made to the 

quantitative analysis of compliance 

costs. However, because of some 

fundamental flaws in the commenter’s 

analysis, the Department declines to 

adopt the commenter’s methods in 

whole, and, as a result, declines to 

adopt the commenter’s ultimate 

conclusions regarding costs of 

compliance with this rule. For instance, 

a sample size of 118 Form LM–2 filers 

is insufficient to make generalizations 

about a population of 2,279 filers. Nor 

can a portion of the 118 filers be used 

to make generalizations about the 

individual tiers without accepting a 

very low confidence level. Further, the 

commenter focused on section 3(l) trusts 

in general, not trusts for which labor 

organizations would be required to file 

the Form T–1. At least some of the listed 

section 3(l) trusts would not meet the 

financial dominance or control elements 

of the Form T–1. At best, the 

commenter’s estimate can be seen as the 

maximum possible number of Form T– 

1s required to be filed by the 118 labor 

organizations studied. Therefore, the 

Department cannot rely on the 

commenter’s analysis to determine the 

number of Form T–1s that will be filed 

each year. Similarly, while the online 

survey of trusts provides an interesting 

snapshot of multiemployer plans, no 

general assumptions can be drawn from 

40 self-selected multiemployer plans. 

This survey, like all self-selecting 

surveys, is subject to self-selection bias. 

In this case, it is likely that the 

participants’ decision to participate is 

correlated with a high number of hours 

needed to provide the information to 

complete the Form T–1, making the 

participants a non-representative 

sample. Further, no general assumptions 


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12The NPRM indicated that the Department’s 

initial PRA analysis employed wage rate data 

adjusted to reflect total compensation. 73 FR 11776. 

The use of total compensation figures is more 

apparent in this final cost analysis because, as 

noted in the discussion that follows, wage figures 

are adjusted upward by a factor of 30% to account 

for total compensation, and that upward adjustment 

is specifically shown in Table 4 below. 

13This upward revision occurred despite the fact 

that this final rule reinstated the exemption for 

section 3(l) trusts that are required to file a Form 

5500 under ERISA. That exemption realized a 

reduction in overall compliance costs for covered 

labor organizations, but the methodological 

improvements in the cost analysis offset those 

savings. 

14The compliance costs for all covered labor 

organizations for the first year, and the compliance 

costs averaged over the first three years—$15.19 

million and $10.51 million, respectively—are well 

below the $100,000,000 threshold that would make 

this rule economically significant under Executive 

Order 12866. Therefore, as noted earlier, the 

Department has determined that this rule is not an 

‘‘economically significant’’ regulatory action under 

section 3(f)(1) of Executive Order 12866. 

can be made about multiemployer plans 

or section 3(l) trusts from a sample size 

of 40 without accepting a very low 

confidence level. Finally, even if the 

sample size is accepted the information 

collected from multiemployer plans 

cannot be used to make general 

assumptions about all section 3(l) trusts. 

Multiemployer plans are one of the most 

complicated types of section 3(l) trusts. 

One plan can cover hundreds to 

thousands of employees working for two 

or more employers. Therefore, these 

trusts will have the greatest number of 

receipts, disbursements, and employees. 

The Department cannot rely on the 

commenter’s analysis to calculate the 

estimated burden. 

Based upon careful consideration of 

the commenter’s cost estimates and the 

methods employed to arrive at cost 

estimates, the Department has made 

adjustments to its quantitative methods 

and therefore to its burden estimates. As 

reflected in the analysis that follows, the 

Department has, among other things: 

• Relied on data reported from Form 

LM–2 filers in 2006 contained in the 

Department’s e.LORS database to 

estimate more accurately the number of 

Form T–1s that a covered labor 

organization may file; 

• Analyzed a randomly selected, 

statistically reliable sample of the 2,292 

Form LM–2 filers in 2006 that indicated 

an interest in at least one trust in order 

to better estimate the number of trusts 

about which a labor organization may 

need to file Form T–1s; 

• Disaggregated the tasks associated 

with completing the Form T–1 in a more 

detailed fashion so that the number of 

hours estimated as necessary to prepare 

the Form T–1 is more accurate; and 

• Employed a total compensation 

figure to estimate the costs to a labor 

organization in preparation of the Form 

T–1.12

As a result of these improvements to 

the Department’s methodological 

approach, the estimates of costs to labor 

organizations for compliance with this 

rule have been revised upward.13 Those 

figures are reported in the analyses that 

follow. 

Pursuant to the PRA, the information 

collection requirements contained in 

this final rule were submitted to OMB 

and received approval on September 29, 

2008 under OMB control number (1215– 

0188). The approval will expire on 

September 30, 2011. The Form T–1 and 

its instructions, which are modified to 

reflect the new filing criteria, are 

published as an appendix to this final 

rule. 

B. Summary of the Rule: Need and 

Economic Impact 

This final rule implements the Form 

T–1 Trust Annual Report required to be 

filed by the largest labor organizations 

for trusts in which they are interested, 

under conditions prescribed by the 

Secretary of Labor. See 29 U.S.C. 402(l); 

431(b); 438. 

As discussed in the preamble, 

members have long been denied 

important information about labor 

organization funds that were being 

directed to other entities, presumably 

for the members’ benefit, such as joint 

funds administered by a labor 

organization and an employer pursuant 

to a collective bargaining agreement, 

educational or training institutions, 

credit unions, and redevelopment or 

investment groups. The Form T–1 is 

necessary to close this gap, prevent 

certain trusts from being used to evade 

the Title II reporting requirements, and 

provide labor organization members 

with information about financial 

transactions. Trust reporting is 

necessary to ensure, as intended by 

Congress, the full and comprehensive 

reporting of a labor organization’s 

financial condition and operations, 

including a full accounting to labor 

organization members whose work 

obtained the payments to the trust. It is 

also necessary to prevent circumvention 

and evasion of the reporting 

requirements imposed on officers and 

employees of labor organizations and on 

employers. 

The form is designed to take 

advantage of technology that makes it 

possible to increase the detail of 

information that is required to be 

reported, while at the same time making 

it easier to file and publish the contents 

of the reports. Labor organization 

members thus will be able to obtain a 

more accurate and complete picture of 

their labor organization’s financial 

condition and operations without 

imposing an unwarranted burden on 

respondents. Supporting documentation 

need not be submitted with the forms, 

but labor organizations are required, 

pursuant to the LMRDA, to maintain, 

assemble, and produce such 

documentation in the event of an 

inquiry from a labor organization 

member or an audit by an OLMS 

investigator. 

The Department’s NPRM in this 

rulemaking contained an initial PRA 

analysis, which was also submitted to 

OMB. Based upon careful consideration 

of comments received regarding the 

Department’s estimate of costs in the 

NPRM, the Department made 

methodological revisions which 

resulted in adjustments to its burden 

estimates in this final rule. The costs to 

the Department also were adjusted. 

Federal annualized costs are discussed 

after the burden on the reporting labor 

organizations is considered. 

Based upon the analysis presented 

below, the Department estimates that 

the total first year burden to comply 

with Form T–1 will be 423,913.74 hours 

for all covered labor organizations. The 

total first year compliance costs 

associated with this burden is estimated 

to be $15.19 million for all covered 

labor organizations. Both the burden 

hours and the compliance costs 

associated with Form T–1 decline in 

subsequent years. The Department 

estimates that the total burden averaged 

over the first three years for all covered 

labor organizations to comply with the 

Form T–1 to be 345,736.92 hours per 

year. The total compliance costs 

associated with this burden averaged 

over the first three years are estimated 

to be $10.51 million for all covered 

labor organizations.14

C. Overview of Form T–1 

The Form T–1 in this rule is identical 

to the form promulgated at 73 FR 11779, 

with the exception of the addition of an 

item requiring the reporting of the 

trust’s EIN and the deletion of an item 

requiring the listing of the trust’s tax 

status. However, as discussed in the 

preamble, the scope of the reporting 

requirement has been narrowed in order 

to conform the rule with the DC 

Circuit’s decision in AFL–CIO v. Chao, 

409 F.3d 377 (2005). This final rule 

provides that no Form T–1 will be 

required if the trust files a report 

pursuant to 26 U.S.C. 527, or is required 

to file a Form 5500 pursuant to the 

requirements of ERISA (if the trust can 

elect to exempt itself from filing a Form 


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15The NPRM contained an inadvertent error 

stating that page 1 of the Form T–1 contained 14 

questions and 6 yes/no questions. 73 FR 11773. 

These errors have been corrected here. 

5500 then it must file a Form T–1 

regardless of whether it takes the 

exemption or not), or if the organization 

files publicly available reports with a 

Federal or state agency as a PAC. 

