[Federal Register Volume 85, Number 45 (Friday, March 6, 2020)]
[Rules and Regulations]
[Pages 13414-13465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03958]



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Vol. 85

Friday,

No. 45

March 6, 2020

Part VI





 Department of Labor





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 Office of Labor-Management Standards





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29 CFR Part 403





 Labor Organization Annual Financial Reports for Trusts in Which a 
Labor Organization Is Interested, Form T-1; Final Rule

  Federal Register / Vol. 85, No. 45 / Friday, March 6, 2020 / Rules 
and Regulations  

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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Part 403

RIN 1245-AA09


Labor Organization Annual Financial Reports For Trusts In Which A 
Labor Organization Is Interested, Form T-1

AGENCY: Office of Labor-Management Standards, Department of Labor.

ACTION: Final rule.

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SUMMARY: In this rule, the Department revises the forms required by 
labor organizations under the Labor-Management Reporting and Disclosure 
Act (``LMRDA'' or ``Act''). Under the rule, specified labor 
organizations file annual reports (Form T-1) concerning trusts in which 
they are interested. This document also sets forth the Department's 
review of and response to comments on the proposed rule. Under this 
rule, the Department requires a labor organization with total annual 
receipts of $250,000 or more (and, which therefore is obligated to file 
a Form LM-2 Labor Organization Annual Report) to also file a Form T-1, 
under certain circumstances, for each trust of the type defined by 
section 3(l) of the LMRDA (defining ``trust in which a labor 
organization is interested''). Such labor organizations will trigger 
the Form T-1 reporting requirements, subject to certain exemptions, 
where the labor organization during the reporting period, either alone 
or in combination with other labor organizations, selects or appoints 
the majority of the members of the trust's governing board or 
contributes more than 50 percent of the trust's receipts. When applying 
this financial or managerial dominance test, contributions made 
pursuant to a collective bargaining agreement (CBA) shall be considered 
the labor organization's contributions. The rule provides appropriate 
instructions and revises relevant sections relating to such reports. 
The Department issues the rule pursuant to section 208 of the LMRDA.

DATES: This rule is effective April 6, 2020; however, no labor 
organization is required to file a Form T-1 until 90 days after the 
conclusion of its first fiscal year that begins on or after June 4, 
2020. A Form T-1 covers a trust's most recently concluded fiscal year, 
and a Form T-1 is required only for trusts whose fiscal year begins on 
or after June 4, 2020. A trust's ``most recently concluded fiscal 
year'' is the fiscal year beginning on or before 90 days before the 
filing union's fiscal year.

FOR FURTHER INFORMATION CONTACT: Andrew Davis, Chief of the Division of 
Interpretations and Standards, Office of Labor-Management Standards, 
U.S. Department of Labor, 200 Constitution Avenue NW, Room N-5609, 
Washington, DC 20210, (202) 693-0123 (this is not a toll-free number), 
(800) 877-8339 (TTY/TDD), [email protected].

SUPPLEMENTARY INFORMATION: The following is the outline of this 
discussion.

I. Statutory Authority
II. Background
    A. Introduction
    B. The LMRDA's Reporting and Other Requirements
    C. History of the Form T-1
III. Summary and Explanation of the Final Rule
    A. Overview of the Rule
    B. Policy Justification
IV. Review of Proposed Rule and Comments Received
    A. Overview of Comments
    B. Policy Justifications
    C. Employer Contributions/Taft-Hartley Plans
    D. Issues Concerning Multi-Union Trusts
    E. ERISA Exemption
    F. Other Exemptions
    G. Objections to Exemptions
    H. Burden on Unions and Confidentiality Issues
    I. Legal Support for Rule
V. Regulatory Procedures
    A. Paperwork Reduction Act
    B. Executive Orders 12866 and 13563
    C. Regulatory Flexibility Act
    D. Small Business Regulatory Enforcement Fairness Act
VI. Text of Final Rule
VII. Appendix

I. Statutory Authority

    The Department's statutory authority is set forth in section 208 of 
the Labor-Management Reporting and Disclosure Act (LMRDA), 29 U.S.C. 
438. Section 208 of the LMRDA provides that the Secretary of Labor 
shall have authority to issue, amend, and rescind rules and regulations 
prescribing the form and publication of reports required to be filed 
under the Act and such other reasonable rules and regulations as he may 
find necessary to prevent the circumvention or evasion of the reporting 
requirements in private sector labor unions.\1\ This statutory 
authority also extends to federal public sector labor unions through 
both the Civil Service Reform Act of 1978 (CSRA), 5 U.S.C. 7120, 
``Standards of Conduct'' regulations at 29 CFR part 458, and the 
Foreign Service Act of 1980 (FSA).
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    \1\ The rule utilizes the terms `union,' `labor union,' and 
`labor organization' interchangeably unless otherwise specified.
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    The Secretary has delegated his authority under the LMRDA to the 
Director of the Office of Labor-Management Standards and permitted re-
delegation of such authority. See Secretary's Order 03-2012 (Oct. 19, 
2012), published at 77 FR 69375 (Nov. 16, 2012).
    Section 208 allows the Secretary to issue ``reasonable rules and 
regulations (including rules prescribing reports concerning trusts in 
which a labor organization is interested) as he may find necessary to 
prevent the circumvention or evasion of [the Act's] reporting 
requirements.'' 29 U.S.C. 438.
    Section 3(l) of the LMRDA, 29 U.S.C. 402(l) provides that a ``Trust 
in which a labor organization is interested' means a trust or other 
fund or organization (1) which was created or established by a labor 
organization, or one or more of the trustees or one or more members of 
the governing body of which is selected or appointed by a labor 
organization, and (2) a primary purpose of which is to provide benefits 
for the members of such labor organization or their beneficiaries.''
    The authority to prescribe rules relating to section 3(l) trusts 
augments the Secretary's general authority to prescribe the form and 
publication of other reports required to be filed under the LMRDA. 
Section 201 of the Act requires unions to file annual, public reports 
with the Department, detailing the union's cash flow during the 
reporting period, and 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 union, 
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). The statute 
requires that such information shall be filed ``in such detail as may 
be necessary to disclose [a union's] financial conditions and 
operations.'' Id. Large unions report this information on the Form LM-
2. Smaller unions report less detailed information on the Form LM-3 or 
LM-4.

II. Background

A. Introduction

    On May 30, 2019 the Department proposed to establish a Form T-1 
Trust Annual Report to capture financial information pertinent to 
``trusts in which a labor organization is interested'' (``section 3(l) 
trusts''). See 84 FR 25130. Historically, this information has largely 
gone unreported despite the

[[Page 13415]]

significant impact such trusts have on labor organization financial 
operations and union members' own interests. This proposal was part of 
the Department's continuing effort to better effectuate the reporting 
requirements of the LMRDA.
    The LMRDA's various reporting provisions are 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. 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 disclose 
financial information as required by the LMRDA. By reviewing a labor 
organization's financial 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 rule helps bring the reporting requirements for labor 
organizations and section 3(l) trusts in line with contemporary 
expectations for the disclosure of financial information. Today, labor 
organizations are more complex in their structure and scope than labor 
organizations of the past. In reaction to an increasingly global, 
complicated, and sophisticated marketplace, unions must leverage 
significant financial capital to hire professional economic, financial, 
legal, political and public relations expertise not readily or 
traditionally on hand. See Marick F. Masters, Unions at the Crossroads: 
Strategic Membership, Financial, and Political Perspectives 34 (1997).
    Labor organization members, no less than consumers, citizens, or 
creditors, expect access to relevant and useful information in order to 
make fundamental investment, career, and retirement decisions, evaluate 
options, and exercise legally guaranteed rights.

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.'' 29 U.S.C. 401(b). 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 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 29 U.S.C. 431-436, 441; detailed 
procedural, substantive, and reporting requirements relating to labor 
organization trusteeships, see 29 U.S.C. 461-466; detailed procedural 
requirements for the conduct of elections of labor organization 
officers, see 29 U.S.C. 481-483; 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, a prohibition on certain loans by a labor organization to 
officers or employees, prohibitions on employment by a labor 
organization of certain convicted felons, and prohibitions on payments 
to employees, labor organizations, and labor organization officers and 
employees for prohibited purposes by an employer or labor relations 
consultant, see 29 U.S.C. 501-505; and prohibitions against 
extortionate picketing, retaliation for exercising protected rights, 
and deprivation of LMRDA rights by violence, see 29 U.S.C. 522, 529, 
530.
    The LMRDA 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; and 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 were also 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. Report 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).
    Financial reporting and disclosure were conceived as partial 
remedies for these improper practices. As noted in a key Senate Report 
on the legislation, disclosure would discourage questionable practices 
(``The searchlight of publicity is a strong deterrent.''), aid labor 
organization governance (labor organizations will be able ``to better 
regulate their own affairs'' because ``members may vote out of office 
any individual whose personal financial interests conflict with his 
duties to members''), facilitate legal action by members for fiduciary 
violations (against ``officers who violate their duty of loyalty to the 
members''), and create a record (``the reports will furnish a sound 
factual basis for further action in the event that other legislation is 
required''). S. Rep. No. 187 (1959) 16 reprinted in 1 NLRB Legislative 
History of the Labor-Management Reporting and Disclosure Act of 1959, 
412.
    The Department has developed several forms for implementing the 
LMRDA's financial reporting requirements. The annual reports required 
by section 201(b) of the Act, 29 U.S.C. 431(b) (Form LM-2, Form LM-3, 
and Form LM-4), contain information

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about a labor organization's assets, liabilities, receipts, 
disbursements, loans to officers and employees and business 
enterprises, payments to each officer, and payments to each employee of 
the labor organization paid more than $10,000 during the fiscal year. 
The reporting detail required of labor organizations, as the Secretary 
has established by rule, varies depending on the amount of the labor 
organization's annual receipts. 29 CFR 403.4.
    The labor organization's president and treasurer (or its 
corresponding officers) are personally responsible for filing the 
reports and for any statement in the reports known by them to be false. 
29 CFR 403.6. These officers are also responsible for maintaining 
records in sufficient detail to verify, explain, or clarify the 
accuracy and completeness of the reports for not less than five years 
after the filing of the forms. 29 CFR 403.7. A labor organization 
``shall make available to all its members the information required to 
be contained in such reports'' and ``shall. . .permit such member[s] 
for just cause to examine any books, records, and accounts necessary to 
verify such report[s].'' 29 CFR 403.8(a).
    The reports are public information. 29 U.S.C. 435(a). The Secretary 
is charged with providing for the inspection and examination of the 
financial reports, 29 U.S.C. 435(b). For this purpose, OLMS maintains: 
(1) A public disclosure room where copies of such reports filed with 
OLMS may be reviewed and; (2) an online public disclosure site, where 
copies of such reports filed since the year 2000 are available for the 
public's review.

C. History of the Form T-1

    The Form T-1 report was first proposed on December 27, 2002, as one 
part of a proposal to extensively change the Form LM-2. 67 FR 79280 
(Dec. 27, 2002). The rule was proposed under the authority of Section 
208, which permits the Secretary to issue such rules ``prescribing 
reports concerning trusts in which a labor organization is interested'' 
as he may ``find necessary to prevent the circumvention or evasion of 
[the LMRDA's] reporting requirements.'' 29 U.S.C. 438. Following 
consideration of public comments, on October 9, 2003, the Department 
published a final rule enacting extensive changes to the Form LM-2 and 
establishing a Form T-1. 68 FR 58374 (Oct. 9, 2003) (2003 Form T-1 
rule). The 2003 Form T-1 rule eliminated the requirement that unions 
report on subsidiary organizations on the Form LM-2, but it mandated 
that each labor organization filing a Form LM-2 report also file a 
separate report to ``disclose assets, liabilities, receipts, and 
disbursements of a significant trust in which the labor organization is 
interested.'' 68 FR at 58477. The reporting labor organization would 
make this disclosure by filing a separate Form T-1 for each significant 
trust in which it was interested. Id. at 58524.
    To conform to the statutory requirement that trust reporting is 
``necessary to prevent the circumvention or evasion of [the LMRDA's] 
reporting requirements,'' the 2003 Form T-1 rule developed the 
``significant trust in which the labor organization is interested'' 
test. It used the section 3(l) statutory definition of ``a trust in 
which a labor organization is interested'' coupled with an 
administrative determination of when a trust is deemed ``significant.'' 
68 FR at 58477-78. The LMRDA defines a ``trust in which a labor 
organization is interested'' as 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. Id. (29 U.S.C. 402(l)).
    The 2003 Form T-1 rule set forth an administrative determination 
that stated that a ``trust will be considered significant'' and 
therefore subject to the Form T-1 reporting requirement under the 
following conditions:
    (1) The labor organization had annual receipts of $250,000 or more 
during its most recent fiscal year, and (2) the labor organization's 
financial contribution to the trust or the contribution made on the 
labor organization's behalf, or as a result of a negotiated agreement 
to which the labor organization is a party, is $10,000 or more 
annually. Id. at 58478.
    The portions of the 2003 rule relating to the Form T-1 were vacated 
by the D.C. Circuit in AFL-CIO v. Chao, 409 F.3d at 389-391. The court 
held that the form ``reaches information unrelated to union reporting 
requirements and mandates reporting on trusts even where there is no 
appearance that the union's contribution of funds to an independent 
organization could circumvent or evade union reporting requirements by, 
for example, permitting the union to maintain control of the funds.'' 
Id. at 389. The court also vacated the Form T-1 portions of the 2003 
rule because its significance test failed to establish reporting based 
on domination or managerial control of assets subject to LMRDA Title II 
jurisdiction.
    The court reasoned that the Department failed to explain how the 
test--i.e., selection of one member of a board and a $10,000 
contribution to a trust with $250,000 in receipts--could give rise to 
circumvention or evasion of Title II reporting requirements. Id. at 
390. In so holding, the court emphasized that Section 208 authority is 
the only basis for LMRDA trust reporting, that this authority is 
limited to preventing circumvention or evasion of Title II reporting, 
and that ``the statute doesn't provide general authority to require 
trusts to demonstrate that they operate in a manner beneficial to union 
members.'' Id. at 390.
    However, the court recognized that reports on trusts that reflect a 
labor organization's financial condition and operations are within the 
Department's rulemaking authority, including trusts ``established by 
one or more unions or through collective bargaining agreements calling 
for employer contributions, [where] the union has retained a 
controlling management role in the organization,'' and also those 
``established by one or more unions with union members' funds because 
such establishment is a reasonable indicium of union control of that 
trust.'' Id. The court acknowledged that the Department's findings in 
support of its rule were based on particular situations where reporting 
about trusts would be necessary to prevent evasion of the related labor 
organizations' own reporting obligations. Id. at 387-88. One example 
included a situation where ``trusts [are] funded by union members' 
funds from one or more unions and employers, and although the unions 
retain a controlling management role, no individual union wholly owns 
or dominates the trust, and therefore the use of the funds is not 
reported by the related union.'' Id. at 389 (emphasis added). In citing 
these examples, the court explained 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.'' 
Id. at 390. For this reason, while acknowledging that there are 
circumstances under which the Secretary may require a report, the court 
disapproved of a broader application of the rule to require reports by 
any labor organization simply because the labor organization satisfied 
a reporting threshold (a labor organization with annual receipts of at 
least $250,000 that

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contributes at least $10,000 to a section 3(l) trust with annual 
receipts of at least $250,000). Id.
    In light of the decision by the D.C. Circuit and guided by its 
opinion, the Department issued a revised Form T-1 final rule on 
September 29, 2006. 71 FR 57716 (Sept. 29, 2006) (2006 Form T-1 rule). 
The U.S. District Court for the District of Columbia vacated this rule 
due to a failure to provide a new notice and comment period. AFL-CIO v. 
Chao, 496 F. Supp. 2d 76 (D.D.C. 2007). The district court did not 
engage in a substantive review of the 2006 rule, but the court noted 
that the AFL-CIO demonstrated that ``the absence of a fresh comment 
period . . . constituted prejudicial error'' and that the AFL-CIO 
objected with ``reasonable specificity'' to warrant relief vacating the 
rule. Id. at 90-92.
    The Department issued a proposed rule for a revised Form T-1 on 
March 4, 2008. 73 FR 11754 (Mar. 4, 2008). After notice and comment, 
the 2008 Form T-1 final rule was issued on October 2, 2008. 73 FR 
57412. The 2008 Form T-1 rule took effect on January 1, 2009. Under 
that rule, Form T-1 reports would have been filed no earlier than March 
31, 2010, for fiscal years that began no earlier than January 1, 2009.
    Pursuant to AFL-CIO v. Chao, the 2008 Form T-1 rule stated that 
labor organizations 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, had management control or financial dominance. 73 FR at 
57412. For purposes of the rule, a labor organization had management 
control if the labor organization alone, or in combination with other 
labor organizations, selected or appointed the majority of the members 
of the trust's governing board. Further, for purposes of the rule, a 
labor organization had financial dominance if the labor organization 
alone, or in combination with other labor organizations, contributed 
more than 50 percent of the trust's receipts during the annual 
reporting period. Significantly, the rule treated contributions made to 
a trust by an employer pursuant to CBA as constituting contributions by 
the labor organization that was party to the agreement.
    Additionally, the 2008 Form T-1 rule provided exemptions to the 
Form T-1 filing requirements. No Form T-1 was required for a trust: 
Established as a political action committee (PAC) fund if publicly 
available reports on the PAC fund were filed with Federal or state 
agencies; established as a political organization for which reports 
were filed with the IRS under section 527 of the IRS code; required to 
file a Form 5500 under ERISA; or constituting a federal employee health 
benefit plan that was subject to the provisions of the Federal 
Employees Health Benefits Act (FEHBA), 5 U.S.C. 8901 et seq. Similarly, 
the rule clarified that no Form T-1 was required for any trust that met 
the statutory definition of a labor organization, 29 U.S.C. 402(i), and 
filed a Form LM-2, Form LM-3, or Form LM-4 or was an entity that the 
LMRDA exempts from reporting. Id.
    In the Spring and Fall 2009 Regulatory Agenda, the Department 
announced its intention to rescind the Form T-1. It also indicated that 
it would return reporting of wholly owned, wholly controlled, and 
wholly financed (``subsidiary'') organizations to the Form LM-2 or LM-3 
reports. On December 3, 2009, the Department issued a notice of 
proposed extension of filing due date to delay for one calendar year 
the filing due dates for Form T-1 reports required to be filed during 
calendar year 2010. 74 FR 63335. On December 30, 2009, following notice 
and comment, the Department published a rule extending for one year the 
filing due date of all Form T-1 reports required to be filed during 
calendar year 2010. 74 FR 69023.
    Subsequently, on February 2, 2010, the Department published a 
Notice of Proposed Rulemaking (NPRM) proposing to rescind the Form T-1. 
75 FR 5456. After notice and comment, the Department published the 
final rule on December 1, 2010. In its rescission, the Department 
stated that it considered the reporting required under the rule to be 
overly broad and not necessary to prevent circumvention or evasion of 
Title II reporting requirements. The Department concluded that the 
scope of the 2008 Form T-1 rule was overbroad because it covered many 
trusts, such as those funded by employer contributions, without an 
adequate showing that reporting for such trusts is necessary to prevent 
the circumvention or evasion of the Title II reporting requirements. 
See 75 FR 74936.