Additionally, a labor organization may 

substitute an audit that meets the 

criteria set forth in the Form T–1 

Instructions for the financial 

information otherwise reported on a 

Form T–1. 

Form T–1 consists of 15 questions on 

page 1 that generally identify the labor 

organization and trust; five 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 at terms below 

market rates; four summary numbers for 

total assets, liabilities, receipts, and 

disbursements; a schedule for itemizing 

all receipts of $10,000 or more, 

individually or in the aggregate, from 

any entity or individual; a schedule for 

itemizing all disbursements of $10,000 

or more, individually or in the 

aggregate, to any entity or individual; 

and a schedule for listing all officers of 

the trust and payments to them and all 

employees of the trust who received 

more than $10,000 from the trust.15

Form T–1 and its instructions, which 

are modified to reflect the changes made 

to the proposal, are published as an 

appendix to this final rule. A more 

complete discussion of the form is set 

forth at section II.L. of the preamble. 

D. Methodology for the Burden 

Estimates 

As an initial matter, it should be 

noted, as was noted in the NPRM, that 

some of the numbers included in both 

this PRA analysis and the preceding 

regulatory flexibility analysis will not 

add perfectly due to rounding. 

1. Number of Form T–1s Filed 

The Department started by 

determining the population affected by 

the Form T–1. Form LM–2 Item 10 asks 

the reporting labor organization to 

indicate whether it created or 

participated in the administration of a 

trust or other fund or organization, as 

defined in the Form LM–2 instructions, 

which provides benefits for members or 

their beneficiaries. If the labor 

organization indicates that it did have 

one or more section 3(l) trusts, it must 

list the trusts, including name, address, 

and details about the trust, in Form LM– 

2 Item 69. The Department determined 

that 2,292 Form LM–2 filers indicated 

on their 2006 report that they had at 

least one section 3(l) trust. 

In order to improve the estimates 

concerning the number of trusts about 

which covered labor organizations 

would be required to provide T–1 

reports, the Department sampled a 

randomly selected subset of the 2,292 

Form LM–2 2006 filers that indicated an 

interest in at least one trust. The 

Department first calculated the 

appropriate sample size. Consistent 

with commonly accepted statistical 

practices, the Department determined 

that a level of precision or sample error 

of 6%, a confidence interval of 90%, 

and a degree of variability of 50% 

(maximum variability) was acceptable 

for the Form T–1 final burden analysis. 

The Department concluded that it 

needed to examine Item 69 on the 

reports of 174 of the 2,292 labor 

organizations to determine the average 

number of section 3(l) trusts per Form 

LM–2 filers that answered Item 10 

‘‘Yes,’’ indicating that it had at least one 

section 3(l) trust. The sample size of 174 

LM filers was then increased by 20% to 

210, in order to ensure an appropriate 

sample size was maintained throughout 

the analysis. 

To improve estimates of means, the 

Department used a proportionate 

stratified sample, which ensured that 

neither large nor small labor 

organizations were overrepresented in 

the sample and permitted the final cost 

figures to be reported without regard to 

‘‘tier’’ or size, as was done with the 

NPRM. The population was arranged 

into three strata based on annual 

receipts: 

• Strata I ($250,000–$499,999 

receipts): 380 Form LM–2 filers with 

section 3(l) trusts 

• Strata II ($500,000–$49.9 mil 

receipts): 1,863 Form LM–2 filers with 

section 3(l) trusts 

• Strata III ($50 mil and higher 

receipts): 49 Form LM–2 filers with 

section 3(l) trusts 

The proportion of each strata to the 

population was then determined: 

• Strata I ($250,000–$499,999 

receipts): 16.58% 

• Strata II ($500,000–$49.9 mil 

receipts): 81.28% 

• Strata III ($50 mil and higher 

receipts): 2.14% 

Finally, the sample size from each 

strata was drawn proportionately to its 

representation in the population: 

• Strata I ($250,000–$499,999 

receipts): 210 × 16.58% = 35 

• Strata II ($500,000–$49.9 mil 

receipts): 210 × 81.28% = 171 

• Strata III ($50 mil and higher 

receipts): 210 × 2.14% = 4 

Each labor organization that answered 

Form LM–2 Item 10 affirmatively was 

assigned a random number. A random 

number generator was then used to 

select 35 labor organizations from strata 

I, 171 labor organizations from strata II, 

and 4 labor organizations from strata III. 

After a careful analysis of the Form LM– 

2 of each of those labor organizations, 

the Department determined that of the 

210 labor organizations studied, five 

labor organizations (all from strata II) 

were non-responsive, i.e., either they 

did not list any trusts in Item 69 or the 

information provided in Item 69 did not 

accurately indicate the number of 

section 3(l) trusts. These five labor 

organizations were removed from the 

sample and the burden analysis 

proceeded based on the remaining 205 

labor organizations. 

Information on each trust listed in 

Item 69 in the sampled Form LM–2s, 

including name, address, EIN, and other 

information, was entered on a 

worksheet. The final worksheet listed 

663 trusts, including welfare benefit 

plans, building trusts, strike funds, and 

pension plans. The information was 

uploaded and compared to the EBSA 

database to determine which of these 

663 section 3(l) trusts filed a Form 5500 

in either 2004 or 2005. It was 

determined that 383 or 57.77% filed a 

Form 5500 in either 2004 or 2005. A 

Form T–1 will not have to be filed for 

these entities because of the reinstated 

Form 5500 exemption. Therefore, the 

383 trusts that filed Form 5500 were 

removed from the sample. 

It should be noted that 

inconsistencies in the information 

reported in Item 69 in the sampled Form 

LM–2s made it difficult in some 

instances to determine whether a Form 

5500 was filed by the trust. Many of the 

labor organizations did not include the 

trust’s EIN number. Others did not 

provide the necessary detail, including 

incomplete or incorrect names, to 

determine whether or not a Form 5500 

was filed by the trust. The Department 

surmises that at least some of the 

remaining 280 trusts filed a Form 5500 

in 2006, but cannot calculate the 

magnitude of the overlap because of 

insufficient information on the Form 

LM–2s reviewed. Further, the 

Department cannot determine which of 

the section 3(l) trusts meet the financial 

dominance or managerial control test 

based on the limited information in the 

Form LM–2s. Therefore, a Form T–1 

will not have to be filed for at least some 

of the remaining 280 section 3(l) trusts 

because they do not meet either of the 

above tests. As a result, the Form T–1 

filing estimate calculated in this study 


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16As discussed previously, some labor 

organizations may request section 3(1) trusts to 

provide information needed by labor organizations 

to comply with their Form T–1 reporting 

olbligations. A labor organization must pay for any 

expenses incurred by the trust in providing 

information to the labor organization or in assisting 

with other tasks associated with the Form T–1 

requirements. 

should be seen as a high estimate, if not 

a maximum. 

The Department assumed that the 205 

sampled labor organizations will be 

required to file a Form T–1 for the 

remaining 280 trusts. Therefore, based 

on the 2006 data, each labor 

organization that indicated it had a 

section 3(l) trust will file, on average, 

1.37 Form T–1s each year after the 

implementation of this rule: 

280 (number of trusts reported by 

sampled labor organizations)/205 

(number of labor organizations in 

sample) = 1.37 average number of Form 

T–1s filed each year by all labor 

organizations 

which, based on extrapolation of the 

2006 data, results in the expectation that 

a total of 3,130.54 Form T–1s will be 

filed yearly by all labor organizations: 

1.37 (average number of Form T–1s 

filed each year per labor organization) x 

2,292 reporting labor organizations = 

3,130.54 yearly Form T–1s. 

2. Hours To Complete and File Form T– 

1: Recurring and Nonrecurring 

Reporting and Recordkeeping 

The Department estimated burden 

hours for the nonrecurring (first year) 

recordkeeping and reporting 

requirements, the recurring 

recordkeeping and reporting burden 

hours, and a three-year annual average 

for the additional nonrecurring and 

recurring burden hours associated with 

the final rule.16

a. Hours To Complete Page 1 

The Department estimates that, on 

average, labor organizations will expend 

1.83 reporting hours each year 

completing page 1 of the Form T–1, 

which is broken out as follows. To 

complete the first page of the Form T– 

1 the labor organization will have to 

train new staff on the reporting 

software, enter trust information, 

answer Items 9, 14, and 15, provide 

additional information (if necessary), 

and sign the report. Items 1, 2, and 4– 

8 will be automatically filled by the 

reporting software when the Form T–1 

is downloaded. The remaining 

information provided on the first page 

of the Form T–1 is very similar to the 

information provided on the first page 

of the Form LM–3 (10 items that 

identify the labor organization and one 

yes/no question addressing whether or 

not the organization’s records are kept at 

its mailing address). Experience with 

the Form LM–3 has indicated that Form 

LM–3 filers expend approximately 15 

minutes each year training new staff on 

how to fill out the first page of the Form 

LM–3. Additionally, Form LM–3 filers 

spend approximately 5 minutes on each 

item on the Form LM–3. Therefore, the 

Department has determined that Form 

T–1 filers will spend 50 minutes filling 

out the trust information and 15 

minutes answering the 3 yes/no 

questions on page 1. If additional 

information is required, the Department 

has determined that the labor 

organization should be able to fill out 

the address(es) where the records of the 

trust and labor organization are 

maintained in 10 minutes. Finally, the 

labor organization president and 

treasurer will be able to sign the Form 

T–1 in 20 minutes once they have 

reviewed the report. The president and 

treasurer will already have the 

electronic signature software available 

for signing the Form LM–2, so in most 

cases it will be a matter of a click on the 

signature field on Form T–1 to apply the 

signature. 

There is no recordkeeping burden 

associated with the first page of the 

Form T–1, because the labor 

organization should already keep 

records on the labor organization and 

trusts in which it is interested to 

complete the Form LM–2, including the 

trust’s name, address, purpose, and EIN. 

Further, neither the trust nor the labor 

organization will have to make any 

changes to their accounting systems to 

report the information required on page 

1 of the Form T–1. 

b. Hours To Complete Page 2 

The Department estimates that, on 

average, labor organizations will expend 

1.33 reporting hours each year 

completing page 2 of the Form T–1, 

broken out as follows. The labor 

organization will have to train new staff, 

answer five questions, enter the total 

assets, liabilities, receipts, and 

disbursements, and enter additional 

information as necessary. Like the first 

page of the Form T–1, the second page 

is relatively straightforward. The 

Department has determined that it will 

take, on average, 15 minutes for labor 

organizations to train staff to complete 

the second page of the Form T–1. The 

majority of the reporting burden is 

attributable to Items 16 through 20. 

Although rare, the types of losses and 

transactions captured by Items 16 

through 20 are of significant importance 

to both labor organizations and trusts. 

Each of these losses or transactions 

should be tracked closely by the trust to 

ensure that the trust is properly 

managed and free from preferential 

insider transactions. Therefore, the trust 

should be able to easily identify and 

provide details on any loss or 

transaction that falls within Items 16 

through 20. The Department has 

determined that the trust can provide 

the labor organization with answers to 

Items 16 through 20 in 25 minutes, 5 

minutes per question. Further, the 

Department has determined that the 

labor organization will spend 

approximately 30 minutes entering the 

required details in Item 25 for the items 

that are answered affirmatively. Due to 

the rare nature of these transactions, the 

Departments estimates that, on average, 

trusts will have one transaction that 

must be described in Item 25. Finally, 

the Department has determined that it 

will take 10 minutes to find and enter 

the total receipts, disbursements, assets, 

and liabilities in Items 21, 22, 23, and 

24. 

There is no recordkeeping burden 

associated with the second page of the 

Form T–1. The answers to Items 16 

through 20 are tracked by the trust along 

with receipts and disbursements. 

Therefore, the recordkeeping burden 

associated with Items 16 through 20 has 

been included in the recordkeeping 

burden for the receipts and 

disbursements schedules. Further, there 

is no recordkeeping burden associated 

with Items 21 through 24. Information 

provided in Items 21, total assets, and 

22, total liabilities, are kept in the 

normal course of the trust’s 

recordkeeping. Items 23, total receipts, 

and 24, total disbursements, are easily 

accessible from records maintained by 

the trust in the regular course of 

business. There is no recordkeeping 

burden associated with Items 23 and 24 

as information about receipts and 

disbursements is already required for 

their individual schedules. 

c. Hours To Revise Information Systems 

and Train Personnel To Collect 

Required Information 

Working from information provided 

by the trusts labor organizations will be 

able to utilize information systems and 

personnel now used by labor 

organizations in fulfilling their Form 

LM–2 obligations. In 2003, Form LM–2 

filers had to change their accounting 

systems to capture information very 

similar to the information reported on 

the Form T–1. Experience with the 

Form LM–2 indicates that, on average, 

Form T–1 respondents will expend 5.50 

hours on each schedule or 16.51 total 

hours changing their accounting 

systems in the first year (non-recurring 

recordkeeping burden) and 4.25 hours 


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on each schedule preparing the systems 

to report the information (non-recurring 

reporting burden), including 

developing, testing, and reviewing 

revisions to the accounting software; 

preparing the download methodology 

(converting data into a format for 

submission to the Department); and 

training personnel on each of the 

schedules. 

d. Hours To Complete Receipts, 

Disbursements, and Officers and 

Employees Schedules 

The reinstatement of the Form 5500 

exemption has significantly reduced the 

variability of types of section 3(l) trusts 

for which the Form T–1 will need to be 

filed. A careful analysis of the nonexempt trusts, used in the analysis 

above, indicates that many if not most 

of the Form T–1s will be filed for 

building trusts, strike funds, and 

apprenticeship and training funds. 

Unlike pension and health plans, these 

trusts, on average, will have few 

disbursements, receipts, officers, and 

employees. For example, strike funds 

are likely to have no disbursements 

unless the labor organization is striking. 

Further, many of these trusts, including 

building trusts, are closely associated 

with the labor organization and function 

in a similar fashion. Therefore, the 

Department has estimated the number of 

disbursements, receipts, officers, and 

employees listed on the Form T–1 based 

on the 2006 Form LM–2 data. 

The Department estimates that, on 

average, Form T–1 filers will expend 

5.43 hours a year on recordkeeping to 

document the information necessary to 

complete the Form T–1 receipts 

schedule. Based on the sample outlined 

above, Form LM–2 filers, on average, 

itemize 11 receipts on Schedule 14 

(other receipts). The remaining receipts 

are reported as aggregates in 12 separate 

categories: dues, per capita tax, fees, 

sales of supplies, interest, dividends, 

rents, sales of investment and fixed 

assets, loans, repayment of loans, 

receipts held on behalf of affiliates for 

transmission to them, and receipts from 

members for disbursement on their 

behalf. The average number of itemized 

receipts listed on Form LM–2 Schedule 

14, 11 itemized receipts, was multiplied 

by 10 to capture all itemized receipts on 

the Form T–1. The Department did not 

increase the number of itemized receipts 

by 13 because it does not believe trusts 

will have receipts from per capita taxes 

nor will they hold money for members 

and affiliates. Therefore, on average, 

trusts will itemize 109.86 receipts each 

year. Experience with the Form LM–2 

indicates that a labor organization can 

input all the necessary information on 

an itemized receipt in 3 minutes. The 

total number of itemized receipts, 

109.86, was multiplied by 3 minutes to 

reach the yearly recordkeeping burden, 

5.43 hours. 

For the Form T–1 disbursement 

schedule the Department estimates that, 

on average, filers will expend 54.13 

hours a year on recordkeeping. The 

Department estimated the number of 

itemized disbursements on the Form T– 

1 by looking at the Form LM–2 filers in 

the original sample. The sample 

indicated that the average Form LM–2 

has 1,083 itemized disbursements. Like 

receipts, the Department estimates it 

will take 3 minutes to input all the 

necessary information on an itemized 

disbursement. The total number of 

itemized disbursements, 1,083, was 

multiplied by 3 minutes to reach the 

yearly recordkeeping burden, 54.13 

hours. Like labor organizations, trusts 

are primarily established to provide 

benefits to members and beneficiaries. 

Therefore, it is not surprising that the 

number of disbursements greatly 

exceeds the number of receipts. 