III. Summary and Explanation of the Final Rule

A. Overview of the Rule

    This rule requires a labor organization with total annual receipts 
of $250,000 or more to file a Form T-1, under certain circumstances, 
for each trust of the type defined by section 3(l) of the LMRDA, 29 
U.S.C. 402(l) (defining ``trust in which a labor organization is 
interested''). Such labor organizations trigger the Form T-1 reporting 
requirements where the labor organization during the reporting period, 
either 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. When applying this financial or managerial dominance test, 
contributions made pursuant to a CBA are considered the labor 
organization's contributions. As explained further below, this test was 
tailored to be consistent with the court's holding in AFL-CIO v. Chao, 
409 F.3d 377, 389-391 (D.C. Cir. 2005), as well as the 2008 final Form 
T-1 rule.
    The Form T-1 uses the same basic template as prescribed for the 
Form LM-2. Both forms require the labor organization to provide 
specified aggregated and disaggregated information relating to the 
financial operations of the labor organization and the trust. 
Typically, a labor organization is required to provide information on 
the Form T-1 explaining certain transactions by the trust (such as 
disposition of property by other than market sale, liquidation of 
debts, loans or credit extended on favorable terms to officers and 
employees of the labor organization); and identifying major receipts 
and disbursements by the trust during the reporting period. The Form T-
1, however, is shorter and requires less information than the Form LM-
2. The Form T-1, unlike the Form LM-2, does not require that receipts 
and disbursements be identified by functional category.
    The Form T-1 includes: 14 questions that identify the trust; six 
yes/no questions covering issues such as whether any loss or shortage 
of funds was discovered during the reporting year and whether the trust 
had made any loans to officers or employees of the labor organizations, 
which were granted at more favorable terms than were available to 
others; statements regarding the total amount of assets, liabilities, 
receipts and disbursements of the trust; a schedule that separately 
identifies any individual or entity from which the trust receives 
$10,000 or more, individually or in the aggregate, during the reporting 
period; a schedule that separately identifies any entity or individual 
that received disbursements that aggregate to $10,000 or more, 
individually or in the aggregate, from the trust during the reporting 
period and the purpose of disbursement; and a schedule of disbursements 
to officers and employees of the trust who received more than $10,000.
    Two threshold requirements that were contained in the 2003 and 2006 
rules,

[[Page 13418]]

but not the 2008 rule, relating to the amount of a labor organization's 
contributions to a trust ($10,000 per annum) and the amount of the 
contributions received by a trust ($250,000 per annum) are not included 
in the rule. The Department believes that, consistent with the D.C. 
Circuit's AFL-CIO v. Chao decision, the labor organization's control 
over the trust either alone or with other labor organizations, measured 
by its selection of a majority of the trust's governing body or its 
majority share of receipts during the reporting period, provides the 
appropriate gauge for determining whether a Form T-1 must be filed by 
the participating labor organization.
    Under the rule, exemptions are provided for labor organizations 
with section 3(l) trusts where the trust, as a political action 
committee (``PAC'') or a political organization (the latter within the 
meaning of 26 U.S.C. 527), submits timely, complete and publicly 
available reports required of them by federal or state law with 
government agencies; federal employee health benefit plans subject to 
the provision of the Federal Employees Health Benefits Act (FEHBA); or 
any for-profit commercial bank established or operating pursuant to the 
Bank Holding Act of 1956, 12 U.S.C. 1843. The Department also exempts 
credit unions from Form T-1 disclosure, as explained further below. 
Similarly, no Form T-1 is required for any trust that meets the 
statutory definition of a labor organization and files a Form LM-2, 
Form LM-3, or Form LM-4 or is an entity that the LMRDA exempts from 
reporting. Consistent with the 2008 rule, but in contrast to the 2003 
and 2006 rules, today's rule includes an exemption for section 3(l) 
trusts that are part of employee benefit plans that file a Form 5500 
Annual Return/Report under the Employee Retirement Income Security Act 
of 1974 (``ERISA''). Additionally, a partial exemption is provided for 
a trust for which an audit was conducted in accordance with prescribed 
standards and the audit is made publicly available. A labor 
organization choosing to use this option must complete and file the 
first page of the Form T-1 and a copy of the audit.
    Also, unlike the 2008 rule, the Department exempts unions from 
reporting on the Form T-1 their subsidiary organizations, retaining the 
requirement that unions must report their subsidiaries on the union's 
Form LM-2 report. See Part X of the Form LM-2 instructions (defining a 
``subsidiary organization'' as ``any separate organization of which the 
ownership is wholly vested in the reporting labor organization or its 
officers or its membership, which is governed or controlled by the 
officers, employees, or members of the reporting labor organization, 
and which is wholly financed by the reporting labor organization.'').
    Also, unlike the 2008 rule, the Department permits the parent union 
(i.e., the national/international or intermediate union) to file the 
Form T-1 report for covered trusts in which both the parent union and 
its affiliates meet the financial or managerial domination test.\2\ The 
affiliates must continue to identify the trust in their Form LM-2 
report, and also state in their Form LM-2 report that the parent union 
will file a Form T-1 report for the trust. The Department will also 
allow a single union to voluntarily file the Form T-1 on behalf of 
itself and the other unions that collectively contribute to a multiple-
union trust, relieving the Form T-1 obligation on other unions.
---------------------------------------------------------------------------

    \2\ If the purported trust actually constitutes a subsidiary of 
the parent union, then the parent union would need to include the 
subsidiary within its Form LM-2 report, pursuant to Part X of the 
Form LM-2 Instructions. See OLMS Interpretative Manual Sections 
215.200 (Holding of Stock by District Council and Member Locals) and 
215.300 (Holding of Stock by Member Locals).
---------------------------------------------------------------------------

    This final rule also differs in three specific respects from the 
proposed rule in response to concerns raised by commenters. These 
features of the rule are related above, but merit specific recognition 
here as determinations made by the Department subsequent to the 
published NPRM. First, unions need not file for trusts that operate as 
credit unions. Second, the Department will allow a union to voluntarily 
file the Form T-1 on behalf of one or more other unions where each of 
those unions would otherwise be obligated to individually file for the 
same trust. Third, the trust's fiscal year that the union must report 
on has been changed. Under the proposed rule, the union would have 
reported on trusts whose most recent fiscal year ended on or before the 
union's fiscal year. Under the current rule, the union will report on 
trusts whose most recent fiscal year ended 90 or more days before the 
end of the union's fiscal year.

B. Policy Justification

    The Form T-1 closes a reporting gap whereby labor organizations are 
required to report only on the funds that they exclusively control, but 
not those funds over which they exercise domination. As a result, this 
rule helps prevent the circumvention or evasion of the LMRDA's 
reporting requirements. Further, this rule is designed to provide labor 
organization members a proper accounting of how their labor 
organization's funds are invested or otherwise expended by the trust. 
Such disclosure helps deter fraud and corruption involving such trusts. 
Labor organization members have an interest in obtaining information 
about a labor organization's funds provided to a trust for the member's 
particular or collective benefit whether solely administered by the 
labor organization or a separate, jointly administered governing board. 
Also, because the money an employer contributes to such trusts pursuant 
to a CBA might otherwise have been paid directly to a labor 
organization's members in the form of increased wages and benefits, the 
members on whose behalf the financial transaction was negotiated have 
an interest in knowing what funds were contributed, how the money was 
managed, and how it was spent.
    In terms of preventing the circumvention or evasion of the LMRDA's 
reporting requirements, the rule will make it more difficult for a 
labor organization to avoid, simply by transferring money from the 
labor organization to a trust, the basic reporting obligation that 
applies if the funds had been retained by the labor organization. 
Although the rule will not require a Form T-1 to be filed for all 
section 3(l) trusts in which a labor organization participates, it will 
be required where a labor organization, alone or in combination with 
other labor organizations, appoints or selects a majority of the 
members of the trust's governing board or where contributions by labor 
organizations, or by employers pursuant to a CBA, represent greater 
than 50 percent of the revenue of the trust.
    Thus, the rule follows the instruction in AFL-CIO v. Chao, where 
the D.C. Circuit concluded that the Secretary had shown that trust 
reporting was necessary to prevent evasion or circumvention where 
``trusts [are] established by one or more unions with union members' 
funds because such establishment is a reasonable indicium of union 
control of the trust,'' as well as where there are characteristics of 
``dominant union control over the trust's use of union members' funds 
or union members' funds constituting the trust's predominant 
revenues.'' 409 F.3d at 389, 390.
    As an illustration of how this check will work, consider an 
instance in which a Form T-1 identifies a $15,000 payment from the 
trust to a company for printing services. Under this rule, the labor 
organization must identify on the Form T-1 the company and the purpose 
of the payment. This information,

[[Page 13419]]

coupled with information about a labor organization official's 
``personal business'' interests in the printing company, a labor 
organization member or the Department may discover whether the official 
has reported this payment on a Form LM-30.\3\
---------------------------------------------------------------------------

    \3\ See Form LM-30 Instructions, p.7 (``Complete Part B if you, 
your spouse, or your minor child held an interest in or derived 
income or other benefit with monetary value, including reimbursed 
expenses, from a business . . . any part of which consists of buying 
from or selling or leasing directly or indirectly to, or otherwise 
dealing with your labor organization or with a trust in which your 
labor organization is interested.'').
---------------------------------------------------------------------------

    Additional information from the labor organization's Form LM-2 
might allow a labor organization member to ascertain whether the trust 
and the labor organization have used the same printing company and 
whether there was a pattern of payments by the trust and the labor 
organization from which an inference could be drawn that duplicate 
payments were being made for the same services.\4\ Upon further inquiry 
into the details of the transactions, a member or the government might 
be able to determine whether the payments masked a kickback or other 
conflict-of-interest payment, and, as such, reveal an instance where 
the labor organization, a labor organization official, or an employer 
may have failed to comply with their reporting obligations under the 
Act. Furthermore, this rule will provide a missing piece to one part of 
the Department's system to crosscheck a labor organization's reported 
holdings and transactions by party, description, and reporting period 
and thereby helps identify deviations in the reported details, 
including instances where the reporting obligation appears reciprocal, 
but one or more parties have not reported the matter.
---------------------------------------------------------------------------

    \4\ See Form LM-2 Instructions, p.21 requires itemization of 
major disbursements, allowing the union members to see the 
recipients and the amount paid, as well as the purpose of the 
payments. (``Schedules 15 through 19 reflect various services 
provided to union members by the union in which all ``major'' 
disbursements during the reporting period in the various categories 
must be separately identified. A ``major'' disbursement includes: 
(1) any individual disbursement of $5,000 or more; or (2) total 
disbursements to any single entity or individual that aggregate to 
$5,000 or more during the reporting period.'')
---------------------------------------------------------------------------

    In reviewing submitted Form LM-2 reports, the Department located 
several instances in which labor organizations disbursed large sums of 
money to trusts. As an example, one local disbursed over $700,000 to 
one trust and over $1.2 million to another of its trusts, in fiscal 
year 2017. Also in 2017, a national labor organization disbursed almost 
$400,000 to one of its trusts. Several locals each reported on their FY 
17 Form LM-2 reports varying ownership interests in a building 
corporation that owns the unions' hall. The Form T-1 requires that the 
labor organizations report the trusts' management of these 
disbursements and assets. By establishing reporting for their trusts 
comparable to that for their own funds, the Form T-1 will prevent the 
unions from circumventing or evading their reporting requirements, 
ensuring financial transparency for all funds dominated by the unions.
    Additionally, as stated, the Form T-1 will establish a deterrent 
effect on potential labor-management fraud and corruption. Labor 
organization officials and trustees owe a fiduciary duty to both their 
labor organization and the trust, respectively. Nevertheless, there are 
examples of embezzlement of funds held by both labor organizations and 
their section 3(l) trusts.\5\ By disclosing information to labor 
organization members--the true beneficiaries of such trusts--the Form 
T-1 will increase the likelihood that wrongdoing is detected and may 
deter individuals who might otherwise be tempted to divert funds from 
the trusts.
---------------------------------------------------------------------------

    \5\ The fiduciary duty of the trustees to refrain from taking a 
proscribed action has never been thought sufficient in and of itself 
to protect the interests of a trust's beneficiaries. Although a 
fiduciary's own duty to the trust's grantors and beneficiaries 
includes disclosure and accounting components, public disclosure 
requirements, government regulation, and the availability of civil 
and criminal process complement these obligations and help ensure a 
trustee's observance of his or her fiduciary duty. See Restatement 
(Third) of Agency Sec.  8.01 (T.D. No. 6, 2005) et seq.; see also 1 
American Law Institute, Principles of Corporate Governance Sec.  
1.14 (1994).
---------------------------------------------------------------------------

    The following examples illustrate recent situations in which funds 
held in section 3(l) trusts have been used in a manner that, if subject 
to LMRDA reporting, could have been noticed by the members of the labor 
organization and would likely have been scrutinized by this Department: 
\6\
---------------------------------------------------------------------------

    \6\ The trusts in these examples constitute apprenticeship and 
training funds established under LMRA section 302(C)(6), 29 U.S.C. 
186(c)(6). EBSA does not require such funds to file the Form 5500. 
See 29 CFR 2520.104-22 (conditional exemption from Form 5500 filing 
requirements for apprenticeship and training plans).
---------------------------------------------------------------------------

     In 2011, a former secretary for a union was convicted for 
embezzling $412,000 from the union and its apprenticeship and training 
fund.\7\
---------------------------------------------------------------------------

    \7\ See https://www.wilx.com/home/headlines/Former_Union_Secretary_Sentenced_for_Embezzlement_126151908.html, 
July 25, 2011.
---------------------------------------------------------------------------

     In 2015, an employee of a union pled guilty to embezzling 
over $160,000 from a joint apprenticeship trust fund account that was 
used to train future union members.\8\
---------------------------------------------------------------------------

    \8\ See https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/newsroom/criminal-releases/11-24-015.pdf, November 
24, 2015.
---------------------------------------------------------------------------

     In 2017, a former business manager and financial secretary 
for a union local pled guilty to charges that he embezzled between 
$250,000 and $550,000 in union funds from an operational account and 
from an apprentice fund.\9\
---------------------------------------------------------------------------

    \9\ See https://www.justice.gov/usao-ri/pr/union-officer-plead-guilty-embezzlement-identity-theft, November 27, 2017.
---------------------------------------------------------------------------

     In 2018, a former trustee of a trust fund for apprentice 
and journeyman education and training was sentenced for submitting a 
false reimbursement request in connection with training events. In his 
plea, the former trustee admitted that the amount owed to the training 
fund totaled $12,000.\10\
---------------------------------------------------------------------------

    \10\ See https://www.dol.gov/newsroom/releases/ebsa/ebsa20180323, March 23, 2018.
---------------------------------------------------------------------------

     In 2018, a union official was sentenced for illegally 
channeling funds from a union training center to union officials and 
employees for their personal use.\11\
---------------------------------------------------------------------------

    \11\ See https://www.dol.gov/olms/regs/compliance/enforce_2018.htm.
---------------------------------------------------------------------------

    Under the 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 that meets the significant contribution test, as outlined in 
the rule. In each instance, the labor organization's contribution to 
the trust, including contributions made pursuant to a CBA, 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 individually 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 
that were granted at more favorable terms than were available to 
others, and any disbursements to officers and employees of the trust.

[[Page 13420]]

    In developing this rule, the Department also relied, in part, on 
information it received from the public on previous proposals. In its 
comments on the 2006 proposal, a labor policy group identified multiple 
instances where labor organization officials were charged, convicted, 
or both, for embezzling or otherwise improperly diverting labor 
organization trust funds for their own gain, including the following: 
(1) Five individuals were charged with conspiring to steal over $70,000 
from a local's severance fund; (2) two local labor organization 
officials confessed to stealing about $120,000 from the local's job 
training funds; (3) an employee of an international labor organization 
embezzled over $350,000 from a job training fund; (4) a local labor 
organization president embezzled an undisclosed amount from the local's 
disaster relief fund; and (5) a former international officer, who had 
also been a director and trustee of a labor organization benefit fund, 
was convicted of embezzling about $100,000 from the labor 
organization's apprenticeship and training fund. 71 FR 57716, 57722.
    The comments received from labor organizations on previous 
proposals generally opposed any reporting obligation concerning trusts. 
By contrast, many labor organization members recommended generally 
greater scrutiny of labor organization trust funds. For example, in 
response to the Department's 2008 proposal, commenters included several 
members of a single international labor organization. They explained 
that under the labor organization's CBAs, the employer sets aside at 
least $.20 for each hour worked by a member and that this amount was 
paid into a benefit fund known as a ``joint committee.'' 71 FR 57716, 
57722. The commenters asserted that some of the funds were ``lavished 
on junkets and parties'' and that the labor organization used the joint 
committees to reward political supporters of the labor organization's 
officials. They stated that the labor organization refused to provide 
information about the funds, including amounts paid to ``union staff.'' 
From the perspective of one member, the labor organization did not want 
``this conflict of interest'' to be exposed. Id.
    If the Department's 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 any potential improper use of the trust funds and 
thereby minimize the injury to the trust. Further, the fear of 
discovery could have deterred the wrongdoers from engaging in any 
offending conduct in the first place.
    The foregoing discussion provides the Department's rationale for 
the position that the Form T-1 rule will add necessary safeguards 
intended to deter circumvention or evasion of the LMRDA's reporting 
requirements. In particular, with the Form T-1 in place, it will be 
more difficult for labor organizations, employers, and union officers 
and employees to avoid the disclosure required by the LMRDA. Further, 
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.

IV. Review of Proposed Rule and Comments Received

A. Overview of Comments

    The Department provided for a 60-day comment period ending July 29, 
2019. 84 FR 25130. The Department received 35 comments on the Form T-1 
proposed rule. Of these comments, all 35 were unique, but only 33 were 
substantive. The two remaining comments merely requested an extension 
of the comment period. The Department declined the extension requests 
by letter dated July 29, 2019.
    Comments were received from labor organizations, employer 
associations, public interest groups, benefit funds and plans, 
accounting firms, members of Congress, and private individuals.
    Of the 33 unique, substantive comments received, 15 expressed 
overall support for the proposed rule, 16 were generally opposed, and 
the remaining 2 comments were essentially neutral--focusing on a credit 
union exemption. The Department also received one late comment. 
Although not considered, the concerns raised were substantively 
addressed in the Department's responses to other timely-submitted 
comments.
    Comments offering support for the proposed rule largely focused on 
the value of the rule in promoting financial transparency and union 
democracy and in curtailing union corruption. The primary concern 
expressed by this segment of commenters was that the Department not 
allow more than a few limited exemptions to the reporting requirement, 
if any. Some urged the Department not to adopt exemptions such as 
allowing parent unions to file on behalf of an affiliate when both are 
interested in the same trust, or even remove the union size threshold 
that limits the Form T-1 requirement to unions that currently file an 
annual Form LM-2 report.
    Comments opposed to the NPRM largely focused on the additional 
reporting burden the Form T-1 would create for unions and the 
confidentiality concerns surrounding much of the itemization required 
by the Form T-1. The primary concerns advanced by these commenters were 
that the Department alleviate the redundancy of having each union 
report on a multi-union trust, include all proposed exemptions, and 
refrain from treating employer contributions to trust funds as union 
funds for any purpose. Commenters who opposed the Form T-1 also urged 
the Department to include exemptions beyond those contemplated in the 
NPRM, including exemptions for unions contributing a de minimis amount 
to a multi-union trust and for trusts that file the Form 990 with the 
IRS.