The Department estimates Form T–1 

filers will expend 10.07 hours on 

recordkeeping to compile the 

information necessary to complete the 

officers and employees schedule 

(Schedule 3). The trust will not have to 

increase recordkeeping for officers and 

key employees. Trusts are already 

required to keep records on its officers 

and key employees for the IRS Form 

990, including name, address, current 

position, salary, fees, bonuses, 

severance payments, deferred 

compensation, allowances, and taxable 

and nontaxable fringe benefits. The 

filers will have to begin keeping records 

on non-key employees. Based on the 

Form LM–2 sample, the Department 

determined that Form LM–2 filers have, 

on average, 21.57 employees. Trusts, as 

employers, keep wage records for each 

of their employees. However, it is likely 

that the trusts will not keep records on 

each employee’s allowances, expenses 

for official business, and other 

disbursements attributed to the 

employee. The Form LM–2 sample 

indicated that most employees did not 

receive anything in allowances, 

disbursements for official business, or 

other disbursements. Those that did 

receive allowances, 33.30%, received, 

on average, $6,496.80. Those that did 

receive disbursements for official 

business, 71.89%, received, on average, 

$10,308.49. Finally, those that did 

receive disbursements other than those 

individually itemized, 5.17%, received, 

on average, $2,818.05. The Department 

determined that the trust would expend 

3 minutes on each $10,000 

disbursement to employees. The 

number of employees, 21.57, was 

multiplied by the average number of 

disbursements and the proportion of 

employees that listed each of the 

disbursements for a total of 10.07 

recordkeeping hours. 

e. Hours for Data Input 

Finally, the Department estimated 

that Form T–1 filers will spend 3.75 

hours on each schedule inputting the 

data. Inputting the information into the 

Form T–1 is very similar to inputting 

data into the Form LM–2. Experience 

with the Form LM–2 in previous rule 

makings indicates that labor 

organizations will spend 15 minutes a 

year training new staff, 60 minutes 

preparing the download, 90 minutes 

preparing and testing the data file, and 

60 minutes editing, validating and 

importing the data. 

f. Total Hours Spent on Recordkeeping 

and Reporting 

As discussed above, and as reflected 

in the following tables, the Department 

estimates that, on average, labor 

organizations will expend 94.21 hours 

per Form T–1 filed on recordkeeping the 

first year and 69.70 hours per Form T– 

1 filed on recordkeeping each 

subsequent year on each Form T–1 filed. 

Additionally, on average, labor 

organizations will expend 41.20 hours 

per Form T–1 filed on reporting the first 

year and 28.28 hours per Form T–1 filed 

on reporting each subsequent year on 

each Form T–1 filed. 


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17The wage and salary data is based on 

information contained in Bureau of Labor Statistics, 

Occupational Employment Statistics Survey, 2007. 

TABLE 1—NON-RECURRING BURDEN IN MINUTES PER FORM T–1 FILED

Schedule Schedule or item description 

Non-recurring burden per form T–1 filed 

Total nonrecurring 

burden 

Recordkeeping 

burden 

Reporting burden 

Change acct. 

structure 

Design 

report 

Develop 

query 

Test 

query 

Mgmt. 

review 

Document the 

query 

process 

Train 

staff 

Page 1 .................. General Trust Identifying Information ............ 0 0 0 0 0 0 0 0 

Page 2 .................. Items 16 through 24 ...................................... 0 0 0 0 0 0 0 0 

1 ........................ Individually Identified Receipts ...................... 330 .27 60 60 45 30 45 15 585 .27 

2 ........................ Individually Identified Disbursements ............ 330 .27 60 60 45 30 45 15 585 .27 

3 ........................ Disbursements to Officers and Employees of 

the Trust.

330 .27 60 60 45 30 45 15 585 .27 

Total Non-Recurring Burden per Form T–1 Filed ..................... 990 .82 180 180 135 90 135 45 1,755 .82 

Total Non-Recurring Burden Hours per Form T–1 Filed ........... 16 .51 3.00 3.00 2.25 1.50 2.25 0.75 29 .26 

TABLE 2—RECURRING RECORDKEEPING BURDEN IN MINUTES PER FORM T–1 FILED

Schedule Schedule or item description 

Recurring recordkeeping burden 

per Form T–1 filed 

Page 1 .............. General Trust Identifying Information ............................................................................................................. 0 

Page 2 .............. Items 16 through 24 ....................................................................................................................................... 0 

1 ................. Individually Identified Receipts ....................................................................................................................... 329 .57 

2 ................. Individually Identified Disbursements ............................................................................................................. 3,247 .93 

3 ................. Disbursements to Officers and Employees of the Trust ................................................................................ 604 .4285714 

Total Recurring Burden per Form T–1 Filed .......................................................................................................................... 4,181 .93 

Total Recurring Burden Hours per Form T–1 Filed ............................................................................................................... 69 .70 

TABLE 3—RECURRING REPORTING BURDEN IN MINUTES PER FORM T–1 FILED

Schedule Schedule or item description 

Recurring reporting burden per form T–1 filed 

Total 

recurring reporting 

burden 

Train 

new 

staff 

Prepare 

download 

Preparation 

of test/ 

data 

file 

Edit/ 

validate/ 

import 

data 

file 

Fill out 

trust/ 

labor 

organization 

information 

Answer 

questions 

Fill in 

assets, 

liabilities, 

disbursements, 

and receipts 

Additional 

information 

Signature 

Page 1 .................. General Trust Identifying Information ......... 15 0 0 0 50 15 0 10 20 110 

Page 2 .................. Items 16 through 24 ................................... 15 0 0 0 0 25 10 30 0 80 

1 ........................ Individually Identified Receipts ................... 15 60 90 60 0 0 0 0 0 225 

2 ........................ Individually Identified Disbursements ......... 15 60 90 60 0 0 0 0 0 225 

3 ........................ Disbursements to Officers and Employees 

of the Trust.

15 60 90 60 0 0 0 0 0 225 

Total Recurring Burden per Form T–1 Filed .......................... 75 180 270 180 50 40 10 40 20 865 

Total Recurring Burden Hours per Form T–1 Filed ............... 1.25 3.00 4.50 3.00 0.83 0.67 0.17 0.67 0.33 14.42 

3. Cost of Personnel To Complete and 

File Form T–1 

The Department assumes that, on 

average, the completion by a labor 

organization of Form T–1 will involve 

an accountant/auditor, computer 

software engineer, bookkeeper/clerk, 

labor organization president and labor 

organization treasurer. Based on the 

2007 BLS wage data, accountants earn 

$30.37 per hour, computer engineers 

earn $41.18 per hour, and bookkeepers/ 

clerks earn $15.76 per hour.17 BLS has 

estimated that the total compensation 

cost is approximately 30.2% higher than 

wages. Therefore, the Department 

adjusted each of the BLS salaries to 

include the additional 30.2% attributed 

to benefits to estimate the total 

compensation cost for each of the 

individuals involved in completing the 

Form T–1. 

The Department estimated the average 

annual salaries of labor organization 

officers needed to complete tasks for 

compliance with this rule—the 

president and treasurer—from responses 

to salary inquiries contained in the 

sample of 205 labor organizations that 

filed a Form LM–2 in 2006 and 

indicated an interest in at least one 

section 3(l) trust, as discussed above. 

See, supra, section D.1. These average 

annual salary figures were then adjusted 

to include the additional 30.2% 

attributed to benefits to reflect total 


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57444 Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Rules and Regulations 

18The study determined that labor organization 

presidents make $24.89 an hour. The Department 

knows that 69.8% of compensation cost is 

attributed to salary and 30.2% of compensation cost 

is attributed to benefits. Salary = 69.8% 

(Compensation Cost) or Compensation Cost = 

Salary/69.8%. If we apply the preceding equation 

to the president’s salary we come up with a 

compensation cost of $35.66 (35.66 = 24.89/.698). 

The same equation was used to calculate 

compensation cost for accountants, computer 

software engineers, bookkeepers, and treasurers. 

compensation cost for each officer, 

which the Department calculated as 

$35.66 per hour for labor organization 

president and $45.24 per hour for labor 

organization treasurer.18

TABLE 4—COMPENSATION COST TABLE

Title Salary: hourly Salary: yearly Compensation 

cost: hourly 

Accountants/Auditors ....................................................................................................... $30.37 $63,180.00 $43.51 

Computer software engineers, applications .................................................................... 41.18 85,660.00 59.00 

Bookkeepers/Clerks ......................................................................................................... 15.76 32,780.00 22.58 

President .......................................................................................................................... 24.89 51,770.35 35.66 

Treasurer ......................................................................................................................... 31.58 65,680.48 45.24 

Once the compensation costs were 

calculated, the Department applied 

those costs to each of the Form T–1 

tasks computed in the previous section. 

Each task was evaluated separately to 

determine which individual from a 

particular job category would be needed 

to complete the task. For instance, as 

indicated above, the Department 

determined that trusts will expend 

16.51 hours changing their accounting 

structure. As part of that total, an 

accountant will spend approximately 

3.3 hours of the total 16.51 hours, or 20 

percent of the time allotted for this task, 

updating and changing the accounting 

structure. The remaining 12.21 burden 

hours, 80 percent of the total time 

allotted for this task, will be completed 

by a computer software engineer. The 

computer software engineer will have to 

write the program to track and accept 

accounting entries specific to the 

reporting requirements of the Form T– 

1, i.e., itemization of all receipts and 

disbursements over $10,000 including 

name, address, and purpose of receipt or 

disbursement. 

As demonstrated by this example, all 

tasks identified by the Department 

above as necessary for compliance with 

the requirements of this rule were 

analyzed to determine which personnel 

would conduct those tasks. The 

following table presents this analysis of 

which personnel are needed to perform 

each task, and the hours that such 

personnel will spend completing each 

task. 

TABLE 5—COST BY TASK

Burden type Task Individual(s) participating Hourly cost Hours to 

complete Total cost 

Non-Recurring Recordkeeping .. Install/Setup Hardware ............. Computer Software Engineer ... $59.00 8.00 $471.98 

Non-Recurring Recordkeeping .. Change Acct. Structure ............ Computer Software Engineer 

and Accountant.

55.90 16.51 923.11 

Non-Recurring Reporting .......... Obtain Trust Number ................ Bookkeeper ............................... 22.58 0.17 3.76 

Non-Recurring Reporting .......... Design Report ........................... Computer Software Engineer 

and Accountant.

51.25 3.00 153.76 

Non-Recurring Reporting .......... Develop Query .......................... Computer Software Engineer 

and Accountant.

55.90 3.00 167.70 

Non-Recurring Reporting .......... Test Query ................................ Computer Software Engineer, 

Bookkeeper, and Accountant.

54.08 2.25 121.68 

Non-Recurring Reporting .......... Mgmt. Review ........................... Treasurer .................................. 45.24 1.50 67.86 

Non-Recurring Reporting .......... Document the Query Process .. Bookkeeper ............................... 22.58 2.25 50.80 

Non-Recurring Reporting .......... Train Staff ................................. Computer Software Engineer, 

Bookkeeper, and Accountant.

41.70 0.75 31.27 

Recurring Recordkeeping .......... Input Records ........................... Bookkeeper ............................... 22.58 69.70 1,573.72 

Recurring Reporting .................. Train New Staff ......................... Computer Software Engineer, 

Bookkeeper, and Accountant.

41.70 1.25 52.12 

Recurring Reporting .................. Information on Form T–1 Provided to Trust.Accountant ................................ 43.51 2.40 104.42 

Recurring Reporting .................. Review Form T–1 and Instructions.Computer Software Engineer 

and Accountant.

51.25 4.30 220.39 

Recurring Reporting .................. Review by Trust ........................ Accountant ................................ 43.51 2.00 87.02 

Recurring Reporting .................. Form/Information Sent to Labor 

Organization.

Bookkeeper ............................... 22.58 1.00 22.58 

Recurring Reporting .................. Obtain Pre-Filled Form T–1 ...... Bookkeeper ............................... 22.58 0.17 3.76 

Recurring Reporting .................. Prepare Download .................... Bookkeeper ............................... 22.58 3.00 67.74 

Recurring Reporting .................. Preparation of Test/Data File ... Accountant and Bookkeeper .... 26.77 4.50 120.44 

Recurring Reporting .................. Edit/Validate/Import Data File ... Accountant and Bookkeeper .... 26.77 3.00 80.30 

Recurring Reporting .................. Fill Out Trust/Labor Organization Information.Accountant ................................ 43.51 0.83 36.26 

Recurring Reporting .................. Answer Questions .................... Accountant ................................ 43.51 0.67 29.01 

Recurring Reporting .................. Fill In Assets and Liabilities ...... Accountant ................................ 43.51 0.17 7.25 

Recurring Reporting .................. Fill Additional Information ......... Accountant ................................ 43.51 0.67 29.01 

Recurring Reporting .................. Management Review ................ President and Treasurer ........... 40.45 4.00 161.80 


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TABLE 5—COST BY TASK—Continued 

Burden type Task Individual(s) participating Hourly cost Hours to 

complete Total cost 

Recurring Reporting .................. Signature .................................. President and Treasurer ........... 40.45 0.33 13.48 

Total Non-Recurring Recordkeeping and Reporting ................................................................................................ 37.43 1,991.92 

Total Recurring Recordkeeping and Reporting Burden ........................................................................................... 97.98 2,609.29 

4. Calculation of Total Costs to Labor 

Organizations Filing a Form T–1 

Based on the analysis reflected in the 

table above, the average cost per Form 

T–1 filed is estimated at $4,851.20 in 

the first year and $2,609.29 in each 

subsequent year. The total cost for all 

Form T–1s filed is estimated at 

$15,186,874.46 in the first year and 

$8,168,474.74 in each subsequent year. 

The Department believes that most of 

the section 3(l) trusts covered by the 

Form T–1 will have the necessary 

hardware to compile the information 

required by the Form T–1 and provide 

it to the labor organization(s). However, 

some of the smallest plans might choose 

to upgrade their systems. Therefore, the 

Department has included in these final 

figures a one-time cost of $250 in the 

burden analysis to account for any 

hardware or software purchases. These 

results are reflected in the table below. 

TABLE 6—REPORTING AND RECORDKEEPING BURDEN HOURS AND COSTS FOR T–1 

Form 

Number 

of form 

T–1s filed 

Reporting 

hours per 

form T–1 

filed 

Total reporting hours 

Recordkeeping 

hours per 

form T–1 

Total recordkeeping 

hours 

Total burden hours 

per form 

T–1 filed 

Total burden hours 

Average 

cost per 

form T–1 

filed 

Total cost 

Form T–1: 

First Year ....................................... 3,130.54 41.20 128,978.11 94.21 294,935.64 135.41 423,913.74 $4,851.20 $15,186,874.46 

Second Year .................................. 3,130.54 28.28 88,542.01 69.70 218,194.92 97.98 306,736.92 2,609.29 8,168,474.74 

Third Year ...................................... 3,130.54 28.28 88,542.01 69.70 218,194.92 97.98 306,736.92 2,609.29 8,168,474.74 

Three Year Average .............................. 3,130.54 32.59 102,020.71 77.87 243,775.16 110.46 345,795.86 3,356.59 10,507,941.31 

Final Regulatory Flexibility Analysis 

The Department’s NPRM in this 

rulemaking contained initial Regulatory 

Flexibility Act and Paperwork 

Reduction Act analyses. As noted above 

in the introduction to the Department’s 

PRA analysis, because of the 

overlapping nature of costs for the 

purposes of both the RFA and PRA 

analyses, the Department construed all 

comments received related to the 

Department’s assessment of costs to the 

regulated community as comments 

addressing both the PRA and the RFA 

analyses. The Department’s discussion 

of significant issues raised in comments 

related to cost estimates, the agency’s 

response thereto, and adjustments made 

to the methodology as a result of 

comments is found in the PRA section 

of this preamble. See, supra, Paperwork 

Reduction Act, Sec. A. As explained in 

that section, based upon careful 

consideration of the comments, the 

Department made significant 

adjustments to the methodology 

employed to assess costs, and those 

adjustments resulted in modifications to 

conclusions on costs, which have been 

employed in the following final RFA 

analysis. Thus, the statutory 

requirement that the Department 

provide in its final RFA analysis ‘‘a 

summary of the significant issues raised 

by the public comments in response to 

the initial regulatory flexibility analysis, 

a summary of the assessment of the 

agency of such issues, and a statement 

of any changes made in the proposed 

rule as a result of such comments[,]’’ 5 

U.S.C. 604(a)(2), has been satisfied. 

Moreover, the Department received no 

comments addressing or challenging the 

specific conclusion in the NPRM that 

the rule does not have a significant 

economic impact on a substantial 

number of small entities. 

The Regulatory Flexibility Act of 1980 

(RFA), 5 U.S.C. 601 et seq., requires 

agencies to consider the impact of their 

regulatory proposals on small entities, 

analyze effective alternatives that 

minimize small entity impacts, and 

make initial analyses available for 

public comment. 5 U.S.C. 603, 604. If an 

agency determines that its rule will not 

have a significant economic impact on 

a substantial number of small entities, it 

must certify that conclusion to the 

Small Business Administration (SBA). 5 

U.S.C. 605(b). 

In the 2003 and 2006 Form T–1 rules, 

the Department undertook regulatory 

flexibility analyses, utilizing the SBA’s 

‘‘small business’’ standard for ‘‘Labor 

Unions and Similar Labor 

Organizations.’’ Specifically, the 

Department used the $5 million 

standard established in 2000 (as 

updated in 2005 to $6.5 million) for 

purposes of its regulatory flexibility 

analyses. See 65 FR 30836 (May 15, 

2000); 70 FR 72577 (Dec. 6, 2005). This 

same standard has been used for the 

Department’s regulatory flexibility 

analysis in this rule. 