B. Policy Justifications

    In the NPRM, the Department cited public disclosure and 
transparency of union finances as major benefits of and policy 
justifications for creating the Form T-1. A number of commenters 
approved of the Form T-1 as a means to increase union transparency. The 
Department agrees with these commenters that the fundamental reason the 
Form T-1 is necessary is to effectuate the level of transparency 
envisioned by Congress in drafting the LMRDA. In fact, those commenters 
who were generally opposed to this rule maintained only that the 
transparency benefits were outweighed by the costs involved, rather 
than claiming that preventing circumvention or evasion to ensure union 
financial transparency would not be a benefit to union members, the 
unions as organizations, and the public. One union commenter wrote, as 
part of expressing support for the proposed exemptions to the Form T-1 
reporting obligation under the rule, that the union ``invests 
significant resources to ensure that we are accountable to our members 
and that our financial operations are transparent, responsible, and 
compliant with applicable laws.''
    Thus, the comments collectively illustrate there is a general 
consensus that public reporting of union finances and the transparency 
it provides is desirable for all parties. The Department promulgates 
this rule, in part, because the Department agrees with those commenters 
who stated that the greater financial transparency that this rule 
provides, and which serves the LMRDA purpose of preventing 
circumvention or

[[Page 13421]]

evasion, outweighs the reporting burden and other costs of this rule.
    Finally, the Department notes that, as the union commenter quoted 
above recognized, the Department has provided exemptions from the 
reporting requirement wherever doing so does not compromise the 
benefits of the rule's transparency and reduces reporting redundancy. 
Two examples are: The Form 5500 exemption, which recognizes that trusts 
filing that form already provide sufficient public disclosure; and the 
confidentiality exemption, which recognizes that there are privacy 
concerns that outweigh the benefit of additional transparency for 
itemized disbursements in a limited number of circumstances.
    Additionally, in the NPRM, the Department cited specific instances 
of, and the general potential for, corruption on the part of union 
leadership or individual union officials or employees as a significant 
rationale for establishing the Form T-1. A number of commenters agreed, 
highlighting additional instances of union corruption as justifications 
for the rule. Commenters agreed that a substantial benefit of the 
financial transparency discussed above is that it will reveal and 
likely deter misuse of covered funds. Documented instances of union 
corruption, involving trusts and the opportunities for such while 
union-controlled funds' financial information remained unreported, make 
a strong case for this rule.
    The Department notes that many commenters relied upon the same 
example of union corruption as the specific type of corruption which 
necessitates the Form T-1. Nine separate commenters discussed a 
training center trust fund corruption scandal involving employees of 
Fiat Chrysler and top union officials of the United Auto Workers (UAW). 
In 2018, an investigation of this auto industry corruption in Detroit, 
Michigan produced multiple criminal convictions in the United States 
District Court for the Eastern District of Michigan. The joint 
investigations conducted by OLMS, the Department of Labor's Office of 
Inspector General, the Federal Bureau of Investigation, and the 
Internal Revenue Service focused on a conspiracy involving Fiat 
Chrysler executives bribing labor officials to influence labor 
negotiations. Their violations included conspiracy to violate the Labor 
Management Relations Act for paying and delivering over $1.5 million in 
prohibited payments and things of value to UAW officials, receiving 
prohibited payments and things of value from others acting in the 
interest of Fiat Chrysler, failing to report income on individual tax 
returns, conspiring to defraud the United States by preparing and 
filing false tax returns for the UAW-Chrysler National Training Center 
(NTC) that concealed millions of dollars in prohibited payments 
directed to UAW officials, and deliberately providing misleading and 
incomplete testimony in the federal grand jury.\12\ These comments 
demonstrate that stakeholders are concerned about the problems caused 
by a lack of transparency, and that such corruption is not purely 
theoretical.
---------------------------------------------------------------------------

    \12\ See https://www.dol.gov/olms/regs/compliance/annualreports/highlights_18.pdf.
---------------------------------------------------------------------------

C. Employer Contributions/Taft-Hartley Plans

    In the NPRM, the Department proposed a test for the degree of union 
control of a trust as the basis for applying the Form T-1 reporting 
obligation. This test has a managerial dominance prong and a financial 
dominance prong. As part of the test, the Department proposed that 
employer contributions to a trust made pursuant to a CBA with the union 
count as union contributions for purposes of determining financial 
dominance. This final rule adopts the test.
    The rule's provision that employer contributions made pursuant to a 
CBA constitute union contributions will likely lead to a number of 
unions reporting joint union and employer trusts, known as Taft-Hartley 
trusts, on their Form T-1 reports. These trusts are expressly permitted 
by section 302 of the Taft-Hartley Act of 1947, 29 U.S.C. 186, and are 
designed to be managed by a board of trustees on which the union and 
employer are equally represented. The funding for these trusts 
typically comes from employer contributions under a negotiated CBA. 
Generally speaking, these trusts are designed to provide employee 
benefits, such as pensions. In addition to the requirement that these 
trusts be managed by a board of equal union and employer 
representation, these trusts are subject to specific regulatory 
requirements under the Taft-Hartley Act, and many of these trusts 
report under ERISA as well.
    Several commenters who objected to the Department applying the Form 
T-1 reporting obligation to Taft-Hartley trusts claimed that the Taft-
Hartley Act provides sufficient protection against union or union agent 
misuse of the funds. These commenters pointed to three particular 
requirements they believe adequately protect the funds in these trusts 
such that T-1 reporting is not necessary. First, the trust must be 
legally separate from the union. Second, such trusts are administered 
by boards on which union(s) and employer(s) involved in the trusts are 
equally represented. Third, Taft-Hartley trusts are subjected to an 
annual independent audit.
    As to the trust being a legally and functionally separate entity, 
the Department does not consider this sufficient either to prevent 
evasion or circumvention of LMRDA reporting requirements or to 
eliminate the opportunity for corruption created by such evasion or 
circumvention. A union or individual bad actor might engage in corrupt 
activities to misdirect union funds with an entity wholly separate from 
the union. If union officers or employees have the authority to direct 
the union's funds, then whether the trust is a separate legal entity 
will not meaningfully reduce the potential for misuse of such funds. 
Reporting on such trusts, however, will help prevent the opportunity 
for such misuse of union funds. Where the funds are overseen by a board 
that includes union representatives and are meant to benefit union 
members, the opportunities for such corruption are apparent. A more 
``traditional'' union trust, such as a multi-union building trust, is 
legally distinct from the unions and yet also subject to abuse. 
``Trusts'' that are wholly owned, governed, and financed by a single 
union are considered subsidiaries under the LMRDA and subject to a 
different reporting obligation that is already part of the Form LM-2.
    As to the requirement that the trust's governing board be composed 
of an equal number of union and employer representatives, the 
Department does not consider this a sufficient protection against 
corruption either. While the Department acknowledges that this 
arrangement could provide a greater deterrent to corruption relative to 
a board composed wholly of union appointees, this arrangement does not 
sufficiently operate to prevent circumvention or evasion of the overall 
LMRDA reporting framework that provides for financial transparency and 
ensures funds are directed to the benefit of union members and their 
beneficiaries.
    As Justice Louis D. Brandeis once wrote, ``Sunlight is said to be 
the best of disinfectants.'' \13\ The recent convictions of UAW and 
Fiat Chrysler officials involving funds intended for a Taft-Hartley 
trust meant to operate a training center for UAW members

[[Page 13422]]

demonstrates that oversight from employer representatives is not 
enough.
---------------------------------------------------------------------------

    \13\ Brandeis, Louis D., Other People's Money, and How the 
Bankers Use It (National Home Library Foundation) (1933).
---------------------------------------------------------------------------

    As to the audit requirement, the Department does not consider this 
requirement alone or even in conjunction with the other two 
requirements discussed by commenters to provide an adequate 
justification for exempting Taft-Hartley trusts from the T-1 reporting 
requirements. The Department does, however, recognize that an 
independent audit that meets certain financial auditing standards is 
functionally equivalent to the financial disclosures required on the 
Form T-1, which is why this rule allows a union to file only the basic 
informational portions of the Form T-1 if it attaches such an audit. 
The Department allows this audit exception because it ensures that the 
key financial information of the trust is publicly disclosed.
    Moreover, many Taft-Hartley trusts file Form 5500 reports with the 
Employee Benefit and Security Administration (EBSA), which exempts such 
trusts entirely from the Form T-1.
    A commenter argued that requiring, for purposes of demonstrating 
managerial control, that a majority of trustees be appointed by unions 
would effectively free all Taft-Hartley funds from Form T-1 coverage. 
Management control or financial dominance is required, but not both. 
Under today's rule, a labor organization has management control if the 
labor organization alone, or in combination with other labor 
organizations, selects or appoints the majority of the members of the 
trust's governing board. Further, for purposes of today's rule, a labor 
organization had financial dominance if the labor organization alone, 
or in combination with other labor organizations, contributed more than 
50 percent of the trust's receipts during the annual reporting period. 
This commenter proposed extending the reporting requirement to include 
trusts in which the labor organization selects or appoints only 50 
percent of the members of the governing board, in order to maximize the 
application of the regulation within legal limits. The Department 
believes that, consistent with AFL-CIO v. Chao, labor organizations 
exert control over a trust, either alone or with others collectively, 
when labor organizations represent a majority of the trust's governing 
body or labor organizations contribute a majority share of receipts 
during the reporting period.
    Additionally, many commenters discussed the Department's proposal 
to treat funds contributed by employers pursuant to a CBA as union 
funds for purposes of the financial dominance test. Some commenters 
supported this approach and the Department's rationale that such 
negotiated contributions are meant to be used to the exclusive benefit 
of union members and might otherwise have been secured by the union as 
wages or benefits for union members.
    The commenters opposed to this approach advanced one or more of the 
following five arguments: (1) Unions are never actually in possession 
of these funds as they are paid directly into the trusts by employers; 
(2) unions cannot unilaterally determine how the funds are used because 
their use is governed by the agreement with the employer; (3) employer 
contributions are not legally considered the union's money; (4) the 
proposed approach could set a precedent for treating employer 
contributions as union money in other circumstances; and (5) the 
proposed approach could cause confusion about the union's relationship 
to the employer-contributed funds.
    Initially, the Department notes that commenters did not challenge 
the Department's authority to apply Form T-1 reporting requirements to 
Taft-Hartley trusts, because that question was resolved in the 
affirmative by the court in AFL-CIO, 409 F.3d at 387. LMRDA section 208 
grants the Secretary authority, under the Title II reporting and 
disclosure requirements, to issue ``other reasonable rules and 
regulations (including rules prescribing reports concerning trusts in 
which a labor organization is interested) as he may find necessary to 
prevent the circumvention or evasion of such reporting requirements.'' 
Employer payments to a trust are negotiated by a union. The union can 
choose to negotiate for numerous and varied items of value, and thus 
may choose to negotiate for employer concessions that do not benefit 
the trust. This means that the trust's continued existence depends on 
the union's decisions at the bargaining table. The influence that this 
potentially gives the union over the trust could be used to manipulate 
the trust's spending decisions. If so, the union has circumvented the 
reporting requirements by effectively making disbursements not 
disclosed on its Section 201 reporting form.
    Further, Section 208 does not limit the ``circumvention or 
evasion'' of the reporting requirements to merely the Section 201 union 
disclosure requirements. Rather, such ``circumvention or evasion'' 
could also involve the Section 203 employer reporting requirements, as 
well as the related Section 202 union officer and employee conflict-of-
interest disclosure requirements. As such, the reporting by unions of 
Taft-Hartley trusts could reveal whether the employer diverted, 
unlawfully, funds intended for the trust to a union official. For 
example, the public will see the amount of receipts of the trust, which 
could reveal whether it received all intended funds. As a further 
example, the public will know the entities with which such trusts deal, 
thereby providing a necessary safeguard against the potential 
circumvention or evasion by third-party employers (e.g., service 
providers and vendors to trusts and unions) of the Form LM-10 reporting 
requirements.
    Next, the Department's approach to employer contributions does not 
state or imply that such funds were at any point held by a union. The 
Department considers it sufficient, in light of the limited purpose for 
which employer contributions are treated as union funds, that the union 
secured those funds for the benefit of its members and their 
beneficiaries as part of a negotiated CBA.
    Further, the Department's concern in every facet of LMRDA financial 
reporting is the misuse and misappropriation of union finances. The 
fact that a written agreement limits the legitimate use of certain 
funds does not in itself prevent their misuse. That a union and its 
agents are not authorized to use funds for purposes other than those 
contemplated in the CBA is not an adequate safeguard against financial 
abuse. This position is supported by the reality of the misuse of 
employer-contributed funds by the various apprenticeship and training 
plans mentioned above in Part III, Section B (Policy Justifications), 
as well as the UAW officials tasked with overseeing a training center 
for UAW members.
    Moreover, as a response to both the third and fourth arguments 
offered by commenters, the Department notes that the treatment of 
employer contributions as union funds is expressly limited within the 
rule itself to the financial dominance test. The Department is not 
claiming that such funds are or should be considered union funds for 
any other purpose. Furthermore, the Department takes this approach in 
this specific case only in the interest of ensuring that there is 
financial disclosure, as a means to prevent circumvention or evasion of 
the LMRDA reporting that is necessary for union financial integrity, 
for all funds that a union secures, by any means, for the benefit of 
its members and their beneficiaries. As an illustration of why employer 
funding pursuant to a CBA should not remain as a means to evade LMRDA 
reporting, consider the following example.

[[Page 13423]]

Consider a trust that is 96 percent funded from union payments, 48 
percent of which is funded by three different employers' payments made 
pursuant to a CBA negotiated by the same union (48 percent, or 16 
percent per employer contribution). The remaining 4 percent is funded 
by some other, non-union entity. It is apparent that the union has a 
level of direct and indirect control over the trust that far exceeds 
any other entity that contributes to the trust and the trust would, 
appropriately, file under this rule. Yet, were employer contributions 
made pursuant to a CBA not considered by the Department, the public may 
not otherwise receive necessary disclosure.
    As to the fifth assertion regarding potential confusion about the 
union's relationship to the employer-contributed funds, the Department 
notes that union members and the public should still be able to discern 
the nature of the employer-contributed funds, even if they are treated 
as union funds, for purposes of determining the Form T-1 reporting 
obligation. The rule itself and the Form T-1 instructions are clear 
that these funds come from the employer subject to a CBA and are 
treated as union funds solely for purposes of the reporting obligation. 
A union is also free to indicate that its trust's funds come from 
employer contributions in the additional information section on the 
Form T-1 in order to further dispel confusion. Those members of the 
public and of unions who take the time to review Form T-1 reports are 
likely familiar with Taft-Hartley trusts and the concept of employer 
contributions under a CBA.

D. Issues Concerning Multi-Union Trusts

    In the NPRM, the Department proposed, in order to reduce the 
reporting burden, that parent unions may file the Form T-1 on behalf of 
their subordinate unions that also share an interest in a trust that 
triggers Form T-1 reporting. The Department sought comment on other 
possible methods to reduce burden in multi-union trust situations.
    In regards to multi-union trusts in which managerial control or 
financial dominance by each participating labor organization would 
require a Form T-1 from each, one commenter expressed support for an 
approach to resolving the duplication of reports. Particularly, the 
commenter supported an approach allowing a single labor organization to 
voluntarily assume responsibility for filing the Form T-1 on behalf of 
all labor organizations associated with that trust. The Department 
agrees with this approach and it will allow a single union to file both 
on its behalf and on the behalf of the other unions involved. The union 
submitting must identify, in the Form T-1 Additional Information 
section, the name of each union that would otherwise be required to 
file a Form T-1 report for the multi-union trust. Additionally, on 
their Form LM-2 reports, the other unions must identify the union that 
filed the Form T-1 on their behalf.\14\ The Department reiterates, 
however, that in the event the unions cannot agree on who should assume 
sole responsibility, each involved labor organizations will be 
obligated to file a Form T-1 for the reporting period.
---------------------------------------------------------------------------

    \14\ The information collection request (ICR) accompanying this 
rule, pursuant to the Paperwork Reduction Act (PRA), revises the 
Form LM-2 instructions.
---------------------------------------------------------------------------

    In situations in which a single union voluntarily assumes 
responsibility, it may subsequently receive partial compensation from 
the other participating unions for doing so, pursuant to a pre-arranged 
agreement. Such options for consolidated filing should reduce burden, 
and mitigate the need for a de minimis exemption for relatively small 
contributors to a trust. Furthermore, the Department declines a de 
minimis exemption because such an exemption could allow for 
arrangements in which multiple unions join into a trust in such small 
proportions that, although they trigger the Form T-1 receipts branch of 
the dominance test, they each qualify for the de minimis exemption. In 
such a case, there would be no financial reporting despite the fact 
that unions exert control over the trust. Such a loophole could be 
exploited.
    One commenter asserted that the Department is in logical error by 
conceiving that multiple unions, including some with minority stakes, 
could work in concert to circumvent reporting requirements and embezzle 
funds, yet provides no reason as to how this type of arrangement is 
``vastly out of step with reality.'' One commenter also suggested that 
such working in concert would be effective only if the participating 
unions had the same affiliation. Reflecting on the ability of union 
officials to misdirect trust funds in all of the cases behind the 
convictions listed in Part III, Section B, the Department does not 
doubt that officials from different unions could work in concert to 
embezzle funds and evade reporting. Multiple unions can exercise joint 
control of a trust to use it as a vehicle for corruption that 
circumvents or evades reporting.
    Finally, having received no support for such an approach, the 
Department declines to adopt the idea of requiring the labor 
organization with the largest stake in the covered trust to bear the 
sole responsibility of filing a Form T-1. The complexity of determining 
who has the largest ``stake'' would add additional unnecessary costs 
and complications; it is unclear whether the union with the largest 
percentage of managerial control or the largest percentage of financial 
contribution should be considered the stakeholder best suited to 
filing. Especially in situations where the difference is negligible 
between the size of the contributions of two unions, the rationale of 
obligating the largest contributor seems far less compelling.
    Last, in regards to unnecessary costs to the trusts in having to 
provide information to multiple labor organizations instead of a single 
labor organization in these multi-union trust situations, the 
Department maintains that such additional costs are negligible. 
Although one commenter disagreed with the Department's reasoning, the 
commenter provided no evidence supporting its position. No additional 
information would need to be acquired in providing the information to 
one labor organization or multiple. The trust would forward the same 
files to each union. And, ultimately, the costs, including any 
hypothetical additional costs in providing electronic files to multiple 
unions instead of one, would be compensated by the unions at net zero 
cost to the trust.

E. ERISA Exemption

    In the NPRM, the Department proposed to exempt from the Form T-1 
all employee benefit trusts that are subject to Title I of ERISA and 
that file the Form 5500 Annual Return/Report of Employee Benefit Plan 
or, if applicable, the Form 5500-SF (Annual Return/Report of Small 
Employee Benefit Plan) (together Form 5500) with EBSA. The exemption 
applies even if an ERISA-covered plan was not otherwise required to 
submit an ERISA annual report. Effectively, this means that the 
exemption applies when a union has a plan covered by ERISA, and is 
therefore eligible under ERISA to file and files the full annual 
return/report of employee benefit plan or the Form 5500-SF for eligible 
small plans, as appropriate. A union would be exempt from filing a Form 
T-1 if it files an annual report under ERISA unless it files a Form 
5500-SF without meeting the eligibility requirements for filing the 
simplified report, such as being a multi-employer plan, not having the 
correct plan membership size, or not being invested

[[Page 13424]]

in ``eligible plan assets.'' \15\ For example, a multi-employer 
apprenticeship and training plan must file the full Form 5500, not the 
SF, in order for the union to qualify for this Form T-1 exemption. The 
Department received numerous comments in response to this proposal, 
and, while the Department retains the ERISA exemption in the final 
rule, the Department has modified the regulatory language and Form T-1 
instructions to make clear its scope.
---------------------------------------------------------------------------

    \15\ See Who May File Form 5500-SF, Instructions for Form 5500-
SF Short Form Annual Return/Report of Small Employee Benefit Plan, 
available at https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500.
---------------------------------------------------------------------------

    The commenters opposed to this exemption argued that the Form 5500 
does not offer comparable disclosure. They also stated that ERISA and 
the LMRDA serve different purposes.
    Those who supported the exemption argued that the Form 5500 
exemption should be retained. ERISA exemptions have always been a 
feature of the Form T-1 filing requirements, and the reasoning has not 
changed. The Form 5500 offers disclosure and accountability for both 
employee benefit pension plans and employee benefit welfare plans 
operated with a trust comparable to what the Form T-1 offers. The 
commenters argued that, were no Form 5500 exemption granted, the 
resulting redundancy created by the overlapping reports would be an 
unjustifiable burden on labor organizations with no justifiable gain in 
disclosure for members. Moreover, some commenters maintained that the 
Form 5500 provides even greater transparency than the Form T-1, because 
the itemization threshold for reporting certain payments to service 
providers is only $5,000 on Form 5500 as opposed to $10,000 on the Form 
T-1. The Form 5500 also requires reporting of certain types of indirect 
compensation, not just direct compensation, paid to or received by a 
service provider. Finally, Form 5500 filers with plans funded by trusts 
generally have to file an audit report based on an audit conducted by 
an independent, qualified public accountant.
    A commenter took the position that the Form 5500 does not offer 
sufficient disclosure and that ERISA works to blunt inquiry for 
members. Another commenter claimed that there is ``no rationale basis 
[sic]'' for the Department to believe the Form 5500 will adequately 
inform members for the purposes of maintaining democratic control of 
their union or to ensure a proper accounting of union funds. The 
Department disagrees with these statements. First, the Form 5500 has 
for decades provided important financial disclosure regarding the 
entities that file it. Second, the Form 5500 is available to not only 
participants, beneficiaries, and fiduciaries, but to union members and 
to the public. Members interested in the operations of the employee 
benefit trusts to which their union contributes can continue to utilize 
it for the effective monitoring of those filing entities. While the 
first commenter also suggested that the Form 5500 is inappropriate 
because the LMRDA and ERISA serve different purposes, this does not 
have any bearing on the quality of Form 5500 disclosure or the salience 
of those disclosures for these purposes. In any event, in the 
Department's view, the transparency provided by the Form 5500 can serve 
the purposes of both statutes.
    Another commenter argued that the Form 5500 exemption should not be 
included because the additional burden of preparing the Form T-1 would 
be minimal. The trust would already have garnered much of the 
information needed when it was preparing the Form 5500. While it is 
true that similar information from the same sources would reduce the 
burden of a second form, even a reduced unnecessary burden is still an 
unnecessary burden. The exemption avoids any unnecessary burden in 
relation to the Form T-1.
    The Department agrees with the reasoning offered by one union 
commenter as to why the Form 5500 exemption has long been a feature of 
Form T-1 initiatives and should be maintained. The exemption reduces 
the redundancy of information already publicly available, and 
eliminates burden hours that would be otherwise borne by the union. The 
exemption is, as another commenter explained, well-founded because Form 
5500 reporting already ensures transparency and accountability to 
members whose trusts file. Lastly, as one accounting firm commenter 
reasoned, the Form 5500 is arguably superior in certain respects to the 
Form T-1, primarily the lower threshold for identifying recipients of 
disbursements which is set at $5,000 as opposed to $10,000.\16\
---------------------------------------------------------------------------

    \16\ Filers required to file a Schedule C with their Form 5500 
must identify various service providers who receive $5,000 or more 
directly or indirectly for services rendered to the plan or as a 
result of their position with the plan during the covered year.
---------------------------------------------------------------------------

    The ERISA exemption would require a union to take the step of 
determining whether or not a given trust covered by this rule in which 
it has an interest files the Form 5500 with EBSA.\17\ On this point, 
one commenter argued that unions would have no more difficulty in 
finding out whether their trust files a Form 5500 than determining and 
acquiring all of the necessary information from the trust for the 
completion of the Form T-1. Again, the Form 5500 is publicly available, 
including via a simple search on the Department's Form 5500 online 
Search Tool.\18\ Furthermore, when contacted by the union, the trust 
would know if it files the Form 5500 and could indicate the fact to the 
union. Thus, the Department remains convinced that the exemption for 
trusts that file the Form 5500 with EBSA should remain.
---------------------------------------------------------------------------

    \17\ Under the ERISA exemption, the ERISA annual return/report 
filing would technically be for the plan of which the trust is part, 
and the annual filing would include and cover the trust.
    \18\ Available online at https://www.efast.dol.gov/portal/app/disseminate?execution=e1s1.
---------------------------------------------------------------------------

    In a closely related issue, some commenters expressed concern that 
the trust's provision of information to the union for purposes of 
completing the Form T-1 raises ERISA fiduciary duty and prohibited 
transaction issues. In this regard, ERISA requires that plan assets be 
used only for the provision of plan benefits or for defraying the 
reasonable expenses of administering a plan. See 29 U.S.C. 1103(c)(2) 
and 1104(a)(1)(A). Moreover, ERISA prohibits, subject to exemptions, a 
plan fiduciary from using plan assets for the benefit of a party in 
interest, a term that includes a union whose members are covered by the 
plan. See 29 U.S.C. 1002(14)(D), 1106(a)(1)(D). Additionally, other 
commenters argued that when a trust enters an agreement with a union to 
receive reimbursement for costs incurred in providing Form T-1 data to 
a union, union trustees will have to recuse themselves in order to 
avoid violating ERISA's self-dealing restrictions in agreeing to the 
amount and terms of the reimbursement. These same issues were raised by 
commenters in connection with the 2008 final Form T-1 rule. 
Specifically, in the preamble to the 2008 rule, the Department noted 
that ``[i]n 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.''
    The Department does not believe that it is necessary to issue a 
``good faith'' exception, as suggested by commenters, from the 
requirement to report Form T-

[[Page 13425]]

1 information in any case in which a trust refuses to provide required 
information to the union. In issuing today's rule, OLMS consulted with 
EBSA, the Department agency responsible for the administration and 
enforcement of the fiduciary rules under Title I of ERISA. As stated in 
the 2008 Form T-1 Final Rule preamble: ``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 union with [Form T-1 
information], provided the plan is reimbursed for any material costs 
incurred in collecting and providing the information to the labor 
organization officials.'' 73 FR 57412, 57432 (Oct. 2, 2008). 
Additionally, the Department went on to state that EBSA explained that 
a ``sharing of information in this manner is consistent with ERISA's 
text and purposes, and a contrary construction [of ERISA] is disfavored 
because it would impede compliance 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.'' Id. EBSA confirmed in connection with today's rule 
that those statements continue to reflect its view.\19\
---------------------------------------------------------------------------

    \19\ Comments on the application of section 302(c) of the Labor 
Management Relations Act of 1947 (LMRA) are outside both the purview 
of this rulemaking and the purview of OLMS because the Department of 
Justice rather than the Department of Labor has jurisdiction 
regarding that provision.
---------------------------------------------------------------------------

    Further, the exemption for trusts filing the Form 5500 should 
substantially reduce the number of trusts and unions that will need to 
follow this procedure in order to be compliant with the requirements of 
the Form T-1. If an employee benefit plan is exempt from filing a Form 
5500 pursuant to EBSA regulations, but nevertheless chooses to file a 
Form 5500 so that the sponsoring union can avoid filing a Form T-1 for 
the trust, the union would reimburse the plan for any administrative 
costs associated with the Form 5500 filing that would not have 
otherwise been incurred by the plan.\20\ If, however, the responsible 
plan fiduciaries decide not to rely on an exemption and file a Form 
5500 for prudent reasons related to plan administration and unrelated 
to the union's ability to claim an exemption from the Form T-1, the 
fact that the Form 5500 filing might result in an incidental benefit to 
the sponsoring union would not require the union to reimburse the plan 
for all or part of the Form 5500 filing costs.\21\
---------------------------------------------------------------------------

    \20\ For example, under ERISA section 107, plans are required to 
maintain records sufficient to support a Form 5500 report even if 
they are eligible for a reporting exemption or simplified reporting 
alternative.
    \21\ See generally Advisory Opinion 2003-04A (``[T]the Supreme 
Court has recognized that plan sponsors receive a number of 
incidental benefits by virtue of offering an employee benefit plan, 
such as attracting and retaining employees, providing increased 
compensation without increasing wages, and reducing the likelihood 
of lawsuits by encouraging employees who would otherwise be laid off 
to depart voluntarily. It is the view of the Department that the 
mere receipt of such benefits by plan sponsors does not convert a 
settlor activity into a fiduciary activity or convert an otherwise 
permissible plan expense into a settlor expense. See Hughes Aircraft 
Company v. Jacobson, 525 U.S. 432 (1999); Lockheed Corp. v. Spink, 
517 U.S. 882 (1996).'').
---------------------------------------------------------------------------

    One commenter reasoned that this rule's promulgation was generally 
inappropriate because Congress sought to regulate transactions between 
ERISA trust plans and union officers and employees through extensive 
reporting and disclosure through ERISA, not the LMRDA. This rule 
responds to the comment, to the extent appropriate, by including a Form 
5500 exemption recognizing the quality and appropriateness of 
disclosure through that form rather than the Form T-1. However, section 
208 of the LMRDA clearly affords the Secretary authority to promulgate 
regulations governing trusts in which a labor organization is 
interested.
    A commenter argued that, due to several court cases, it is 
incorrect for the Department to count employer contributions to ERISA 
plans toward its determination of a union's control over a trust 
according to this rule's financial or managerial dominance test. More 
particularly, the commenter suggested that this line of cases 
establishes a total prohibition against counting ERISA trust funds for 
any LMRDA reporting or enforcement purposes whatsoever. The commenter 
inflated the scope of these decisions. The cases the commenter cited 
are limited to the misuse of ERISA plan funds as the basis for 
fiduciary violation claims under the LMRDA. Although courts have issued 
narrow holdings establishing that fiduciary breach under section 501(a) 
of the LMRDA cannot be shown through a trustee's malfeasance in regards 
to ERISA plan trust funds,\22\ these cases do not support the 
commenter's conclusion that such cases establish a total prohibition of 
against applying LMRDA provisions to ERISA funds. Moreover, as 
discussed at Part III, Section C, the end use of employer funds 
contributed pursuant to a CBA, as negotiated by the union, is of 
obvious interest to union members and indicative of the control a union 
or unions have over the particular trust.
---------------------------------------------------------------------------

    \22\ See, e.g., Hearn v. Mckay, 603 F.3d 897 (11th Cir. 2010); 
Noble v. Sombrotto, 525 F.3d 1230 (D.C. Cir. 2008).
---------------------------------------------------------------------------

    Furthermore, with harsh lessons learned from the UAW/Fiat Chrysler 
scandal, the ability of a union to collaborate with an employer to 
attain domination allowing for distribution of trust assets, including 
employer funds, is not to be underestimated. Some commenters argued 
that by including employer contributions towards the determination of 
union dominance, the Department failed to grasp the idea that the 
employer and its contributions serve as an inherently competitive 
balance to the union. While this might be the theoretical and 
traditional ideal, such a clean cut, unqualified role of employer funds 
has not been realized. Similarly while ERISA can be said to grant 
exclusive control to trustees alone, it does not alter the fact that a 
union might in fact control the trust. The Form T-1 and its dominance 
test have been crafted to deal with the reality that unions can exert 
control and/or domination of a trust through direct contributions or 
those employer contributions made at the union's direction, i.e., 
contributions made pursuant to a CBA.
    Lastly, commenters suggested changes that could be made to ERISA or 
its implementing regulations that would achieve additional disclosure 
from apprenticeship and training programs. Any suggestions for changes 
to ERISA regarding apprenticeship and training plans, or any other 
element of ERISA regulations, are outside the purview of this 
rulemaking and the purview of OLMS. OLMS has shared those comments with 
EBSA and encourages interested stakeholders to communicate their 
suggestions directly to EBSA. Today's rule, though, makes it clear that 
the ERISA exemption in this final rule for the Form T-1 includes 
apprenticeship and training plans that do file the Form 5500, even if 
EBSA by regulation has provided a conditional exemption for such plans 
from the generally applicable Form 5500 annual reporting requirements.

F. Other Exemptions Raised by Commenters

Exemption for Trusts That Are Required To File IRS Form 990
    Multiple union commenters requested an exemption from filing the T-
1 for any organization that files a Form 990 with the Internal Revenue 
Service (IRS). These commenters asserted that the Form 990 requests 
much of the same, if not more information than the Form T-

[[Page 13426]]

1. Thus, according to these commenters, the Form T-1 is largely 
unnecessary to prevent the circumvention or evasion of LMRDA reporting 
requirements because that information is already largely reported on a 
trust's Form 990, especially with regard to entities that are tax-
exempt under sections 501(c)(3) and 501(c)(4) of the Internal Revenue 
Code. See 26 U.S.C. 501. One commenter requested that the Department 
provide an exemption for completion of parts of the proposed Form T-1 
for organizations that annually file IRS Form 990 or allow those 
organizations to skip completion of Schedules 1, 2, and 3 of Form T-1 
because so much of the information is duplicated with information that 
is required to be reported on Form 990.
    Required IRS disclosures do not exempt labor organizations from 
their LMRDA reporting requirements. Labor organizations that are 
required to file an annual Form 990 are still required to file their 
annual LM-2, LM-3, and LM-4 form. Indeed, the purposes of LMRDA and IRS 
disclosure differ to a greater degree than does the LMRDA with ERISA, 
with correspondingly different disclosure requirements. As explained, 
the LMRDA was enacted, in part, to address fraud and corruption 
occurring within labor-management relations. The LMRDA's reporting 
requirements exist to deter such fraud and corruption, as well as 
promote union democracy. IRS reporting requirements are not tailored in 
this manner because the IRS provisions were enacted for the purpose of 
ensuring the IRS can monitor the activity of tax-exempt entities to 
ensure they remain duly eligible for the substantial benefit of tax-
exempt status. Rather, the LMRDA's reporting requirements were tailored 
to prevent the circumvention or evasion of meaningful financial 
disclosure for labor organizations and trusts in which a labor 
organization is interested. While some information may overlap, there 
are substantial differences between the forms that continue to make the 
need for the Form T-1 apparent. For example, the Form T-1 requires 
itemization in all three of its schedules and thus provides a degree of 
specificity that the Form 990 does not; such particular detail as to 
certain, large transactions provides a level of transparency that 
exceeds that provided by similar fields in the Form 990. The Form T-1 
is organized for review by union members, who are familiar with 
similarly-structured union financial disclosure reports such as the 
Form LM-2. Members will find the reporting structure of the Form T-1 
far more accessible than the Form 990. Furthermore, whatever 
information is overlapped on both forms will simply provide members 
with a means of cross-referencing financial disclosures of a particular 
trust.
    Moreover, while the Form 990 is detailed, it is less readily 
available for public inspection than the Form T-1, Form LM-2, or Form 
5500 reports. Contrast this to LMRDA disclosure, which allows free, 
instant access to the entire LM form from the time electronic filing 
was available (the year 2000 for unions filing the Form LM-2) using the 
OLMS database.
Exemption for Credit Unions
    The Department invited comment on whether it should exempt 
financial institutions affiliated with labor organizations, such as 
credit unions, from the final rule. Several commenters supported an 
exemption for credit unions affiliated with labor organizations in any 
final rule. According to these commenters, credit unions are highly 
regulated by the National Credit Union Administration (NCUA) and other 
financial regulatory agencies. One commenter noted that the reporting 
thresholds created by the proposal would make it extremely unlikely 
that any credit union would be covered. Multiple commenters noted that 
the structure of a credit union, which includes a Board of Directors 
democratically elected by the credit unions' entire membership, does 
not warrant the treatment of a credit union as a labor organization's 
``trust.'' Credit unions are distinct, independently-managed legal 
entities according to the commenter. Another commenter noted that 
credit unions' revenue come largely from the deposits of individual 
members. Thus, according to the commenter and as echoed by a second 
commenter, the only time Form T-1 reporting on a credit union would be 
required is in the ``extremely unlikely'' circumstance where most 
deposits come from labor organizations rather than from individual 
depositors.
    Another commenter opposed an exemption for credit unions, asserting 
that labor union-controlled banking and financial institutions create 
an opportunity to covertly influence actors in the labor-management 
field and that non-disclosure serves no LMRDA purpose.
    Another commenter expressed concern that the reporting called for 
by the Form T-1 proposal would directly conflict with the Federal 
Credit Union Act, 12 U.S.C. 1751, as well as other laws and regulations 
governing credit unions. The comment cited the Department's example in 
its 2002 Form T-1 proposal, in which a labor organization contributed 
97 percent of the funds on deposit at a credit union and provided large 
loans to union officers exclusively. The commenter noted that ``the 
loans described in the Department's example are characterized by the 
NCUA as `loans to insiders' and, as such, are subject to special review 
by NCUA examiners.'' The commenter also more pointedly observed that 
information about credit union loans, as personally identifiable 
financial information, is exempt from public disclosure under the Gramm 
Leach Bliley Act. This commenter also wrote that applicable privacy 
regulations forbid a credit union from providing loan information to a 
union without first giving the borrower an opportunity to prevent such 
disclosure.
    Another commenter was concerned that by creating the impression 
that private financial dealings with credit unions might be subject to 
public disclosure, the Form T-1 proposal would discourage the use of 
credit unions, running contrary to the federal policy of fostering the 
formation of credit unions. Based on these comments, the Department 
considered the extensive reporting requirements and regulations to 
which credit unions and other financial institutions are subject. The 
Department has decided to exempt from filing the Form T-1 organizations 
that are subject to the Federal Credit Union Act, 12 U.S.C. 1751.
Exemption for Fraternal Benefit Societies
    One commenter requested an exemption for Fraternal Benefit 
Societies, which generally issue life insurance products to members of 
the sponsoring organizations. The commenter maintained that such trusts 
merit an exemption due to their similarity to PACs and commercial 
financial institutions. According to the commenter, fraternal benefit 
societies operate under a rigorous regulatory framework of state 
insurance laws administered in most states by an Insurance 
Commissioner. This regulatory framework requires fraternal benefit 
societies to file, on a quarterly and annual basis, a true statement of 
its financial condition, transactions, and affairs with the relevant 
State Insurance Commissioner in a form approved by the National 
Association of Insurance Commissioners (NAIC). Fraternal benefit 
societies also must produce any supplemental information required by 
the relevant state's Commissioner, as well as a valuation of its 
certificates in force for the prior year, as certified by

[[Page 13427]]

a qualified actuary. The commenter claimed that such reports produced 
and submitted by the fraternal benefit society are available to the 
public. Fraternal benefit societies are also subject to state insurance 
requirements for any state in which they sell insurance products.
    The Department was not persuaded that this type of trust 
necessitated an exemption by the information the commenter provided, 
which did not detail the information required in existing financial 
disclosures. The Department is also concerned about variations in state 
requirements for these entities, even if each state's regime does meet 
a minimum set out by NAIC. Further, the Department has not been able to 
substantiate that such annual disclosures are wholly or widely 
available to the public as the commenter suggests. As to similarities 
to entities for which the Department has granted exemptions, fraternal 
benefit societies differ from PACs in this context because union-
affiliated PACs are more restricted and more heavily regulated than 
PACs in general (e.g., union PACs may only solicit contributions from 
members), whereas fraternal benefit societies are regulated in the same 
manner as other life insurance providers. Moreover, while union trusts 
that function as commercial banks or credit unions are also regulated 
in the same manner as any other such entity, it is significant that the 
services of fraternal benefit societies are much more related to 
traditional union activities than are commercial banking and credit 
union services. As stated previously, requirements for filing from 
another government agency does not, per se, exempt an organization from 
its LMRDA reporting requirements.