The Department recognizes that the 

SBA has not established fixed financial 

thresholds for ‘‘organizations,’’ as 

distinct from other entities. See A Guide 

for Government Agencies: How to 

Comply with the Regulatory Flexibility 

Act, Office of Advocacy, U.S. Small 

Business Administration at 12–13, 

available at http://www.sba.gov. The 

Department further recognizes that 

under SBA guidelines, the relationship 

of an entity to a larger entity with 

greater receipts is a factor to be 

considered in determining the necessity 

of conducting a regulatory flexibility 

analysis. In this regard, the affiliation 

between a local labor organization and 

a national or international labor 

organization, a widespread practice 

among labor organizations subject to the 

LMRDA, presents a unique 

circumstance in determining whether 

and, if so, how, receipts of labor 

organizations should be aggregated, if at 

all, in assessing whether a regulatory 

flexibility analysis is required and how 

it should be conducted. The Department 

has concluded, however, that it would 

be inappropriate, given the past 

rulemaking concerning the Form T–1 

and the Form LM–2, to depart from the 


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$6.5 million receipts standard in 

preparing this regulatory flexibility 

analysis. 

All numbers used in this analysis are 

based on 2006 data taken from the 

Office of Labor-Management Standards 

e.LORS database, which contains data 

from annual financial reports filed by 

labor organizations with the Department 

pursuant to the LMRDA, and BLS wage 

data. 

1. Statement of the Need for, and 

Objectives of, the Rule 

The following is a summary of the 

need for and objectives of the rule. A 

more complete discussion is found in 

the preamble. 

The objective of this rule is to 

increase the transparency of labor 

organization financial reporting by 

creating a new form for labor 

organization trust reporting (Form T–1) 

to enable members to be responsible, 

informed, and effective participants in 

the governance of their labor 

organizations; discourage embezzlement 

and financial mismanagement; prevent 

the circumvention or evasion of the 

statutory reporting requirements; and 

strengthen the effective and efficient 

enforcement of the LMRDA by the 

Department. The Form T–1 is designed 

to close a reporting gap where labor 

organization finances in relation to 

LMRDA section 3(l) trusts were not 

disclosed to members, the public, or the 

Department. 

One of the LMRDA’s primary 

reporting obligations (Forms LM–2, LM– 

3, and LM–4) applies to labor 

organizations, as institutions; other 

important reporting obligations apply to 

officers and employees of labor 

organizations (Form LM–30), requiring 

them to report any conflicts or potential 

conflicts between their personal 

financial interests and the duty they 

owe to the labor organization they serve, 

and to employers who must report 

payments to labor organizations and 

their representatives (Form LM–10). See 

29 U.S.C. 432, 433. Requiring labor 

organizations to report the information 

required by the Form T–1 provides an 

essential check for labor organization 

members and the Department to ensure 

that labor organizations, labor 

organization officials, and employers are 

accurately and completely fulfilling 

their reporting duties under the Act, 

obligations that can easily be ignored 

without fear of detection if reports 

relating to trusts are not required. 

Under the Department’s former LM–2 

rule (superseded by the revised 2003 

Form LM–2), a reporting obligation 

concerning section 3(l) trusts would 

arise only if the trust was a ‘‘subsidiary’’ 

of the reporting labor organization and 

met other requirements previously set 

by the Department. See Form LM–2 

instructions in effect prior to the 2003 

final rule; see also 68 FR 58413. Thus, 

the former LM–2 rule, which was 

crafted shortly after the Act’s enactment, 

required reporting by only a portion of 

the labor organizations that contributed 

to section 3(l) trusts. During the 

intervening decades, the financial 

activities of individuals and 

organizations have increased 

exponentially in scope, complexity, and 

interdependence. 67 FR 79280–81. For 

example, many labor organizations 

manage benefit plans for their members, 

maintain close business relationships 

with financial service providers such as 

insurance companies and investment 

firms, operate revenue-producing 

subsidiaries, and participate in 

foundations and charitable activities. 67 

FR 79280. The complexity of labor 

organization financial practices, 

including business relationships with 

outside firms and vendors, increases the 

likelihood that labor organization 

officers and employees may have 

interests in, or receive income from, 

these businesses. As more labor 

organizations conduct their financial 

activities through sophisticated trusts, 

increased numbers of businesses have 

commercial relationships with such 

trusts, creating financial opportunities 

for labor organization officers and 

employees who may operate, receive 

income from, or hold an interest in such 

businesses. In addition, employers also 

have fostered multi-faceted business 

interests, creating further opportunities 

for financial relationships between labor 

organizations, labor organization 

officials, employers, and other entities, 

including section 3(l) trusts. 

Such trusts ‘‘pose the same 

transparency challenges as ‘off-thebooks’ accounting procedures in the 

corporate setting: Large scale, 

potentially unattractive financial 

transactions can be shielded from public 

disclosure and accountability through 

artificial structures, classification and 

organizations.’’ 67 FR 79282. The 

Department’s former rule required labor 

organizations to report on only a subset 

of such trusts. This approach allowed a 

gap in the reporting of financial 

information concerning these trusts. The 

trust funds, if they had been retained by 

the labor organization, would have 

appeared on the labor organization’s 

Form LM–2. Despite the close 

relationship between the labor 

organization and the trust and the 

purpose of the funds to benefit the 

members of the labor organization, 

transparency ended once the funds left 

the labor organization and thereby 

limited accountability. Thus, Form T–1 

will essentially follow labor 

organization funds that remain in 

closely connected trusts, but which 

would otherwise go unreported. As a 

result of non-disclosure of these funds, 

members have long been denied 

important information about labor 

organization funds that were being 

directed to other entities, presumably 

for the members’ benefit, such as joint 

trusts administered by a labor 

organization and an employer pursuant 

to a collective bargaining agreement, 

educational or training institutions, 

credit unions, and redevelopment or 

investment groups. See 67 FR 79285. 

The Form T–1 is necessary to close 

this gap, and to prevent certain trusts 

from being used to evade the Title II 

reporting requirements. The Form T–1 

will identify the trust’s significant 

vendors and service providers. A labor 

organization member who is aware that 

a labor organization official has a 

financial relationship with one or more 

of these businesses will be able to 

determine whether the business and the 

labor organization official have made 

required reports. The purpose of the 

LMRDA disclosure requirements is to 

prevent financial malfeasance of labor 

organization money. 67 FR 79282–83. 

This purpose is demonstrably frustrated 

when existing reporting obligations fail 

to disclose, for example, opportunities 

for fraud. (Examples of situations where 

money in section 3(l) trusts was being 

used to circumvent or evade the 

reporting requirements can be found in 

the preamble and at 67 FR 79283.) 

As explained in the preamble, 

additional trust reporting is necessary to 

ensure, as intended by Congress, the full 

and comprehensive reporting of a labor 

organization’s financial condition and 

operations, including a full accounting 

to labor organization members from 

whose work the payments were earned. 

67 FR 79282–83. This final rule will 

prevent circumvention and evasion of 

these reporting requirements by 

providing labor organization members 

with financial information concerning 

their labor organization’s trusts when 

the labor organization, alone or in 

combination with other labor 

organizations, selects the majority of the 

directors or provides the majority of the 

trust’s receipts. 

2. Legal Basis for Rule 

The legal authority for this final rule 

is section 208 of the LMRDA. Section 

208 provides that the Secretary of Labor 

shall have authority to issue, amend, 

and rescind rules and regulations 


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prescribing the form and publication of 

reports required to be filed under title 

II of the Act, including rules prescribing 

reports concerning trusts in which a 

labor organization is interested, and 

such other reasonable rules and 

regulations as she may find necessary to 

prevent the circumvention or evasion of 

the reporting requirements. Section 3(l) 

of the Act, 29 U.S.C. 402(l), defines a 

‘‘trust in which a labor organization is 

interested.’’ 

3. Number of Small Entities Covered 

Under the Rule 

The e.LORS database shows that 

4,452 labor organizations filed the Form 

LM–2 in 2006. Based on an analysis of 

annual receipts reported by Form LM– 

2 filers in 2006, the Department 

estimates that of the 4,452 labor 

organizations subject to this rule, 4,228 

of these, or 94.96 percent of all Form 

LM–2 filers, have receipts less than $6.5 

million, the SBA small business size 

standard for ‘‘Labor Unions and Similar 

Labor Organizations.’’ These labor 

organizations have annual average 

receipts of $1.3 million. Based on 

e.LORS data, the Department has 

determined that only 2,009 of these 

4,228 labor organizations have an 

interest in a section 3(l) trust and will 

have to file Form T–1 reports. The 

Department estimates that these 

organizations will file approximately 

2,752.33 reports annually (on average 

about 1.37 reports per labor 

organization). See PRA analysis, supra. 