G. Objections to Proposed Exemptions

Opposition to the Audit Option for Trusts
    Multiple commenters opposed the proposed audit option that allows 
trusts to submit an audit in addition to page one of the T-1 form, 
instead of the entire form. Under the audit option, 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 the audit of the trust that meets the requirements as detailed 
in the Form T-1 Instructions (generally modeled on provisions in 29 
U.S.C. 1023 and 29 CFR 2520.103-1, relating to annual reports and 
financial statements required to be filed under ERISA). These 
requirements are that the audit must:
     Be performed by an independent qualified public 
accountant.
     Be performed by an accountant who examines the financial 
statements and other books and records of the trust, as the accountant 
deems necessary, and certifies that the trust's financial statements 
are presented fairly in conformity with Generally Accepted Accounting 
Principles (GAAP) or Other Comprehensive Basis of Accounting (OCBOA).
     Include notes to the financial statements that disclose, 
for the relevant fiscal year:
     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 trust officers and employees that were 
liquidated, reduced, or written off.
     Be 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 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.
    These commenters asserted that the proposed option to file an audit 
would allow trusts to submit less information than is required on the 
complete T-1 Form, thus decreasing transparency and undermining the 
purpose of this rule. One commenter insisted that the audit must 
disclose the same information as the Form T-1 or the audit will 
disclose less information than required on a Form T-1 and undermine the 
regulation's goal of promoting transparency. The Department believes 
the requirement that a labor organization deciding to file an audit 
must complete and file the first page of the Form T-1 with a copy of 
the audit is an acceptable approach that reduces the overall reporting 
burden on the labor organization and the section 3(l) trust, while 
providing sufficient disclosure. The Department notes that the Form LM-
2 already provides an audit option for subsidiaries, and subsidiaries 
in the usual course are closer to the labor organization than a section 
3(l) trust. See Form LM-2 Instructions, Part X (Labor Organizations 
with Subsidiary Organizations).
    One commenter suggested the Department require the Form T-1 
signature page be included with the audit submission in order to allow 
the LMRDA-related criminal provisions to be effectuated. This was 
already a feature of the proposed rule and is included in this final 
rule.
    One commenter expressed concern that the audit required for the 
audit exemption is more stringent than the Form T-1 in certain 
respects, namely with regard to losses and shortages. The commenter 
points to the reporting exception from Item 16, that indicates losses 
and shortages do not include ``delinquent contributions from employers, 
delinquent accounts receivable, losses from investment decision, or 
overpayments of benefits.'' The commenter explains that these three 
categories are not included next to the criterion for the audit that 
all ``Losses, shortages, or other discrepancies in the trust's 
finances'' are documented. The Department wishes to clarify that the 
exception in Item 16 for ``delinquent contributions from employers, 
delinquent accounts receivable, losses from investment decision, or 
overpayments of benefits'' does apply, and that the audit required by 
the audit exemption is no more stringent as to the documentation of 
losses and shortages than the Form T-1.
    Other commenters supported the audit option but requested 
clarification on whether the exemption from itemized reporting on 
Schedule 1 for ``receipts derived from pension, health, or other 
benefit contributions that are provided pursuant to a collective 
bargaining agreement'' will also apply to the audit disclosure option. 
To clarify, this exemption applies to the audit option, as well.
    One commenter stated that the Department should do one of the 
following: Retain the overall audit exemption but drop the requirement 
for itemization of transactions of $10,000 or more because it is 
unrelated to any business purpose of the trusts and would not be 
ordinarily tracked in that way; or, allow the audit to omit specific 
itemization for trust receipts of collectively bargained employer 
contributions or for benefit payments to participants. The Department 
declines to modify the audit exemption in either manner, because it is 
critical that the audit provide comparable disclosure to the full Form 
T-1.

[[Page 13428]]

    Multiple commenters suggested that because of the complexity of 
producing audited financial statements for multiemployer trusts, they 
would rarely, if ever, be available within 90 days following the close 
of a trust's fiscal year. One such commenter argued that the T-1 should 
be due no sooner than a full year after the end of a trust's fiscal 
year. Another commenter requested that OLMS permit a labor organization 
to take advantage of the limited exemption by filing the trust's most 
recently available audited financial statements. In the alternative, 
this same commenter requested that the labor organization be permitted 
to file for an automatic extension enabling it to submit the audited 
financial statements of the trust no later than the date the trust is 
required to produce those statements, and in no event later than 10\1/
2\ months following the end of the labor organization's fiscal year.
    The Department concurs with these comments, in part. Under the 
final rule, as proposed, labor organizations will file a Form T-1 and 
Form LM-2 together. The filing will be due 90 days after the labor 
organization's fiscal year ends. The Form T-1 will be based on the 
latest available information for the trust. The Department recognizes, 
however, that the trust needs an adequate amount of time to gather the 
Form T-1 data and provide it to the union and the union needs an 
adequate amount of time to prepare and submit the Form T-1. In certain 
cases, time would not be adequate. For example, if the trust and the 
labor union follow the same fiscal year, the Form T-1 would be due 
within 90 days of the close of the trust's fiscal year. This would give 
the trust and the union only 90 days to collect the trust's Form T-1 
data, transfer the data from the trust to the union, and complete and 
file the Form T-1. It would give the trust 90 days to conclude an 
audit, if that course was taken. Based on the comments, this likely 
would not be a sufficient amount of time.
    The Department will avoid this scenario. A labor union must still 
file the Form T-1 within 90 days of the close of its fiscal year. But 
it will be required to report on the trust's fiscal year that ends 90 
days or more before the union's fiscal year ends. In other words, if a 
union and trust both have a calendar fiscal year ending December 31, 
2021, the union would file its Form T-1 by March 31, 2023. The Form T-1 
would cover the trust's fiscal year ending December 31, 2021. That 
would be the trust's most recent fiscal year that ended 90 days or more 
before the union's fiscal year's end. In another example, the union has 
a March 31, 2022 fiscal year ending date. The trust's fiscal year ends 
December 31, 2021. The Form T-1 would be filed June 29, 2022 (90 days 
after the close of the union's fiscal year) and would cover the trusts 
fiscal year ending December 31, 2021. That would be the trust's most 
recent fiscal year that ended 90 days or more before the union's fiscal 
year's end. Under this rule, the trust and the union would always have 
at least 180 days to prepare the Form T-1. This additional time will 
also aid in the preparation of a qualifying audit.
    The Department's intention in 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, is to ease the burden for 
both the trust and the labor organization. The Department anticipates 
that a trust will be able to more readily provide necessary information 
to the reporting labor organization at the conclusion of the trust's 
fiscal year and that a labor organization will have correspondingly 
less difficulty in obtaining information at that time. This change will 
alleviate the need for any later deadline or any form of automatic 
extension. The Department includes in the instructions that are 
published as part of the final rule examples of the rule's application 
to trusts and labor organizations that have the same or different 
fiscal years.
    Finally, a commenter suggested that the Department should accept an 
audit, prepared pursuant to the Taft-Hartley Act, pursuant to the Form 
T-1 audit exemption. The Department declines this suggestion, since the 
audit option described here is specifically tailored for the 
requirements of the LMRDA and the trusts' connection with labor unions, 
such as whether the trusts made loans to labor union officers.
Opposition to Exemption for Smaller Labor Organizations and Subordinate 
Organizations
    Several commenters opposed the proposed rule's exemption of unions 
with total annual receipts less than $250,000. These commenters stated 
that members of smaller labor organizations deserve as much protection 
and transparency as members of larger labor organizations. In the 2003, 
2006, and 2008 rules, the Department explained that it had been 
persuaded that the relative size of a union, as measured by its overall 
finances, will affect its ability to comply with the proposed Form T-1 
reporting requirements. 68 FR 58412-13. For this reason, the Department 
set as a Form T-1 reporting threshold a union's receipt of at least 
$250,000 during the one-year reporting period, the same filing 
threshold that applies for the Form LM-2. 68 FR 58413. For the same 
reason, the final Form T-1 rule applies only to unions that have 
$250,000 or more in annual receipts. This threshold is based on annual 
receipts because they are the monetary component that is most 
reflective of the union's overall finances and are the most effective 
proxy for ``size'' in the sense of number of members and effect on 
commerce. Moreover, using receipts is also consistent with the existing 
delineation between unions that file the Form LM-2 and unions that file 
the Form LM-3 or 4, which makes it a more familiar and straight-forward 
method for labor organizations to determine their size.
    The Department has carefully considered and balanced the burden on 
labor organizations versus the benefits of increased transparency 
gained through such reporting and determined that T-1 reporting was 
most beneficial for larger labor organizations and their trusts. The 
Department is particularly hesitant to expand coverage to filers with 
less than $250,000 in annual receipts, as this rule is already 
predicted to have a significant impact on a substantial number of small 
entities, even when applied only to Form LM-2 filers. Were compliance 
to be expanded to all Form LM-3 and LM-4 filers, every one of these 
small filers would be impacted, and, in some cases, the cost of 
compliance could exceed the entire amount of annual receipts the labor 
organization receives annually. Therefore, expanding coverage to the 
smallest labor organizations is untenable and the Department declines 
to eliminate the filing threshold.
    Many of the comments on the 2002 proposal expressed the view that 
the Form T-1 would impose a substantial burden on small labor 
organizations, because they are usually staffed with part-time 
volunteers, with little computer or accounting experience and limited 
resources to hire professional services. In the 2003, 2006, and 2008 
rules, the Department explained that it had been persuaded by the 
comments 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. For this reason in the 2003, 
2006, and 2008 final rules, the Department did not require any labor 
organization with annual receipts of less than $250,000 to file a Form 
T-1 report. For the same reasons, the Department again adopts a Form T-
1

[[Page 13429]]

filing threshold of $250,000 in annual receipts for the labor 
organization.
    One commenter opposed creating an exemption for a subordinate union 
when both a parent and its subordinate meet the financial or managerial 
domination test. This commenter suggested that the trust prepare a Form 
T-1, make blank signature copies for each affiliated labor 
organization, and have each sign and submit the Form T-1 with their LM 
filing. The Department declines this suggestion. The Department has 
determined that this requirement would create a burden on the trust and 
the affiliate unions without increasing transparency in any 
demonstrable manner.
Criticism of Written Agreement Requirement for Itemization Exceptions
    Two commenters argued that the Benefits Payment Itemization 
Exemption in the Form T-1 Instructions is insufficient because as 
written it fails to exempt a number of benefits payments. The 
instructions read that a ``labor organization is not required to 
itemize benefit payments on Schedule 2 from the trust to a plan 
participant or beneficiary, if the detailed basis on which such 
payments are to be made is specified in a written agreement'' (emphasis 
added). The commenters argue that the last clause is too limiting, 
because many benefits payments are not in the original governing 
written document and are later added on through additional notes on a 
plan summary or a schedule of benefits that are not expressly 
incorporated into the governing document. One of the two commenters 
also makes the same claim about this ``written agreement'' language 
with respect to the Department permitting a confidentiality exception 
to itemization requirements for employer contributions that could 
reveal business operations. In each scenario, the commenters suggest 
that the simplest solution is to eliminate the final clause and simply 
indicate that all benefit payments and all employer contributions meet 
the exceptions. The Department believes that the edit is unnecessary 
and that removing the clause would provide undue opportunities for 
trusts and labor organizations to hide illicit transactions under the 
guise of ``benefit payments'' or ``employer contributions'' without 
having any proof. Having a written agreement of some sort is important 
in order to ensure there is documentation providing the terms of a 
legitimate agreement for the movement of funds. The Department, 
however, clarifies that the term ``written agreement'' is more 
expansive than how the commenters have interpreted it. The term is not 
limited to the original governing document or to documents that are 
expressly incorporated into it. If the union or trust entered into an 
associated agreement in writing that provides a detailed basis for such 
benefit payments to a plan participant or beneficiary or employer 
contributions to the trust, the exemption is met.

H. Burden on Unions and Confidentiality Issues

    The proposed Form T-1 used the same basic template as the Form LM-
2. Both forms require the labor organization to provide specified 
aggregated and disaggregated information relating to the financial 
operations of the labor organization and the trust. Typically, the Form 
T-1 will require that a labor organization disclose information related 
to a covered trust's transactions, such as: Disposition of property by 
other than market sale, liquidation of debts, and loans or credit 
extended on favorable terms to officers and employees of the trust. 
Further, the Form T-1 will require that a labor organization identify 
major receipts and disbursements by the trust during the reporting 
period.
    Several union commenters opposed the level of disclosure required 
by the Form T-1 report because of confidentiality concerns. These 
commenters asserted that the necessary information for the Form T-1, 
such as the total assets, total liabilities, total receipts, and total 
disbursements, is confidential information that belongs exclusively to 
the trust. These commenters further asserted that the trust is legally 
obligated to protect the information from public reporting.
    One commenter opposed the proposed rule because it would require 
public disclosure of confidential information regarding employer work 
hours. The commenter reasoned that employers who work with its 
association would be obliged to disclose information about 
contributions they make to the funds. Because employers often sign 
agreements specifying how much they contribute per employee work hour, 
this would then permit readers to estimate the number of hours an 
employer's employees worked during the reporting period. This would 
undermine the contributing employers' businesses by making this type of 
information available to competitors.
    One commenter opposed the required disclosure of apprentice trust 
funds. According to this commenter, requiring union representatives to 
disclose all contributions received in excess of $10,000 and all 
disbursements made in excess of $10,000 would require disclosure by the 
apprentice fund of its employees, their salaries, instructor salaries, 
apprentice coordinator salaries, payments to vendors, suppliers, 
equipment manufacturers, training materials, publications, website 
designers, and many other features which are confidential and 
proprietary. This would also give apprenticeship programs not covered 
by this rule the benefit of reviewing confidential and propriety 
information and an undeserved advantage, according to the commenter.
    Another commenter opposed the NPRM's proposed protections for union 
members' personal information and for sensitive information related to 
a labor organization's negotiating or bargaining strategies. This 
commenter asserted that these exemptions undermined the LMRDA's purpose 
of informing employees about who is trying to influence and persuade 
them to join or not join a union and that publicity would constrain 
fraudulent activity. This commenter stated that allowing labor 
organizations to conceal their actions while requiring employers to 
report and disclose their ``sensitive information,'' creates an 
imbalance the LMRDA statutorily prohibits. The commenter proposed that, 
if adopted, the protections from disclosure discussed in the proposed 
rule should apply to all current LM forms and not just those filed by 
union officers. The commenter did not identify what sensitive 
information employers currently report or would be exempt from 
reporting under the commenter's proposal. The Department notes that 
employers, generally, have no obligation to file any LM report unless 
the employer ``has made an expenditure, payment, loan, agreement, or 
arrangement'' to or with a third party. 29 U.S.C. 433(d). An employer 
need not report the employer's own, regular efforts, sensitive or 
otherwise, to influence or persuade their employees concerning union 
membership. Moreover, this approach to the Form T-1 is consistent with 
the existing exemptions for such information on the Form LM-2. 
Furthermore, LMRDA Title II protects all filers from disclosing 
material protected by the attorney-client privilege. See LMRDA Section 
204, 29 U.S.C. 434.
    The Department carefully balanced increased transparency against 
revealing confidential private information or information that may 
place an organization at a competitive disadvantage. The final rule 
maintains consistency with the LMRDA's other disclosure requirements 
for the LM-2,

[[Page 13430]]

as well as protecting confidential trust information. The Form T-1 will 
be subject to the same confidentiality provisions contained in the Form 
LM-2 regulations, 29 CFR 403.8. The only difference between the 
provisions relating to the Form LM-2 and final rule for the Form T-1 is 
that each addresses the distinct itemization thresholds for the two 
reports ($5,000 for Form LM-2 and $10,000 for Form T-1).
    In the proposed rule as well as this final rule the Department also 
provides labor organizations the same reporting options 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'' (persons having sought and attained employment at a company 
in order to organize its workers), or its prospective negotiation 
strategy. Reporting labor organizations may withhold such information 
provided they do so in the manner prescribed by the instructions. Thus, 
this information may be reported without itemization; however, as 
discussed below, this information must be available for inspection by 
labor organization members with ``just cause.''
    Under the final rule, a labor organization that elects to file only 
aggregated information about a particular receipt or disbursement, 
whether to protect an individual's privacy or to avoid the disclosure 
of sensitive negotiating or organizing activities, must so indicate on 
the Form T-1. A labor organization member has the 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. Information reported only in aggregated form remains subject to 
a labor organization's member's statutory right to access such 
financial information. Such aggregation will constitute a per se 
demonstration of ``just cause,'' and thus the information must be 
available to a member for inspection. By invoking the option to 
withhold such information, the labor organization is required to 
undertake reasonable, good faith actions to obtain the requested 
information from the trust and facilitate its review by the requesting 
member. Payments that are aggregated because of risk to an individual's 
health or safety or where federal or state laws forbid the disclosure 
of the information are not subject to the per se disclosure rule.
    Commenters also made various suggestions as to ways in which the 
burden of the form could be reduced. First, the burden of itemization 
on Schedules 1 and 2 could be reduced by raising the threshold for the 
individual itemization of receipts and disbursements higher than 
$10,000. The Department declines the suggestion. While raising the 
threshold would reduce the burden of itemization, it also would 
unacceptably reduce the amount of disclosure available to union 
members. Furthermore, the Department has already accounted for this 
concern by increasing the threshold to $10,000; on the Form LM-2 for 
labor organizations, the threshold for major receipts and disbursements 
for itemization on Schedules 14-19 is $5,000. Since the threshold of 
$10,000 already doubles the traditional threshold for itemization, the 
Department declines to alter it further.\23\ Additionally, the 
Department is declining the request of another commenter who advocated 
for the lower $5,000 threshold on the Form T-1. The Department has 
decided against a lower threshold in favor of a $10,000 threshold in 
recognition of the underlying concerns about burden advanced by the 
commenters asking for a higher threshold.
---------------------------------------------------------------------------

    \23\ A commenter proposed that the threshold for the itemization 
of major disbursements and major receipts on the form T-1 should be 
set at $5,000, not $10,000. The commenter, however, did not provide 
reasoning as to why the decreased threshold is necessary in this 
context to prevent circumvention or evasion and thereby provide 
adequate union financial transparency, justifying the additional 
burden. Without support in the rulemaking record why $10,000 is 
insufficient but $5,000 sufficient to prevent circumvention or 
evasion, the Department declines to make this change.
---------------------------------------------------------------------------

    Another suggestion made was that DOL should reduce the burden by 
requiring only the top five receipts or disbursements to be itemized. 
The commenter offered no explanation as to why such a method or number 
of receipts/disbursements is well suited for financial transparency and 
burden reduction. The Department declines this idea due to the 
arbitrary limit suggested and for the obvious deficiencies in 
transparency this could create. For example, a trust with a dozen 
$50,000 disbursements as its top disbursements could handpick which 
five of its disbursements it wanted to have to itemize and name, and 
which to hide in non-itemized disbursements. To continue the example, 
it could have another dozen disbursements of $49,999, each for 
questionable purposes, that would go without itemization or the naming 
of recipients.
    The Department also declines the idea offered by another commenter 
to extend the deadline for the Form T-1 beyond 90 days after the end of 
the union's fiscal year in an attempt to reduce the burden. While 
giving more time to trusts and unions to gather the necessary 
information would reduce the burden, the Department believes that 90 
days at the end of the union's fiscal year creates a familiar, 
predictable timeline for both union members and the Department to 
expect union disclosure. Any recommendation to extend the deadline 
would cause problems greater than the burden reduction benefit in 
separating the Form T-1 deadline from the Form LM-2 deadline. Without a 
shared deadline, it will be more difficult for the Department to 
confirm that all obligated unions are complying with Form T-1 filing 
requirements, including identifying whether they or another union on 
their behalf will file the Form T-1 for each and every covered trust in 
which they are interested. Similarly, it will be more difficult for 
unions that have another union filing on their behalf, whether as a 
parent or a volunteer, to monitor compliance with that arrangement, 
which they must report on their Form LM-2 in lieu of a Form T-1. The 
Department sees no sufficient reason to depart from the statutory 
deadline for Form LM-2 reporting in requiring the Form T-1 from some of 
the same unions. Further, the policy that the union will report on 
trust fiscal years ending 90 days prior to the close of the labor 
unions' fiscal years will provide additional time, ensuring that there 
will always be a minimum of 180 days from the close of the trust's 
fiscal year to the submission of the Form T-1.
    Lastly, while the Department has not changed its regulatory impact 
analysis methodology in response to public comments, the Department has 
updated its wage figures to the most recent, available, and complete 
data set from 2018. All figures are measured in 2018 dollars except 
where noted.

I. Legal Support for Rule

    The NPRM explains that this rule is based on the Secretary's 
authority to require union financial reporting under Title II of the 
LMRDA, proposing that the Secretary has such legal authority as 
delegated by Congress. 29 U.S.C. 438. The LMRDA provides the Secretary 
with the specific authority to regulate ``trusts in which a labor 
organization is interested'' in order to prevent

[[Page 13431]]

circumvention or evasion of reporting requirements. Id.
    One commenter asserted that the Form T-1 reporting obligation would 
exceed the Secretary's statutory authority on the basis that trusts 
make expenditures ``beyond traditional union expenditures'' that are 
accordingly beyond the authority granted to the Secretary under the 
LMRDA.
    The Department acknowledges that the Secretary's authority is 
limited and that the case AFL-CIO v. Chao, 409 F.3d 377 (D.C. Cir. 
2005) made clear that the Secretary cannot require ``general trust 
reporting'' in the sense of requiring reporting on all trusts in which 
unions have any stake. Yet, as explained in the Department's response 
to comments that raised concerns related to the treatment of employer 
contributions to a trust, or Taft-Hartley trusts, the Department has 
ensured this rule remains within the bounds of the Secretary's 
authority by making the managerial or financial dominance test a 
prerequisite for coverage under this rule. As the court stated in AFL-
CIO v. Chao, ``[t]here is no serious dispute over whether Congress 
delegated authority to the Secretary to promulgate rules to enforce 
section 208 . . . . Under section 208, the Secretary may require 
reporting of union-related trusts where a two part nexus is met: A 
union must have an interest in the trust as defined in 29 U.S.C. 
402(l), and the required reporting must be `necessary' only for the 
purpose of `prevent[ing] the circumvention or evasion of [union] 
reporting requirements' under LMRDA Title II.'' 409 F.3d 377, 386-87 
(D.C. Cir. 2005) (internal citations omitted). The control test in this 
current rule, along with the union receipts threshold and other 
features, ensures that Form T-1 reporting covers trusts where the 
danger of circumvention and evasion is most serious, the control unions 
have over the trusts is higher, and there is currently an absence of 
significant financial disclosure.
    The LMRDA explicitly grants the Secretary the power to require 
reporting for ``trusts in which a labor organization is interested.'' 
29 U.S.C. 402(l). The LMRDA definition of ``trusts in which a labor 
organization is interested'' specifies that such trusts are those ``a 
primary purpose of which is to provide benefits for the members of such 
labor organization or their beneficiaries'' (emphasis added). Id. Thus, 
the LMRDA already contemplates that trusts will have purposes and 
expenditures in addition to those that serve the ``traditional'' union 
and union member interests.
    The Department has taken due consideration of this comment, as well 
as other comments that argued the Department has the authority to 
require more trust reporting than was proposed. Ultimately, the 
Department adopts the managerial and financial dominance test as its 
basis for determining which trusts primarily serve union interests and 
purposes. Further, such a threshold test focuses reporting on those 
trusts that are most susceptible to corrupt misappropriation of union 
funds in the absence of adequate financial disclosures.

J. Multi-Union Control of Trusts

    The NPRM explained that this rule is grounded in the Secretary's 
authority to require union financial reporting under the LMRDA, 
proposing that the Department take the position that the Secretary has 
such legal authority as delegated by Congress. This includes the 
specific authority to regulate ``trusts in which a labor organization 
is interested'' to prevent circumvention or evasion of reporting 
requirements. 29 U.S.C. 438. The NPRM further proposed that under the 
managerial and dominance tests, where multiple unions are involved in 
the same trust, the Department will count the total number of trustees 
appointed and total amount of funds contributed by all interested 
unions together in determining whether the interested unions must each 
file a Form T-1.
    Some commenters questioned the Department's proposal to apply the 
control test collectively to multiple unions interested in the same 
trust. The policy justifications for this proposal are discussed at 
Part III, Section B of this rule. One commenter, however, specifically 
pointed to the language of LMRDA, which discusses ``trust'' in which 
``a'' labor organization is interested, as presenting a legal barrier 
to the Department's approach. Given the statutory wording, this 
commenter asserted that the control test can only be applied serially 
to each individual union interested in a given trust.
    The commenter's argument ignores the Dictionary Act: ``In 
determining the meaning of any Act of Congress, unless the context 
indicates otherwise--words importing the singular include and apply to 
several persons, parties, or things . . . .'' 1 U.S.C. 1; see, e.g., 
FDIC v. RBS Sec. Inc., 798 F.3d 244, 258 (5th Cir. 2015). The context 
here does not suggest that Congress meant the Department to only 
regulate trusts in which one labor organization has an interest, but 
not trusts in which several labor organizations have an interest, or 
that the Department can only regulate trusts with certain relationships 
to a particular labor organization while ignoring others. Union members 
in both instances have the same interest in transparency, and nothing 
else in the statutory context suggests the overly technical reading of 
the statute propounded by the commenter. See N. Ill. Serv. Co. v. 
Perez, 820 F.3d 868, 870 (7th Cir. 2016) (``Statutes and regulations 
are long enough as they are without forcing drafters to include both 
the singular and the plural every time.'').
    Further, the commenter's reading reaches a conclusion contrary to 
the language and purposes of the LMRDA. The statutory language 
concerning ``a trust in which a labor organization is interested'' in 
section 208 and the statutory definition of that terminology at section 
3(l) do not expressly limit the number of unions that might be 
interested in a single trust. Rather, they relate to the relationship 
between a given union and given trust, with no regard for exclusivity. 
Accordingly, the statute is properly read as requiring that at least 
one union must be interested in a given trust for it to be a 3(l) 
trust. Once a trust meets the definition of a 3(l) trust in this 
manner, the section 208 language provides the Secretary with authority 
to require reporting from that trust for the purpose of preventing 
circumvention or evasion of LMRDA requirements. Given this statutory 
language and purpose, the Department must use its discretion, within 
the parameters set forth by the D.C. Circuit in AFL-CIO v. Chao, to 
establish reporting requirements that are tailored to effectuating the 
LMRDA through trust reporting rules that cover all trusts where union 
dominance allows for circumvention or evasion of the LMRDA, while not 
amounting to general trust reporting. This purpose warrants a control 
test that aggregates the level of control of multiple unions interested 
in the same trust because unions could work together to circumvent or 
evade their respective LMRDA reporting obligations.
    The D.C. Circuit described this aspect of the LMRDA as ``a two part 
nexus'' for determining the extent of the Secretary's authority to 
require trust reporting. AFL-CIO v. Chao, 409 F.3d at 387. The first 
part of the nexus is that the Department must establish that a trust is 
a trust in which ``a'' labor organization is interested. But, as the 
court noted, the Secretary's authority to find coverage under the 
statutory definition is quite broad. Id. (``statutory definition of 
`trusts in which a union has an interest,' 29 U.S.C. 402(l), is 
sufficiently broad to encompass trusts that are neither financed nor 
controlled by unions'').

[[Page 13432]]

The breadth of coverage under section 402(l) makes it reasonable to 
treat a trust that is funded by multiple labor organizations the same 
as a trust funded by a labor organization. This is further demonstrated 
by the fact that, in such cases, those unions likely already report the 
trust as a trust in which they are interested on their annual Form LM-2 
reports.
    The second part of the nexus is the control test, which is not used 
to determine whether a trust is a trust in which a labor organization 
is interested, but to determine whether the trust must be reported on a 
Form T-1 in order to prevent circumvention or evasion of the reporting 
requirements. Applying this to multiple unions collectively thereby 
acts on the Court's determination in AFL-CIO v. Chao, where the D.C. 
Circuit concluded that the Secretary had shown that trust reporting was 
necessary to prevent evasion or circumvention where ``trusts [are] 
established by one or more unions with union members' funds because 
such establishment is a reasonable indicium of union control of the 
trust,'' as well as where there is some form of ``dominant union 
control over the trust's use of union members' funds or union members' 
funds constituting the trust's predominant revenues.'' 409 F.3d at 389, 
390. Accordingly, the Department's position is reasonable and in 
furtherance of the purposes of the LMRDA.
    The same commenter asserting that the control test should be 
applied serially also stated that the Department presumptively 
conflated the existence of aggregate contributions by multiple unions 
into a trust as establishing concerted effort to control a trust. The 
Department's response is that the rule properly addresses union 
dominance over trusts because once multiple unions are in a position to 
collectively control the trust, there exists a clear opportunity for 
circumvention or evasion. The Department is not obligated to prove 
case-by-case that circumvention has occurred for each and every multi-
union trust. The Department's authority to prevent circumvention or 
evasion of LMRDA reporting requirements encompasses preemptively 
closing off opportunities for one or more unions to exploit their 
financial or managerial dominance over a trust. While the Department 
can point to, and has, instances of union financial corruption with 
respect to trusts, this rule aims to prevent any future evasive and 
corrupt uses of union trusts, of any variety, as much as to address 
past instances. Thus, the clear opportunity for unions to act in 
concert is sufficient.

V. Regulatory Procedures

Paperwork Reduction Act

    This statement is prepared in accordance with the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3501 (PRA).\24\
---------------------------------------------------------------------------

    \24\ See 5 CFR 1320.9. The 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 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 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, 
which 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.'' See 5 CFR 
1320.9; 44 U.S.C. 3506(c).
---------------------------------------------------------------------------

A. Summary
    The LMRDA entitles union members to important information about 
union funds that are directed to other entities, for the members' 
benefit, when the Secretary finds that such reporting would be 
necessary to prevent the circumvention or evasion of the reporting 
requirements. See 29 U.S.C. 438. Examples include joint funds 
administered by a union and an employer pursuant to a CBA, educational 
or training institutions, and redevelopment or investment groups. The 
Form T-1 is necessary to close the information gap that exists for 
these trusts and thereby prevent certain trusts from being used to 
evade the LMRDA Title II reporting requirements, which are designed to 
provide union members with information about financial transactions 
involving a significant amount of money relative to the union's overall 
financial operations and other reportable transactions. Trust reporting 
is necessary to ensure, as intended by Congress, the full and 
comprehensive reporting of a union's financial condition and 
operations, including a full accounting to union members whose work 
obtained the payments to the trust. It is also necessary to prevent 
circumvention or evasion of the reporting requirements imposed on 
officers and employees of unions and on employers.
    Union members thus will be able to obtain a more accurate and 
complete picture of their union'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 union member or a compliance audit by an OLMS investigator.
    This rule is based upon improvements from previous efforts to 
institute the Form T-1, and this PRA analysis has been adjusted 
according to the Department's more accurate understanding of the Form 
LM-2 filers that will actually be subject to this revised Form T-1.
    The Department estimates that a maximum of 2,070 Form T-1 reports 
will be submitted annually by 810 labor organizations as a result of 
this rule. The Department derives this estimate from a review of 2018 
LM-2 reports from labor organizations that identified having a trust. 
The Department recognizes that this number of Form T-1 filers is an 
overestimation due to the Department's policy determination that only 
the parent union (i.e., the national/international or intermediate 
union) should file the Form T-1 report for covered trusts in which both 
the parent union and its affiliates meet the financial or managerial 
domination test.
    Each of these 810 labor organizations will file at least one Form 
T-1 annually. Given that the Department estimates a maximum of 2,070 
Form T-1 reports will be submitted annually, the 810 labor 
organizations will file ~2.56 reports on average.
    Based on the calculations of the 2008 Form T-1 Final Rule, 73 FR 
57436-57445, the Department estimates that, on average, labor 
organizations will expend 86.21 hours on recordkeeping the first year 
and 69.70 hours on recordkeeping each subsequent year for each Form T-1 
filed. Additionally, on average, labor organizations will expend 35.17 
hours on reporting the first year and 14.42 hours on reporting each 
subsequent year for each Form T-1 filed. Therefore, Form T-1 filers 
will spend 121.38 hours (86.21 + 35.17 = 121.38) on each T-1 report in 
the first year, and 84.12 hours (69.70 + 14.42 =

[[Page 13433]]

84.12) on each Form T-1 report in subsequent years.
    On any given report in the first year, the Form T-1 filers would 
spend approximately 121.38 hours per report (see Form T-1 
Instructions), which results in a total of 251,256.6 additional burden 
hours (121.38 x 2,070 = 251,256.6 hours). In subsequent years, T-1 
filers would spend approximately 84.12 hours per report (see Form T-1 
Instructions), which would result in 174,128.4 additional burden hours 
(84.12 x 2,070 = 174,128.4), a 30.70 percent decrease from the first 
year.
    The Department estimates that the total burden averaged over the 
first three years to comply with the Form T-1 to be 199,837.8 hours per 
year.
B. Response to Comments Received
    Some commenters claimed that the reporting burden is too high, but 
offered no reasoning as to how they reached this conclusion. Similarly, 
many commenters argued that ultimately members are disserved by the 
expenditure of union funds for the purpose of disclosure, but offered 
no argument as to why securing disclosure is not of sufficient benefit. 
While the rule has a burden, the Department believes securing much-
needed and long-awaited transparency for union members is well worth 
the burden in order to prevent embezzlement and maintain a corruption 
free labor-management relationship.
    There were also numerous comments concerned with the burden of the 
rule taking away from the funds or time these trusts provide for 
training and benefits to union members. For example, one commenter 
expressed concern at the expense trusts would sustain from coding 
credit card transactions of officers. While there is recordkeeping 
burden shared by the union and the trust, this burden analysis includes 
estimates of time for both parties, and the union will entirely 
compensate the trust for its time. As such, these concerns are 
misplaced. The costs associated with this rule are ultimately not borne 
by the trusts, but by the unions who dominate them. Thus, it is the 
recordkeeping and reporting burden of the union that is the subject of 
the burden analyses in this final rule.
    There were multiple comments relating to the accuracy of the 
burden. One commenter stated that the burden is incorrect because the 
union would have to hire outside consultants to gather trust 
information. The Department believes this commenter misunderstands the 
rule. The trust will gather all information necessary and then provide 
that information to the union, which will compensate the trust. Due to 
the financial expertise the administration of such funds require, 
trusts will overwhelmingly already have the expertise to analyze and 
provide their own information; any outside assistance should be needed 
infrequently and to a minimal extent because trusts overwhelmingly 
already possess the financial expertise necessary to administer and 
analyze their own financial records and transaction data. Thus, the 
cost would be negligible and, again, whatever part of the recordkeeping 
burden the trust would bear is ultimately compensated by the union. The 
same commenter also indicated that it seems likely that special 
software will be needed to process the trust information. This is 
incorrect. The information needed for the Form T-1 is largely similar 
to the Form LM-2. Every union that will ultimately submit a Form T-1 is 
submitting an LM-2 as well. Thus, the union will already have access to 
the necessary software. Lastly, a commenter indicated that the 
Department had only calculated the burden for each Form T-1, not for 
the total number of Form T-1s that a union would have to file, which 
could be multiple. This is incorrect. The NPRM provided both the 
individual cost of a Form T-1 ($7,226.97, as adjusted in the final 
rule) and the total average union figure ($18,513, as adjusted in the 
final rule, including the one-time regulation familiarization cost of 
$11.90, as adjusted in the final rule). The total figure is the cost 
for a single Form T-1 multiplied by the average number of Form T-1s for 
unions that have at least one trust in which a union is interested 
(2.56 Form T-1s). This figure is an overestimation. It does not take 
into account the audit exemption, for example, which will lower the 
average number of Form T-1s even further. It also does not account for 
duplicative filings; many of these unions are part of trusts for which 
a parent organization, or another union involved in the arrangement, 
will file the Form T-1, thus freeing those other unions from also 
filing for that year. Furthermore, the LM-2 filers with the most 
trusts, many of which will meet the Form 5500 exemption and others 
which may meet the audit exemption, are the largest LM-2 filing unions, 
namely district councils, national/international parent bodies, and 
very large locals. Thus, the scenario one commenter contemplates of 
labor organizations mired in hundreds of burden hours with no benefit 
to their respective members is likewise incorrect. The Department has 
carefully selected its exemptions, reviewed its Form LM-2 filer data, 
and ensured that the average experience of labor organizations, and the 
expense they will endure, do not constitute a substantial burden.
    Some commenters argued that the burden on trusts extends beyond 
financial and to the time and effort taken away from helping 
beneficiaries and participants. Initially, the Department has 
quantified those aspects of reporting and recordkeeping associated with 
the Form T-1, and none of the commenters provided concrete alternative 
estimates. Further, as explained, the Department has refuted the 
critiques of such estimates. Moreover, even to the extent that the Form 
T-1 would prevent the trust from serving beneficiaries, the amount of 
time required is minimal, and, in any event, the Department considers 
the transparency benefits to outweigh the costs. Indeed, if the Form T-
1 helps prevent or deter the potential loss of millions of dollars of 
plan funds like in the UAW-Fiat Chrysler training center scandal, then 
this would clearly justify marginal burdens.
    Finally, as noted by multiple members of Congress, the Department 
has narrowly tailored the Form T-1, reducing the burden to a mere 
$7,226.97 (as adjusted for the final rule) a year and requiring only 
the largest labor organizations with significant stakes in trusts to 
carry such a burden. These unions have a correspondingly large 
membership that will finally gain transparency into the trusts 
providing them with vitally important training and benefits. Thus, the 
Department concludes that, as another commenter stated, the burden is 
fair for the labor organizations that deemed it necessary to divert 
funds to trusts either for legitimate purposes or as potential vehicles 
for evasion of LM reporting.
    The NPRM discussed the recordkeeping and reporting burden that 
unions will bear in complying with this rule. The NPRM also provided a 
monetary estimate of this burden as legally required by the RFA and 
PRA. The Department's position in this Final Rule and in the NPRM is 
that there will be a burden on unions created by the rule but that it 
will be outweighed and thereby justified by the benefits of the rule.
    Some commenters expressed concern that some labor organizations 
would incur significant costs in complying with the reporting 
requirements of the Form T-1. These commenters speculated that a given 
labor organization might need to pay for

[[Page 13434]]

training, develop new recordkeeping processes, purchase new software, 
or even hire expert consultants in order to complete the Form T-1.
    The Department recognizes the possibility of increased costs for 
some unions that would be obligated to file under this rule. In fact, 
in the RFA section of this final rule the Department has built these 
costs into its estimation of the rule's total burden. The Department 
has accordingly designed the rule such that these costs will be small 
and will be outweighed by the substantial benefits of Form T-1 
reporting. For example, the Department has restricted the reporting 
obligation to unions with more than $250,000 in annual receipts (i.e., 
only those unions that file the LM-2 based on size). This measure 
ensures that only unions that already have significant resources and 
sufficient financial sophistication will file the Form T-1. The 
Department has sufficient experience with the Form LM-2 and the unions 
that file it to know they are equipped to provide essentially the same 
types of information with the same level of detail for the trusts in 
which they are interested.
C. Hours To Complete and File Form T-1
    The Department modeled its current analysis on the analysis in the 
2008 Form T-1 final rule. The Department estimates 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 this rule. See 73 FR 57436-57445.
    The Department estimates that, on average, labor organizations will 
expend 1.83 reporting hours each year completing page one of the Form 
T-1. 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 questions 9, 14, and 15; provide addition 
information (if necessary); and sign the report. The labor 
organization's information should 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 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, LM-3 filers spend approximately 5 minutes on each 
item and question 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 answering the 3 yes/no questions. If additional 
information is required, the Department has determined that the labor 
organization should be able to fill out the mailing address for the 
records of the trust and labor organization 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 signature software setup 
for the LM-2. In most cases, it will be a matter of pressing a button 
to apply the signature.
    There is no unique recordkeeping burden associated with the first 
page of the Form T-1. Under the LMRDA, and pursuant to the Form LM-2 
Instructions, Part XI (Completing Form LM-2), Item 10 (Trusts or Funds, 
the labor organization should already keep records on itself and trusts 
in which it is interested to complete the Form LM-2, including the 
trust's name, address, purpose, and EIN.\25\ Further, neither the trust 
nor the labor organization will have to make any changes to its 
accounting systems to report the information required on page 1 of the 
Form T-1.
---------------------------------------------------------------------------

    \25\ The proposed rule contained a typographical error. On the 
Form T-1, as reproduced the Federal Register, Item 11 asks for the 
``Tax Status of the Trust.'' 84 FR 25150. In contrast, the 
Instructions provide, ``Enter the Employer Identification Number 
assigned to the trust by the Internal Revenue Service.'' Id. at 
25,162. A commenter asserted difficulty in calculating the burden 
when it is unclear which piece of data is being sought. The 
Department calculated the burden on the assumption that the filer 
would be entering the trust's Employer Identification Number. The 
error did not prevent meaningful comment on Item 11, or its 
commensurate burden, because both alternatives were made public, 
permitting comment on the burden of either alternative.
---------------------------------------------------------------------------

    The Department estimates that, on average, labor organizations will 
expend 1.33 reporting hours each year completing page two of the Form 
T-1. The labor organization will have to train new staff, answer five 
questions, enter the total assets and liabilities, and enter additional 
information as necessary. Like the first page of the Form T-1, the 
second page of the Form T-1 is relatively straight forward. The 
Department has determined that labor organizations can train staff to 
complete the second page of the Form T-1 in 15 minutes. The majority of 
the reporting burden is attributable to questions 16 through 20. 
Although rare, the types of losses and transactions captured by 
questions 16 through 20 are of significant importance to both labor 
organizations and trusts. Each of these losses or transactions is 
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 easily to identify and provide details on any loss 
or transaction that falls within questions 16 through 20. The 
Department estimates that the trust should be able to provide the labor 
organization with answers to questions 16 through 20 in 25 minutes, 5 
minutes per question. Further, the Department estimates that the labor 
organization will spend approximately 30 minutes entering the details 
of the transaction or loss in item 25. Finally, the Department 
estimates that it will take 10 minutes to find and enter the total 
assets and liabilities in items 21 and 22.
    There is no recordkeeping burden associated with the second page of 
the Form T-1. The answers to questions 16 through 20 are tracked by the 
trust along with receipts and disbursements. Therefore, the 
recordkeeping burden associated with questions 16 through 20 has been 
included in the recordkeeping burden for the receipts and disbursements 
schedules. 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, 
will be automatically calculated and entered by the reporting software.
    Trusts are already tracking most receipts, disbursements, and 
payments to officers and employees in the regular course of business, 
but it is unlikely they are tracking the information in the detail or 
structure required by Form T-1 reporting. Therefore, covered 3(l) 
trusts will have to change their accounting systems to track the 
necessary information in a format that can be provided to the 
interested labor organization to complete the Form T-1. 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, T-1 
respondents will expend 9.75 (of nonrecurring burden) hours developing, 
testing, and reviewing revisions to the account software; preparing the 
download methodology; and training personnel on each of the schedules.