The affiliation among labor 

organizations may have an impact on 

the number of organizations that should 

be counted as ‘‘small organizations’’ 

under section 601(4) of the RFA, 5 

U.S.C. 601(4). Section 601(4) provides 

in part: ‘‘The term ‘small organization’ 

means any not-for-profit enterprise 

which is independently owned and 

operated and is not dominant in its 

field.’’ However, for purposes of 

analysis here and for ready comparison 

with the RFA analyses in its earlier 

Form T–1 rulemakings, the Department 

has used the $6.5 million receipts test 

for ‘‘small businesses,’’ rather than the 

‘‘independently owned and operated 

and not dominant’’ test for ‘‘small 

organizations.’’ Application of the latter 

test likely would reduce the number of 

labor organizations that would be 

counted as small entities under the 

RFA. 

4. Relevant Federal Requirements 

Duplicating, Overlapping or Conflicting 

With the Rule 

To the extent that there are federal 

rules that duplicate, overlap, or conflict 

with this rule, some specific exemptions 

from the requirements of this rule have 

been provided. First, no Form T–1 need 

be filed for a trust that is required to file 

a Form 5500 with EBSA. In addition, no 

Form T–1 must be filed for a trust that 

is covered by the Federal Employees 

Health Benefits Act, 5 U.S.C. 8901 et 

seq. Finally, a labor organization is not 

required to report a Political Action 

Committee (PAC) fund, if publicly 

available reports on the PAC’s funds are 

filed with federal or state agencies, nor 

must a labor organization file a Form T– 

1 for a political organization for which 

reports are filed with the IRS under 26 

U.S.C. 527. 

5. Differing Compliance or Reporting 

Requirements for Small Entities 

Under the rule, the reporting, 

recordkeeping, and other compliance 

requirements apply equally to all labor 

organizations that are required to file a 

Form T–1 under the LMRDA. 

6. Clarification, Consolidation and 

Simplification of Compliance and 

Reporting Requirements for Small 

Entities 

OLMS has updated the e.LORS 

system to allow labor organizations to 

file Form T–1 as they file Form LM–2. 

Under the rule, labor organizations are 

directed to use an electronic reporting 

format to maintain financial 

information. This information can then 

be electronically compiled in the proper 

format for electronic filing. 

OLMS will provide compliance 

assistance for any questions or 

difficulties that may arise from using the 

reporting software. A toll-free help desk 

is staffed during normal business hours 

and can be reached by telephone at 1– 

866–401–1109. 

The use of electronic forms makes it 

possible to download information from 

previously filed reports directly into the 

form; enables officer and employee 

information to be imported onto the 

form; makes it easier to enter 

information; and automatically performs 

calculations and checks for 

typographical and mathematical errors 

and other discrepancies, which reduces 

the likelihood of having to file an 

amended report. The error summaries 

provided by the software, combined 

with the speed and ease of electronic 

filing, will also make it easier for both 

the reporting labor organization and 

OLMS to identify errors in both current 

and previously filed reports and to file 

amended reports to correct them. 

7. The Use of Performance Rather Than 

Design Standards 

The Department considered a number 

of alternatives to the rule that could 

minimize the impact on small entities. 

One alternative would be not to create 

a Form T–1. As stated above, this 

alternative was rejected because OLMS 

case files and experience demonstrate 

that the goals of the Act are not being 

met with regard to the finances of labor 

organizations held in section 3(l) trusts. 

As explained further in the preamble, 

labor organization members have no 

information on their labor organization’s 

section 3(l) trusts. Labor organization 

members need this information to make 

informed decisions on labor 

organization governance. 

Another alternative would be to limit 

the proposed reporting requirements to 

national and international parent labor 

organizations. However, the Department 

has concluded that such a limitation 

would eliminate the availability of 

meaningful information from local and 

intermediate labor organizations, which 

may have a far greater impact on and 

relevance to labor organization 

members, particularly since such lower 

levels of labor organizations generally 

set and collect dues and provide 

representational and other services for 

their members. Such a limitation would 

reduce the utility of the information to 

a significant number of labor 

organization members. Of the estimated 

4,452 labor organizations subject to 

Form T–1 filing requirements under the 

proposal, just 101 are national and 

international labor organizations. 

Requiring only national and 

international organizations to file Form 

T–1 would not effectively increase labor 

organization transparency nor provide 

any deterrent to fraud and 

embezzlement by local and regional 

officials. 

Another alternative would be to 

propose a phase-in of the effective date 

of the Form T–1, which would provide 

some labor organizations additional 

time to modify their recordkeeping 

systems in order to comply with the 

new reporting requirement. The 

Department has concluded, however, 

that the rule allows all Form T–1 filers 

sufficient time to adapt to the disclosure 

requirements and make any necessary 

adjustments to their recordkeeping and 

reporting systems. OLMS also plans to 

provide compliance assistance to any 

labor organization or section 3(l) trust 

that requests it. The Department 

believes it has minimized the economic 

impact of the form on small labor 

organizations to the extent possible 

while recognizing members’ and the 

Department’s need for information to 

protect the rights of labor organization 

members under the LMRDA. 


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19The estimated burden on labor organizations is 

discussed in detail in the section concerning the 

Paperwork Reduction Act, supra. The figures discussed in the text are derived from the figures 

explained in that section. 

8. Reporting, Recording and Other 

Compliance Requirements of the Rule 19

This analysis only considers labor 

organizations with annual receipts 

between $250,000 and $6.5 million. 

Labor organizations with less than 

$250,000 in annual receipts are not 

required to file the Form T–1 and those 

with annual receipts greater than $6.5 

million are outside the coverage of the 

Regulatory Flexibility Act. This rule is 

not expected to have a significant 

economic impact on a substantial 

number of small entities. The LMRDA is 

primarily a reporting and disclosure 

statute. Accordingly, the primary 

economic impact of the final rule will 

be the cost of obtaining and reporting 

required information. 

Because the Form T–1 requires the 

provision of the same trust information 

regardless of the size of the reporting 

labor organization, the burden for 

completing and filing each Form T–1 is 

the same regardless of the size of the 

labor organization. In 2006, there were 

380 labor organizations with annual 

receipts between $250,000 and $499,999 

who indicated on their Form LM–2 that 

they were interested in at least one 

section 3(l) trust. As explained above, 

these labor organizations will spend, on 

average, $4,851.20 in the first year per 

Form T–1 filed, or, on average for all 

labor organizations in this group, 1.35% 

of its annual receipts. The cost per Form 

T–1 filed in each subsequent year will 

drop to $2,609.29 or, on average for all 

labor organizations in this group, 0.72% 

of its annual receipts. 

The Department has determined that 

the impact on the 1,629 labor 

organizations with annual receipts 

between $500,000 and $6,500,000 that 

indicated that they were interested in at 

least one section 3(l) trust will be 

significantly smaller than the impact on 

labor organizations with between 

$250,000 and $499,999 in annual 

receipts. Like the smaller labor 

organizations, these labor organizations 

will spend, on average, $4,851.20 in the 

first year per Form T–1 filed and 

$2,609.29 each subsequent year. 

However, these costs will only require 

the labor organization to spend, on 

average for all labor organizations in 

this group, 0.28% of its annual receipts 

in the first year and, on average for all 

labor organizations in this group, 0.15% 

of its annual receipts in the second year. 

TABLE 7—SUMMARY OF T–1 REGULATORY FLEXIBILITY ANALYSIS

For labor organizations that meet the SBA small entities standard 

Total burden 

hours per respondent per 

T–1 filed 

Total cost per 

respondent per 

T–1 filed 

First Year Cost of Form T–1: 

For Labor Organizations with $250,000 to $499,999 in Annual Receipts ..................................................... 135.41 $4,851 .20 

Percent of Average Annual Receipts ............................................................................................................. n.a. 1 .35% 

Second Year Cost of Form T–1: 

For Labor Organizations with $250,000 to $499,999 in Annual Receipts ..................................................... 97.98 2,609 .29 

Percent of Average Annual Receipts ............................................................................................................. n.a. 0 .72% 

Percentage Reduction in Cost From Previous Year ...................................................................................... n.a. 46 .21% 

First Year Cost of Form T–1: 

For Labor Organizations with $500,000 to $6,500,000 in Annual Receipts .................................................. 135.41 4,851 .20 

Percent of Average Annual Receipts ............................................................................................................. n.a. 0 .28% 

Second Year Cost of Form T–1: 

For Labor Organizations with $500,000 to $6,500,000 in Annual Receipts .................................................. 97.98 2,609 .29 

Percent of Average Annual Receipts ............................................................................................................. n.a. 0 .15% 

Percentage Reduction in Cost From Previous Year ...................................................................................... n.a. 46 .21% 

9. Conclusion 

The Regulatory Flexibility Act does 

not define either ‘‘significant economic 

impact’’ or ‘‘substantial’’ as it relates to 

the number of regulated entities. 5 

U.S.C. 601. In the absence of specific 

definitions, ‘‘what is ‘significant’ or 

‘substantial’ will vary depending on the 

problem that needs to be addressed, the 

rule’s requirements, and the preliminary 

assessment of the rule’s impact.’’ A 

Guide for Government Agencies, supra, 

at 17. As to economic impact, one 

important indicator is the cost of 

compliance in relation to revenue of the 

entity. Id. 