[[Page 13435]]

    The Form 5500 exemption significantly reduces the variability of 
3(l) trusts covered by the Form T-1. A careful analysis of the 
remaining trusts, used in the analysis above, indicates that most of 
the Form T-1s will be filed for building trusts, strike funds, labor-
management cooperation committees, 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, similar to the 2008 rule, the 
Department uses the Form LM-2 experience to estimate the number of 
disbursements, receipts, officers, and employees listed on the Form T-
1.
    In terms of recordkeeping, 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. Additionally, for the Form T-1 disbursement schedule, the 
Department estimates that, on average, filers will expend 54.13 hours a 
year on recordkeeping. Further, 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.
    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 rulemakings 
indicates that a labor organization 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.
    Therefore, the Department estimates that, on average, labor 
organizations will expend 86.21 hours on recordkeeping the first year 
and 69.70 hours on recordkeeping each subsequent year on each Form T-1 
filed. Additionally, on average, labor organizations will expend 35.17 
hours on reporting the first year and 14.42 hours on reporting each 
subsequent year on each Form T-1 filed. Therefore, Form T-1 filers will 
spend 121.38 hours (86.21 + 35.17 = 121.38) on each T-1 report in the 
first year, and 84.12 hours (69.70 + 14.42 = 84.12) on each T-1 report 
in subsequent years.
D. Estimated Number of Form T-1 Reports
    The following charts were used to calculate the various figures 
necessary to do the above calculations.
    The first chart (Table 1) generated the total number of Form T-1s 
by averaging the known number of Form T-1s that would be generated in 
the top 10 percent and bottom 10 percent of Form LM-2 filers with at 
least one (1) trust.
    The second chart (Table 2) generated the actual number of Form T-1 
filers by averaging out the number of Form T-1 filers that exist in the 
top 10 percent and bottom 10 percent of Form LM-2 filers with at least 
one (1) trust.
    The final chart (Table 3) generated the average number of Form T-1s 
that would be filed per Form T-1 filer in each decile and overall.

                                  Table 1--Total Number of Form T-1s by Decile
----------------------------------------------------------------------------------------------------------------
           Decile of LM-2s with at least 1 3(l) trust                Formula *       Variable     Number of T-1s
----------------------------------------------------------------------------------------------------------------
10 (Top 10%)....................................................               Y               Y             330
9...............................................................       (W + Y)/2  ..............          299.25
8...............................................................       (Z + Y)/2               W           268.5
7...............................................................       (W + Z)/2  ..............          237.75
6...............................................................       (X + Y)/2               Z             207
5...............................................................       (X + Y)/2               Z             207
4...............................................................       (T + Z)/2  ..............          176.25
3...............................................................       (Z + X)/2               T           145.5
2...............................................................       (T + X)/2  ..............          114.75
1 (Bottom 10%)..................................................               X               X              84
                                                                 -----------------------------------------------
    Total.......................................................  ..............  ..............            2070
----------------------------------------------------------------------------------------------------------------
* These formulae represent the process by which the Department calculated the average number of T-1 reports
  likely to be produced in each decile. X and Y were not calculations; these variables were figures determined
  from extensive, time-consuming reviews of all LM-2 filers with trusts in the bottom and top deciles by annual
  revenue size, respectively. Decile 5 and 6, being the middle deciles, were represented by a simple arithmetic
  mean, averaging X and Y together to find Z, the average number of T-1 reports in those deciles.

    Given the divide in the number of T-1 reports between the top 
decile consisting of the largest LM-2 filers and the bottom consisting 
of the smallest, namely that the top decile has over twice as many T-1 
reports likely to be filed as the bottom decile, the Department assumes 
that using the simple arithmetic mean Z to represent the number of T-1 
reports by decile would misrepresent the number of reports in those 
deciles. Z would be an overestimation of reports in the lower deciles 
and an underestimation in the top deciles. Instead, in order to 
represent the gradual decline in T-1 reports that is expected in each 
decile, and thus represent the number of T-1 reports generated in each 
decile more accurately, the Department calculated the average of Z & Y 
and then the average of Z & X in order to calculate W and T, 
respectively, where W is the number of T-1 reports expected for the 
middle decile in the top deciles (Decile 8) and T is the middle decile 
in the bottom deciles (Decile 3).
    With W and T, the remaining deciles were determined. The number of 
T-1 reports for Decile 9 was calculated by averaging Y (the number of 
T-1 reports in Decile 10) and W (the number of T-1 reports in Decile 
8). Decile 7 by averaging W (the number of T-1 reports in Decile 8) and 
Z (the number of T-1 reports in Decile 6). Decile 4 by averaging Z (the 
number of T-1 reports in Decile 5) and T (the number of T-1 reports in 
Decile 3). Decile 2 by averaging T (the number of T-1 reports in Decile 
3) and X (the number of T-1 reports in Decile 1).

[[Page 13436]]



                              Table 2--Number of Unions Filing at Least 1 Form T-1
----------------------------------------------------------------------------------------------------------------
                                                                                                     Number of
           Decile of LM-2s with at least 1 3(l) trust                Formula *       Variable      unions filing
                                                                                                  at least 1 T-1
----------------------------------------------------------------------------------------------------------------
10 (Top 10%)....................................................               Y               Y             100
9...............................................................       (W + Y)/2  ..............           95.25
8...............................................................       (Z + Y)/2               W            90.5
7...............................................................       (W + Z)/2  ..............           85.75
6...............................................................       (X + Y)/2               Z              81
5...............................................................       (X + Y)/2               Z              81
4...............................................................       (T + Z)/2  ..............           76.25
3...............................................................       (Z + X)/2               T            71.5
2...............................................................       (T + X)/2  ..............           66.75
1 (Bottom 10%)..................................................               X               X              62
                                                                 -----------------------------------------------
    Total.......................................................  ..............  ..............             810
----------------------------------------------------------------------------------------------------------------
* These formulae represent the process by which the Department calculated the average number of labor
  organizations filing at least 1 (one) T-1 report in each decile. X and Y were not calculations; these
  variables were figures determined from extensive, time-consuming reviews of all LM-2 filers with trusts in the
  bottom and top deciles by annual revenue size, respectively. Decile 5 and 6, being the middle deciles, were
  represented by a simple arithmetic mean, averaging X and Y together to find Z, the average number of unions
  filing at least 1 (one) T-1 report in those deciles.

    Given the divide in the number of labor organizations filing at 
least 1 (one) T-1 report between the top decile consisting of the 
largest LM-2 filers and the bottom consisting of the smallest, namely 
that the top decile has nearly twice as many labor organizations likely 
to file a T-1 report as the bottom decile, the Department assumes that 
using the simple arithmetic mean Z to represent the number of labor 
organizations likely to file a T-1 report in the remaining deciles 
would significantly misrepresent the number of such organizations 
likely in those deciles. Z would be an overestimation of labor 
organizations in the lower deciles and an underestimation in the top 
deciles. Instead, in order to represent the gradual decline in labor 
organizations filing at least 1 (one) T-1 report that is expected in 
each decile, and thus represent the number of labor organizations 
filing the T-1 report in each decile more accurately, the Department 
calculated the average of Z & Y and then the average of Z & X in order 
to calculate W and T, respectively, where W is the number of labor 
organizations filing the T-1 report expected for the middle decile in 
the top deciles (Decile 8) and T is the number of such labor 
organizations for the middle decile in the bottom deciles (Decile 3).
    With W and T, the remaining deciles were determined. The number of 
labor organizations filing at least 1 (one) T-1 report for Decile 9 was 
calculated by averaging Y (the number of such labor organizations in 
Decile 10) and W (the number of such labor organizations in Decile 8). 
Decile 7 by averaging W (the number of such labor organizations in 
Decile 8) and Z (the number of such labor organizations in Decile 6). 
Decile 4 by averaging Z (the number of such labor organizations in 
Decile 5) and T (the number of such labor organizations in Decile 3). 
Decile 2 by averaging T (the number of such labor organizations in 
Decile 3) and X (the number of such labor organizations in Decile 1).

                    Table 3--Number of Form T-1 Reports per Union Filing at Least 1 Form T-1
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Average
                                                                   Number of  T-   unions filing   number of  T-
   Decile of LM-2s with at least 1 3(l) trust        Formula *          1s        at least 1  T-   1s per union
                                                                                         1              **
----------------------------------------------------------------------------------------------------------------
10 (Top 10%)....................................         X/Y = Z             330             100             3.3
9...............................................         X/Y = Z          299.25           95.25            3.14
8...............................................         X/Y = Z           268.5            90.5            2.97
7...............................................         X/Y = Z          237.75           85.75            2.77
6...............................................         X/Y = Z             207              81            2.56
5...............................................         X/Y = Z             207              81            2.56
4...............................................         X/Y = Z          176.25           76.25            2.31
3...............................................         X/Y = Z           145.5            71.5            2.03
2...............................................         X/Y = Z          114.75           66.75            1.72
1 (Bottom 10%)..................................         X/Y = Z              84              62            1.35
                                                 ---------------------------------------------------------------
    Total.......................................  ..............            2070             810        *** 2.56
----------------------------------------------------------------------------------------------------------------
* = Where ``X'' represents the Number of Form T-1s, ``Y'' represents the Number of Unions Filing at Least 1 Form
  T-1, and Z represents the Average number of Form T-1s per Union.
** = Rounded to the Nearest 100th.
*** = This represents the overall average number of reports Form T-1 filers must file.

    As this Form T-1 rule requires an information collection, the 
Department is submitting, contemporaneous with the publication of this 
rule, an information collection request (ICR) to revise the Paperwork 
Reduction Act clearance to address the clearance term. The ICR includes 
a new form, the Form T-1, which the Department has drafted and that LM-
2 filing labor organizations must complete and submit, consistent with 
this rule. The ICR also contains

[[Page 13437]]

corresponding changes to the Form LM-2 Instructions, Part XI 
(Completing Form LM-2), Item 10 (Trusts or Funds). A copy of this ICR, 
with applicable supporting documentation, including among other items a 
description of the likely respondents, frequency of response, and 
estimated total burden may be obtained free of charge from the 
RegInfo.gov website at http://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201903-1245-001 (this link will be updated following 
publication of this rule) or from the Department by contacting Andrew 
Davisat 202-693-0123 (this is not a toll-free number)/email: [email protected].
    Type of Review: Revision of a currently approved collection.
    Agency: Office of Labor-Management Standards.
    Title: Labor Organization and Auxiliary Reports.
    OMB Number: 1245-0003.
    Affected Public: Private Sector--businesses or other for-profits 
and not-for-profit institutions.
    Total Estimated Number of Responses: 33,571.
    Frequency of Response: Varies.
    Estimated Total Annual Burden Hours: 4,754,242.
    Estimated Total Annual Other Burden Cost: $0.

Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Review)

    Under Executive Order (E.O.) 12866, the Office of Management and 
Budget (OMB)'s Office of Information and Regulatory Affairs (OIRA) 
determines whether a regulatory action is significant and, therefore, 
subject to the requirements of the E.O. and OMB review.\26\ Section 
3(f) of E.O. 12866 defines a ``significant regulatory action'' as an 
action that is likely to result in a rule that (1) has an annual effect 
on the economy of $100 million or more, or adversely affects in a 
material way a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local or tribal 
governments or communities (also referred to as economically 
significant); (2) creates serious inconsistency or otherwise interferes 
with an action taken or planned by another agency; (3) materially 
alters the budgetary impacts of entitlement grants, user fees, or loan 
programs, or the rights and obligations of recipients thereof; or (4) 
raises novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the E.O. OMB has 
determined that this rule is significant under section 3(f) of E.O. 
12866. Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
OIRA has designated this rule as not a `major rule', as defined by 5 
U.S.C. 804(2).
---------------------------------------------------------------------------

    \26\ See 58 FR 51735 (September 30, 1993).
---------------------------------------------------------------------------

    E.O. 13563 directs agencies to propose or adopt a regulation only 
upon a reasoned determination that its benefits justify its costs; the 
regulation is tailored to impose the least burden on society, 
consistent with achieving the regulatory objectives; and in choosing 
among alternative regulatory approaches, the agency has selected those 
approaches that maximize net benefits. E.O. 13563 recognizes that some 
benefits are difficult to quantify and provides that, where appropriate 
and permitted by law, agencies may consider and discuss qualitatively 
values that are difficult or impossible to quantify, including equity, 
human dignity, fairness, and distributive impacts.
A. Costs of the Form T-1 for Labor Organizations
    The Form T-1 will be filed by Form LM-2 filing labor organizations 
with trusts that meet the dominance test, if those labor organizations 
are not otherwise exempted from filing. Using data from LM-2 filings, 
the Department estimates that there are at least 810 total affected 
labor organizations (i.e., LM-2 filers with trusts for which they must 
submit at least 1 Form T-1). The average form LM-2 filer will spend 
approximately 121.38 hours on average in the first year, and 84.12 
hours each subsequent year to fill out the report.\27\ The average 
hourly wage for Form T-1 filers, as with Form LM-2 filers, includes: 
$37.89 for an accountant, $20.25 for a bookkeeper or clerk, $25.15 for 
a Form LM-2 filing union secretary-treasurer or treasurer, and $29.21 
for the Form LM-2 filing president, respectively.\28\ The weighted 
average hourly wage is $36.53.\29\ To account for fringe benefits and 
overhead costs, as well as any other unknown costs or increases in the 
wage average, the average hourly wage has been multiplied by 1.63, so 
the fully loaded hourly wage is $59.54 ($36.53 x 1.63 = $59.54).\30\
---------------------------------------------------------------------------

    \27\ For more details, see the Paperwork Reduction Act section 
above.
    \28\ Wage rates are derived from 2018 data; more specifically, 
the president and treasurer wage rates are determined from FY 19 
Form LM-2 report filings, while the accountant and bookkeeper wage 
rates come from 2018 Bureau of Labor Statistics (BLS) data available 
at: https://www.bls.gov/oes/2018/may/oes_nat.htm.
    \29\ The weighted average calculates the wage rate per hour 
weighted according to the percentage of time that the Form T-1's 
completion will demand of each official/employee: 90 percent of the 
Form T-1 burden hours will be completed by an accountant, 5 percent 
by the bookkeeper, 4 percent by the union's treasurer/secretary-
treasurer, and 1 percent by the union president.
    \30\ The use of 1.63 accounts for 17 percent for overhead and 46 
percent for fringe. In the case of the 46 percent for fringe, see 
the following link to BLS data showing that wages and salaries 
represent 68.6 percent (.686) of compensation (https://www.bls.gov/news.release/ecec.t02.htm). Dividing total compensation by the 68.6 
percent represented by wages and salaries is equivalent to a 1.46 
multiplier. Adding a 17 percent multiplier (.17) for overhead equals 
1.63.
---------------------------------------------------------------------------

    During the first year, the cost for each T-1 filer to complete a 
Form T-1 is estimated to be $7,226.97 ($59.54 x 121.38 hours = 
$7,226.97). This number, however, should be multiplied by the average 
number of reports that each Form T-1 filer will be responsible for 
(2.56), for a total of $18,501. In subsequent years, the cost for each 
Form T-1 filer would be $12,822 (2.56 x 84.12 x 59.54 = $12,822).
    Regulatory familiarization costs represent direct costs to Form LM-
2 labor organizations associated with reviewing the new regulation to 
see if it applies to them. The Department calculated this cost by 
multiplying the estimated time to review the rule by the hourly 
compensation of the president of the Form LM-2 filing labor 
organization. Using the same fringe benefit and overhead costs 
rationale as above, the fully loaded hourly wage for the president is 
$47.61 ($29.21 x 1.63 = $47.61). The Department estimates that the 
president of each labor organization will spend 15 minutes to review 
the rule. Therefore, this rule should have a one-time regulation 
familiarization cost of $11.90 per filer (0.25 hours x $47.61 = $11.90) 
included as well. Doing so brings the first year costs per filer to 
$18,513 ($18,501 + $11.90 = $18,513).
    Thus, the total annual cost in the first year for all 810 Form T-1 
filers is estimated to be $14,995,530 (810 x $18,513 = $14,995,530), 
and the total annual cost in subsequent years is estimated to be 
$10,385,820 (810 x $12,822 = $10,385,820).
    The one-time familiarization cost for all remaining 1,199 Form LM-2 
filing labor organizations with trusts (2,009 LM-2 filers with trusts 
minus the 810 T-1 filers that are already accounted for = 1,199), for 
whom this rule does not apply, is estimated to be $14,271 ($47.61 x 
1,199 LM-2 filers with trusts x .25 hours = $14,271) in the first year.
B. Summary of Costs
    The total expected first-year costs would be $15,009,801 
($14,995,530 + $14,271 = $15,009,801). In subsequent years, the total 
cost would be $10,385,820. The 10-year annualized cost is expected to 
be $10,285,704 at a

[[Page 13438]]

3 percent discount rate and $9,608,788 at a 7 percent discount rate. As 
required under E.O. 13771, the annualized perpetual cost in 2016 
dollars at a 7 percent discount rate is expected to be $7,826,522.
C. Benefits
    As explained more fully in the preamble to this final rule, the 
Department has promulgated this rule in order to prevent the 
circumvention or evasion of the LMRDA reporting requirements, which 
Congress created as part of its efforts to ``eliminate or prevent 
improper practices'' in labor organizations, protect the rights and 
interests of workers, and prevent union corruption. 29 U.S.C. 401(b), 
(c). Specifically, to curb embezzlement and other improper financial 
activities of labor organizations, Congress required labor 
organizations to file detailed annual financial reports with the 
Secretary of Labor, which must also be made available to labor 
organization members. 29 U.S.C. 431(b). The reporting provisions of the 
LMRDA were devised to safeguard democratic procedures within labor 
organizations and protect the basic democratic rights of union members. 
By mandating that labor organizations disclose their financial 
operations to employees they represent, Congress intended to promote 
labor organization self- government, which would be advanced by labor 
organization members receiving sufficient information to permit them to 
take effective action in regulating internal union affairs. This final 
rule would ensure that those reporting obligations are not evaded and 
thus expand the benefits of labor organization financial transparency 
to the members of all Form LM-2 filing labor organizations that utilize 
trusts to expend funds for the members' benefit.
    Recent cases of corruption and the continued potential for 
corruption within those trusts only confirms the Department's 
determination that additional financial reporting is necessary to avoid 
the type of circumvention and evasion that Congress authorized him to 
prevent. As recognized in the LMRDA, private sector labor organization 
members and the public have an interest in how labor organizations 
spend their member dues or employer funds through a CBA for their 
benefit. This interest is no less great when the money is expended by a 
trust rather than the labor organization directly. Extending LMRDA 
reporting requirements to bring additional transparency to the 
activities of section 3(l) trusts serves the public interest in 
disclosure and financial integrity.

Final Regulatory Flexibility Analysis

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objectives of the rule and of applicable 
statutes, to fit regulatory and informational requirements to the scale 
of the business, organizations, and governmental jurisdictions subject 
to regulation.'' Public Law 96-354. To achieve that objective, the RFA 
requires agencies promulgating final rules to prepare a certification 
and a statement of the factual basis supporting the certification, when 
drafting regulations that will not have a significant economic impact 
on a substantial number of small entities. The RFA requires the 
consideration of the impact of a regulation on a wide range of small 
entities, including small businesses, not-for-profit organizations, and 
small governmental jurisdictions.
    Agencies must perform a review to determine whether a proposed or 
final rule would have a significant economic impact on a substantial 
number of small entities. See 5 U.S.C. 603. If the determination is 
that it would, the agency must prepare a regulatory flexibility 
analysis as described in the RFA. Id. However, if an agency determines 
that a proposed or final rule is not expected to have a significant 
economic impact on a substantial number of small entities, section 
605(b) of the RFA provides that the head of the agency may so certify 
and a regulatory flexibility analysis is not required. See 5 U.S.C. 
605. The certification must include a statement providing the factual 
basis for this determination, and the reasoning should be clear.
    According to the Small Business Administration, organizations under 
NAICS 813930 are considered small entities if they have average annual 
receipts of less than $8 million.\31\ For this analysis, based on 
previous standards utilized in other regulatory analyses, the threshold 
for significance is 3% of annual receipts, while a substantial number 
of small entities would be 20 percent.
---------------------------------------------------------------------------

    \31\ See https://www.sba.gov/document/support--table-size-
standards.
---------------------------------------------------------------------------

    The Department conducted an initial regulatory flexibility analysis 
at the NPRM stage to aid stakeholders in understanding the small entity 
impacts of this rule and to obtain additional information on the small 
entity impacts. The Department invited interested persons to submit 
comments on the number of small entities affected by the proposed 
rule's requirements, the compliance cost estimates, and whether 
alternatives existed that would reduce the burden on small entities.
    All numbers used in the analysis were based on 2018 data taken from 
the Office of Labor-Management Standards e.LORS data base, which 
contains records of all labor organizations that have filed LMRDA 
reports with the Department and Bureau of Labor Statistics wage data.
(1) Reasons for and Objectives of the Form T-1 Rulemaking
    As explained more fully in the preamble to today's rule, the 
Department is considering this rule as a means to prevent circumvention 
or evasion of the reporting requirements established by Congress in the 
LMRDA to ``eliminate or prevent improper practices'' in labor 
organizations, protect the rights and interests of workers, and prevent 
labor organization corruption. 29 U.S.C. 401(b), (c), 431(b). These 
reporting provisions of the LMRDA were intended to safeguard democratic 
procedures within labor organizations and protect the basic democratic 
rights of union members. Recent cases of corruption have highlighted 
the potential for circumvention and evasion of these requirements 
through the use of section 3(l) trusts. The Form T-1 will prevent such 
evasion and thereby enable labor organization members to be 
responsible, informed, and effective participants in the governance of 
their labor organizations; discourage embezzlement and financial 
mismanagement; and strengthen the effective and efficient enforcement 
of the Act by the Department.
    The Form T-1 is specifically designed to close a reporting gap 
where labor organization finances related to LMRDA section 3(l) trusts 
were not disclosed to members, the public, or the Department. The Form 
T-1 would 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, ostensibly for the members' benefit, such 
as joint funds administered by a labor organization and an employer 
pursuant to a CBA, educational or training institutions, and 
redevelopment or investment groups. See 67 FR 79285. The Form T-1 is 
necessary to close this gap and prevent certain trusts from being used 
to evade the Title II reporting requirements. It will provide labor 
organization members with information about financial transactions 
involving a

[[Page 13439]]

significant amount of money relative to the labor organization's 
overall financial operations and other reportable transactions. 68 FR 
58415. For example, the Form T-1 will also 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 then be able to 
determine whether the business and the labor organization official have 
made required reports concerning that relationship. This rule thus 
serves the fundamental purpose of the LMRDA disclosure requirements to 
prevent financial malfeasance on the part of those handling labor 
organization money. 67 FR 79282-83.
    Congress enacted the LMRDA after an extensive investigation of 
``the labor and management fields . . . [found] that there ha[d] 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 . . . .'' 29 U.S.C. 
401(b). Congress intended the Act to ``eliminate or prevent improper 
practices'' in labor organizations, to protect the rights and interests 
of employees, and to prevent union corruption. 29 U.S.C. 401(b), (c).
    As part of the statutory scheme designed to accomplish these goals, 
the Act required labor organizations to file annual financial reports 
with the Secretary of Labor. 29 U.S.C. 431(b). Congress sought full and 
public disclosure of a labor organization's financial condition and 
operations in order to curb embezzlement and other improper financial 
activities by union officers and employees. See S. Rep. No. 86-187 
(1959), reprinted in 1 NLRB, Legislative History of the Labor-
Management Reporting and Disclosure Act of 1959, at 398-99.
    The legal authority for this rule is section 208 of the LMRDA, 29 
U.S.C. 438. Section 208 provides that the Secretary of Labor shall have 
authority to issue, amend, and rescind rules and regulations 
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 he 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.''
(2) Comments From the Public Regarding the RFA
    There were no comments submitted by the public about the RFA. 
However, as indicated in the PRA section above, the Department received 
comments on burden, generally, and responded to those comments.
(3) Comments From the Chief Counsel for Advocacy of the Small Business 
Administration
    There were no comments submitted from the Chief Counsel for 
Advocacy of the Small Business Administration.
(4) Estimates Regarding the Number of Small Entities to Which the Rule 
Will Apply
    For this analysis, a small union is defined as one in which annual 
receipts are less than $8 million dollars. This final rule impacts 
2,009 labor organizations at least $250,000 in size by annual receipts, 
with at least one trust, resulting in approximately 2,070 Form T-1 
reports. Of these organizations, 1,667 have annual receipts less than 
$8 million. The data cited for the following calculations came from a 
query of the Department's database containing all submitted 2018 Form 
LM-2 union financial disclosure reports. The query asked for all Form 
LM-2 filers with at least one trust. It returned a list of each such 
filer along with various discrete informational fields, including each 
Form LM-2 filer's annual receipts information, which was used to 
identify all of the Form LM-2 filers with less than $8 million in 
annual receipts that inform this RFA analysis.
(5) The Projected Reporting and Recordkeeping Costs and Requirements
    This rule requires that labor organizations subject to the LMRDA, 
the CSRA, or the FSA, as well as labor organizations representing 
employees of the U.S. Postal Service, with total annual receipts of 
$250,000 or more, must file Form T-1 each year for each trust in which 
it is interested, as defined in the LMRDA at 29 U.S.C. 402(l), if the 
following conditions exist:
    The labor organization alone, or in combination with other labor 
organizations, either:
     Appoints or selects a majority of the members of the 
trust's governing board; or
     contributes greater than 50% of the trust's receipts 
during the one-year reporting period.
    The average hourly wage of the parties filing both the Form LM-2 
and Form T-1 include: $37.89 for an accountant, $20.25 for a bookkeeper 
or clerk, $25.15 for a secretary-treasurer or treasurer, and $29.21 for 
the president, respectively.\32\ The weighted average hourly wage for 
Form LM-2 filers is $36.53.\33\ To account for fringe benefits and 
overhead costs, as well as any other unknown costs or increases in the 
wage average, the average hourly wage has been doubled, so the fully 
loaded hourly wage is $59.54 ($36.53 x 1.63 = $59.54).\34\
---------------------------------------------------------------------------

    \32\ See Regulatory Impact Analysis above.
    \33\ See Regulatory Impact Analysis above.
    \34\ See Regulatory Impact Analysis above.
---------------------------------------------------------------------------

    As discussed in the regulatory impact analysis above, the average 
cost per respondent to complete the Form T-1 is $18,513 in the first 
year, and is $12,822 in each subsequent year. As mentioned earlier, for 
this analysis, a small union is defined as one in which annual receipts 
are less than $8 million dollars.
    A threshold of 3 percent of revenues has been used in prior 
rulemakings for the definition of significant economic impact. See, 
e.g., 79 FR 60634 (October 7, 2014, Establishing a Minimum Wage for 
Contractors) and 81 FR 39108 (June 15, 2016, Discrimination on the 
Basis of Sex). This threshold is also consistent with thresholds used 
by other agencies. See, e.g., 79 FR 27106 (May 12, 2014, Department of 
Health and Human Services rule stating that, under its agency 
guidelines for conducting regulatory flexibility analyses, actions that 
do not negatively affect costs or revenues by more than three percent 
annually are not economically significant). The Department believes 
that its use of a 3 percent of revenues significance criterion is 
appropriate.
    The Department believes that its use of a 20 percent of affected 
small business entities substantiality criterion is appropriate given 
prior rulemakings.
    There are only 315 LM-2 filers with at least one trust whose annual 
receipts were small enough that the Form T-1 costs would amount to more 
than a 3 percent impact. The largest of the 315 had annual receipts of 
$614,813 for a 3.01 percent impact. The smallest of the filers had 
$253,475 in annual receipts for an 7.30 percent impact.
    Under this rule 315 unions would have costs representing more than 
3 percent of their annual receipts (at most 7.30 percent). The rule 
thus impacts 18.90 percent of small business entities in the first 
year. In all subsequent years, the percentage of small entities 
significantly impacted is 8.94 percent (149 out of 1,667 small 
entities).

[[Page 13440]]



                                                  Significant Impact on Small Unions in the First Year
                                                               [$8 Million size standard]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            # of small      % of small
                                            # of small      Avg. annual    Avg. T-1 rule  Burden as % of    % of small    unions subject  unions subject
           Size (by receipts)                 unions         receipts       burden per        annual          unions      to significant  to significant
                                             affected                          union         receipts        affected        impact *        impact **
--------------------------------------------------------------------------------------------------------------------------------------------------------
$5M-$8M.................................             164      $6,266,111         $18,513            0.30            9.84               0  ..............
$2.5M-$4.99M............................             377       3,542,277          18,513            0.52           22.62               0  ..............
$1M-$2.49M..............................             543       1,642,769          18,513            1.13           32.57               0  ..............
$500K-$999,999..........................             368         740,459          18,513            2.50           22.08             100  ..............
$250K-$499,999..........................             215         380,192          18,513            4.87           12.90             215  ..............
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................           1,667  ..............  ..............  ..............             100             315           18.90
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The Revenue test for significant impact on small unions is set at 3% for this rule.
** The standard for substantial number is set at 20% of small unions overall for this rule.


                                                 Significant Impact on Small Unions in Subsequent Years
                                                               [$8 Million size standard]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            # of small      % of small
                                            # of small      Avg. annual    Avg. T-1 rule  Burden as % of    % of small    unions subject  unions subject
           Size (by receipts)                 unions         receipts       burden per        annual          unions      to significant  to significant
                                             affected                          union         receipts        affected        impact *        impact **
--------------------------------------------------------------------------------------------------------------------------------------------------------
$5M-$8M.................................             164      $6,266,111         $12,822            0.20            9.84               0  ..............
$2.5M-$4.99M............................             377       3,542,277          12,822            0.36           22.62               0  ..............
$1M-$2.49M..............................             543       1,642,770          12,822            0.78           32.57               0  ..............
$500K-$999,999..........................             368         740,460          12,822            1.73           22.08               0  ..............
$250K-$499,999..........................             215         380,192          12,822            3.37           12.90             149  ..............
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................           1,667  ..............  ..............  ..............             100             149            8.94
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The Revenue test for significant impact on small unions is set at 3% for this rule.
** The standard for substantial number is set at 20% of small unions overall for this rule.

(6) Considerations of Significant Alternatives to the Rule
    The Department's NPRM proposed and invited comments on three 
regulatory alternatives: (1) No regulatory action, (2) a similar 
proposal, but with a modified test for when a Form T-1 is required for 
a given 3(l) trust, and (3) a similar proposal, but modifying the Form 
T-1 in order to reduce its scope. In shaping this final rule, the 
Department did not find any public comments that warranted taking any 
of the three alternative paths from the NPRM. See the response to 
comments in Part IV (Review of Proposed Rule and Comments Received) and 
Part V (Regulatory Procedures), Section A (Paperwork Reduction Act).
    The Department did, however, make three changes between the NPRM 
and this final rule, each of which reduced the burden on T-1 filers in 
general and therefore on small entities. As stated in the preamble, the 
changes that the Department did make in order to reduce the burden of 
this final rule, without losing efficacy in preventing circumvention or 
evasion of LMRDA financial reporting, include: (1) Creating an 
exemption for credit unions, which mitigates the impact on small 
entities because it reduces the number of trusts for which a Form T-1 
will be required; (2) granting permission for a given union to 
voluntarily file on behalf of other unions interested in the same 
trust, which mitigates the impact on small entities and reduces the 
number of unions that will file and especially reduces redundant 
filing; and (3) changing the trust's fiscal year on which the union 
must report, such that a there will be a minimum of 180 days between 
the end of the trust's fiscal year and the filing deadline of a T-1 
covering that fiscal year. These significant changes will help with the 
impact on small entities and are the reason why the Department has 
determined that other alternatives or further modifications to this 
rule--including the three proposed in the NPRM and the various 
commenter proposals for exemptions that were discussed and declined in 
Part III--are not warranted.
    If the Department were not to take this regulatory action, it would 
avoid any new burden on labor organizations and thus ensure no new 
significant economic impact on small entities, but it would at the same 
time prevent realization of the many benefits of the Form T-1 detailed 
in this rule. Regulatory inaction would leave open the current avenue 
for circumvention or evasion of reporting requirements through moving 
funds into union-controlled trusts and would eliminate the associated 
benefits to union financial transparency. The Department did not pursue 
this alternative because the prevention of circumvention or evasion of 
union financial reporting is a responsibility of the Department 
pursuant to the LMRDA.
    Modifying the financial or managerial domination test would serve 
to reduce the burden on small labor organizations because fewer trusts 
would be covered under that alternative to the rule. However, the 
Department has concluded this would not ensure that the trusts that are 
no longer covered do not serve as possible tools for circumventing or 
evading financial reporting. Accordingly, the Department declined to 
change the domination test.
    Simplifying and reducing the scope of the Form T-1 could 
potentially alleviate the burden on small entities by reducing the 
burden hours of completing each Form T-1, but the Department would be 
doing so at the cost of losing important information on every single 
Form T-1 filed. The Department did not pursue

[[Page 13441]]

this alternative because the schedules and itemization requirements are 
already greatly reduced compared to the Form LM-2 that the covered 
labor organizations complete and because further modification could 
impede the prevention of circumvention or evasion of LMRDA reporting 
requirements.
    Thus, this rule provides for no differing compliance requirements 
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. However, it is important to remember that these 
``small entities'' consist of the largest category of labor 
organizations with all of these unions filing the Form LM-2 with OLMS 
annually.
    Similarly, while all of these small entities will be filing the 
same form, the burden of completing that form is totally dependent on 
the complexity of the entity's operation. The smaller the union, the 
fewer trusts it will dominate and thus it will ultimately file fewer 
Form T-1s.
(7) Clarification, Consolidation, and Simplification of Compliance and 
Reporting Requirements for Small Entities
    This final rule was drafted to clearly state the compliance and 
reporting requirements for all small entities subject to this Form T-1 
rule.
    OLMS will update the e.LORS system to allow labor organizations to 
file the Form T-1 as they file the Form LM-2.
    OLMS will provide compliance assistance for any questions or 
difficulties that may arise from using the reporting software. A help 
desk is staffed during normal business hours and can be reached by 
telephone.
    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 any given filer 
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.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996. This rule 
will not result in an annual effect on the economy of $100,000,000 or 
more; a major increase in costs or prices; or significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of the United States-based companies to 
compete with foreign-based companies in domestic and export markets.

List of Subjects in 29 CFR Part 403

    Labor Organization, Trusts, Reporting and Recordkeeping 
Requirements.

    Accordingly, for the reasons provided above, the Department amends 
part 403 of title 29, chapter IV of the Code of Federal Regulations as 
set forth below:

PART 403--LABOR ORGANIZATION ANNUAL FINANCIAL REPORTS

0
1. The authority citation for part 403 continues to read as follows:

    Authority: Secs. 201, 207, 208, 301, 73 Stat. 524, 529, 530 (29 
U.S.C. 431, 437, 438, 461); Secretary's Order No. 03-2012, 77 FR 
69376, November 16, 2012.

0
2. Amend Sec.  403.2 by adding paragraph (d) to read as follows:


Sec.  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) of this section, 
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. Only the parent labor organization (i.e., the national/
international or intermediate labor organization) must file the Form T-
1 report for covered trusts in which both the parent labor organization 
and its affiliates satisfy the financial or managerial domination test 
set forth in paragraph (d)(1)(i) of this section. The affiliates must 
continue to identify the trust in their Form LM-2 Labor Organization 
Annual Report, and include a statement that the parent labor 
organization will file a Form T-1 report for the trust.
    (3) No Form T-1 should be filed for any trust (or a plan of which 
the trust is part) that:
    (i) Meets the statutory definition of a labor organization and 
already files a Form LM-2, Form LM-3, Form LM-4, or simplified LM 
report;
    (ii) The LMRDA exempts from reporting;
    (iii) Meets the definition of a subsidiary organization pursuant to 
Part X of the instructions for the Form LM-2 Labor Organization Annual 
Report;
    (iv) 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;
    (v) 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 (IRS);
    (vi) Constitutes a federal employee health benefit plan subject to 
the provisions of the Federal Employees Health Benefits Act (FEHBA);
    (vii) Constitutes any for-profit commercial bank established or 
operating pursuant to the Bank Holding Act of 1956, 12 U.S.C. 184;
    (viii) Is an employee benefit plan within the meaning of 29 U.S.C. 
1002(3) that is subject to Title I of the Employee Retirement Income 
Security Act pursuant to 29 U.S.C. 1003, and that files an annual 
report in accordance with 29 U.S.C. 1021 and 1024, and applicable rules 
and requirements, for a plan year ending during the reporting period of 
the labor organization; or

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    (ix) Constitutes a credit union subject to the Federal Credit Union 
Act, 12 U.S.C. 1751.
    (4) A labor organization may complete only Items 1 through 15 and 
Items 26 through 27 (Signatures) of Form T-1 if an annual audit 
prepared according to standards set forth in the Form T-1 instructions 
was performed and a copy of that 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.

0
3. Amend Sec.  403.5 by adding paragraph (d) to read as follows:


Sec.  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 Labor-
Management 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.

0
4. Amend Sec.  403.8 by revising paragraph (b)(3) to read as follows:


Sec.  403.8  Dissemination and verification of reports.

* * * * *
    (b) * * *
    (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.
* * * * *

    Signed in Washington, DC.
Arthur F. Rosenfeld,
Director, Office of Labor-Management Standards.

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. 2020-03958 Filed 3-5-20; 8:45 am]
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