In this case, as shown in the table 

above, the Department has determined 

that the costs of compliance with this 

rule in the first year will consist of 

between 0.28% and 1.35% of the 

revenue of all small labor organizations, 

those with annual receipts between 

$250,000 and $6.5 million. In the 

subsequent years, compliance costs for 

those labor organizations will be 

between 0.15% and 0.72% of their 

annual receipts. The Department 

concludes that this economic impact is 

not significant. As to the number of 

labor organizations affected by this rule, 

the Department has determined by 

examining e.LORS data that in 2006, the 

Department received 4,228 Form LM–2s 

from labor organizations with receipts 

between $250,000 and $6,500,000, or 

just 17.6% of the 24,065 labor 

organizations that must file any of the 

annual financial reports required under 

the LMRDA (Forms LM–2, LM–3, or 

LM–4). The Department concludes that 

the rule does not impact a substantial 

number of small entities. Therefore, 

under 5 U.S.C. 605, the Department 

concludes that the final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Electronic Filing of Forms and 

Availability of Collected Data 

Appropriate information technology 

is used to reduce burden and improve 

efficiency and responsiveness. The 

current forms can be downloaded from 

the OLMS Web site. OLMS has also 

implemented a system to require Form 

LM–2 and Form T–1 filers and permit 

Form LM–3 and Form LM–4 filers to 

submit forms electronically with digital 

signatures. Labor organizations are 

currently required to pay a minimal fee 

to obtain electronic signature capability 

for the two officers who sign the form. 

The OLMS Internet Disclosure site at 

http://www.unionreports.gov is 

available for public use. The site 

contains a copy of each labor 


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organization’s annual financial report 

for reporting year 2000 and thereafter as 

well as an indexed computer database 

on the information in each report that is 

searchable through the Internet. Form 

T–1 filings will be available on the Web 

site. 

OLMS includes e.LORS information 

in its outreach program, including 

compliance assistance information on 

the OLMS Web site, individual 

guidance provided through responses to 

e-mail, written, or telephone inquiries, 

and formal group sessions conducted for 

labor organization officials regarding 

compliance. 

Information about this system can be 

obtained on the OLMS Web site at 

http://www.olms.dol.gov. Digital 

signatures ensure the authenticity of the 

reports. 

List of Subjects in 29 CFR Part 403 

Labor unions, Trusts, Reporting and 

recordkeeping requirements. 

Text of Rule 

■ Accordingly, the Department amends 

part 403 of 29 CFR Chapter IV as set 

forth below: 

PART 403—LABOR ORGANIZATION 

ANNUAL FINANCIAL REPORTS 

■ 1. The authority citation for part 403 

is revised to read as follows: 

Authority: Labor-Management Reporting 

and Disclosure Act Secs. 202, 207, 208, 73 

Stat. 525, 529 (29 U.S.C. 432, 437, 438); 

Secretary’s Order No. 4–2007, May 2, 2007, 

72 FR 26159. 

■ 2. In § 403.2, paragraph (d) is revised 

to read as follows: 

§ 403.2 Annual financial report. 

* * * * * 

(d)(1) Every labor organization with 

annual receipts of $250,000 or more 

shall file a report on Form T–1 for each 

trust that meets the following 

conditions: 

(i) The trust is of the type defined by 

section 3(l) of the LMRDA, i.e., the trust 

was created or established by the labor 

organization or the labor organization 

appoints or selects a member of the 

trust’s governing board; and the trust 

has as a primary purpose to provide 

benefits to the members of the labor 

organization or their beneficiaries (29 

U.S.C. 402(1)); and the labor 

organization, alone or with other labor 

organizations, either: 

(A) Appoints or selects a majority of 

the members of the trust’s governing 

board; or 

(B) Makes contributions to the trust 

that exceed 50 percent of the trust’s 

receipts during the trust’s fiscal year; 

and 

(ii) None of the exemptions discussed 

in paragraph (d)(3) of this section apply. 

(iii) For purposes of paragraph 

(d)(1)(i)(B), contributions by an 

employer pursuant to a collective 

bargaining agreement with a labor 

organization shall be considered 

contributions by the labor organization. 

(2) A separate report shall be filed on 

Form T–1 for each such trust within 90 

days after the end of the labor 

organization’s fiscal year in the detail 

required by the instructions 

accompanying the form and constituting 

a part thereof, and shall be signed by the 

president and treasurer, or 

corresponding principal officers, of the 

labor organization. 

(3) No Form T–1 should be filed for 

any trust 

(i) that meets the statutory definition 

of a labor organization and already files 

a Form LM–2, Form LM–3, or Form 

LM–4, 

(ii) that the LMRDA exempts from 

reporting, such as an organization 

composed entirely of state or local 

government employees or a state or 

local central body, 

(iii) established as a Political Action 

Committee (PAC) if timely, complete 

and publicly available reports on the 

PAC are filed with a Federal or state 

agency, 

(iv) established as a political 

organization under 26 U.S.C. 527 if 

timely, complete, and publicly available 

reports are filed with the Internal 

Revenue Service, 

(v) constituting a federal employee 

health benefit plan subject to the 

provisions of the Federal Employees 

Health Benefits Act (FEHBA) 

(vi) required to file a Form 5500. For 

purposes of this section only, a trust is 

‘‘required to file a Form 5500’’ if a plan 

administrator is required to file an 

annual report on behalf of the trust 

under 29 U.S.C. section 1021 and/or 

1024. A trust on whose behalf such 

annual report is required to be filed that 

is eligible for an exemption from filing 

the annual report, the Form 5500, or the 

Form 5500–SF is not included within 

this exemption and is deemed for 

purposes of this section only not to be 

a trust ‘‘required to file a Form 5500,’’ 

even if a Form 5500 is filed on behalf 

of that trust. A trust eligible to file a 

notice or statement with the Secretary of 

Labor in lieu of an annual report 

pursuant to an exemption from, or as an 

alternative method of complying with, 

the annual reporting obligation is not 

included within this exemption, even if 

it does file a Form 5500 or Form 5500– 

SF. 

(4) A labor organization may complete 

only Items 1 through 15 and Items 26 

through 27 (Signatures) of Form T–1 if 

annual audits prepared according to 

standards set forth in the Form T–1 

instructions and a copy of the audit is 

filed with the Form T–1. 

(5) If such labor organization is in 

trusteeship on the date for filing the 

annual financial report, the labor 

organization that has assumed 

trusteeship over such subordinate labor 

organization shall file such report as 

provided in Sec. 408.5 of this chapter. 

■ 3. Amend § 403.5 by revising 

paragraph (d) to read as follows: 

§ 403.5. Terminal financial report. 

* * * * * 

(d) If a labor organization filed or was 

required to file a report on a trust 

pursuant to Sec. 403.2(d) and that trust 

loses its identity during its subsequent 

fiscal year through merger, 

consolidation, or otherwise, the labor 

organization shall, within 30 days after 

such loss, file a terminal report on Form 

T–1, with the Office of LaborManagement Standards, signed by the 

president and treasurer or 

corresponding principal officers of the 

labor organization. For purposes of the 

report required by this paragraph, the 

period covered thereby shall be the 

portion of the trust’s fiscal year ending 

on the effective date of the loss of its 

reporting identity. 

■ 4. In § 403.8, revise paragraph (c)(3) to 

read as follows: 

§ 403.8 Dissemination and verification of 

reports. 

* * * * * 

(c) * * * 

(3) This provision does not apply to 

disclosure that is otherwise prohibited 

by law or that would endanger the 

health or safety of an individual, or that 

would consist of individually 

identifiable health information the trust 

is required to protect under the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

Privacy Regulation. 

* * * * * 


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57450 Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Rules and Regulations 

Signed in Washington, DC, this 24th day of 

September 2008. 

Victoria A. Lipnic, 

Assistant Secretary for Employment 

Standards. 

Don Todd, 

Deputy Assistant Secretary for LaborManagement Programs. 

Appendix 

Note: This appendix, which will not 

appear in the Code of Federal Regulations, 

contains Form T–1 and instructions. 

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[FR Doc. E8–22853 Filed 10–1–08; 8:45 am] 

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