Rescission of Labor Organization Annual Financial Report for Trusts in Which a Labor Organization Is Interested, Form T-1, 28505-28516 [2021-10975]

Agencies

• DEPARTMENT OF LABOR
• Office of Labor-Management Standards

[Federal Register Volume 86, Number 101 (Thursday, May 27, 2021)]
[Proposed Rules]
[Pages 28505-28516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10975]


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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Parts 403 and 408

RIN 1245-AA12


Rescission of Labor Organization Annual Financial Report for 
Trusts in Which a Labor Organization Is Interested, Form T-1

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

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: This document proposes to withdraw the final rule published in 
the Federal Register on March 6, 2020, 85 FR 13414 (Mar. 6, 2020) (2020 
Form T-1 rule), which established the Form T-1, Trust Annual Report, 
required to be filed by labor organizations about certain trusts in 
which they are interested pursuant to the Labor-Management Reporting 
and Disclosure Act (LMRDA). Upon further review of the 2020 Form T-1 
rule, including the pertinent facts and legally relevant policy 
considerations surrounding that rulemaking, the Department of Labor 
(Department) proposes to withdraw the rule implementing the Form T-1, 
because it believes that the trust reporting required under the rule is 
overly broad and is not necessary to prevent the circumvention and 
evasion of the Title II reporting requirements. Moreover, upon further 
consideration, the Department is concerned that the 2020 rulemaking 
record was insufficient to justify the separate trust reporting 
requirements as set forth in the 2020 Form T-1 rule.

DATES: The Department will consider all written comments submitted on 
or before July 26, 2021.

ADDRESSES: You may submit comments, identified by RIN 1245-AA12, only 
by the following method: Internet--Federal eRulemaking Portal. 
Electronic comments may be submitted through https://www.regulations.gov. To locate the proposed rule, use RIN 1245-AA12 or 
key words such as ``T-1,'' ``Labor-Management Standards'' or ``Trust 
Annual Reports'' to search documents accepting comments. Follow the 
instructions for submitting comments. Please be advised that comments 
received will be posted without change to https://www.regulations.gov, 
including any personal information provided.

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:

I. Statutory Authority

    The Department's statutory authority is set forth in section 208 of 
the 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 such reporting requirements.''
    The Secretary has delegated his authority under the LMRDA to the 
Director of the Office of Labor-Management Standards (OLMS) and 
permitted re-delegation of such authority. See Secretary's Order 03-
2012 (Oct. 19, 2012), published at 77 FR 69375 (Nov. 16, 2012).

II. Background

A. Introduction

    In enacting the LMRDA in 1959, Congress sought to protect the 
rights and interests of employees, labor organizations and the public 
generally as they relate to the activities of labor organizations, 
employers, labor relations consultants, and their officers, employees, 
and representatives. 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.

B. The LMRDA's Reporting and Other Requirements

    When it enacted 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

[[Page 28506]]

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 
its 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 from labor organizations 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 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 about a labor organization's 
assets; liabilities; receipts; disbursements; loans to officers, 
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.
    In addition to prescribing the form and publication of the LMRDA 
reports, the Secretary is authorized to issue regulations that prevent 
labor unions and others from avoiding their reporting responsibilities. 
Section 208 authorizes the Secretary of Labor to issue, amend, and 
rescind rules and regulations to implement the LMRDA's reporting 
provisions, including ``prescribing reports concerning trusts in which 
a labor organization is interested'' as she may ``find necessary to 
prevent the circumvention or evasion of [the LMRDA's] reporting 
requirements.'' 29 U.S.C. 438. In other words, the Secretary may 
require separate trust reporting only if: (1) The union has an interest 
in a trust and (2) reporting is determined to be necessary to prevent 
the circumvention or evasion of LMRDA reporting requirements. 29 U.S.C. 
438.

III. Proposal To Rescind the March 6, 2020 Final Rule Establishing the 
Form T-1

A. 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 of a 
significant trust in which the labor organization is interested,'' 
increasing labor organizations' reporting requirements generally and 
expanding the types of trusts for which reporting would be required. 68 
FR at 58477. The reporting labor organization would make this 
disclosure by filing a separate

[[Page 28507]]

Form T-1 for each significant trust in which it was interested. Id. at 
58524.
    To support the assertion that trust reporting was ``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. (quoting 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 377, 389-391 (D.C. 
Cir. 2005). The court held that the form ``reaches information 
unrelated to union reporting requirements and mandates reporting on 
trusts even where there is no appearance that the union's contribution 
of funds to an independent organization could circumvent or evade union 
reporting requirements by, for example, permitting the union to 
maintain control of the funds.'' 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 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: (1) 
Established as a political action committee (PAC) fund if publicly 
available reports on the PAC fund were filed with Federal or state 
agencies; (2) established as a political organization for which reports 
were filed with the IRS under section 527 of the IRS code; (3) required 
to file a Form 5500 under ERISA; or (4) 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

[[Page 28508]]

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 2009 and Fall 2009 Regulatory Agendas, the Department 
notified the public of its intent to initiate rulemaking proposing to 
rescind the Form T-1 and to require reporting of wholly owned, wholly 
controlled, and wholly financed (``subsidiary'') organizations on their 
Form LM-2 or LM-3 reports. See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=200904&RIN=1215-AB75 and https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=200904&RIN=1215-AB75.
    Due to the proposed rescission, 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 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.
    In the Spring and Fall Regulatory Agendas for 2017 and 2018, the 
Department notified the public of its intent to initiate rulemaking 
reinstating the Form T-1 Trust Annual Report. See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201704&RIN=1245-AA09, 
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201710&RIN=1245-AA09, https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201804&RIN=1245-AA09, and https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201810&RIN=1245-AA09. 
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. After notice and comment, the Department published the 
final Rule on March 6, 2020. 85 FR 13414.
    Under this rule, and similar to the 2008 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, 29 U.S.C. 402(l) (defining ``trust in which a labor 
organization is interested''). 85 FR 13417. Such labor organizations 
must file 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. Id. 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. Id. 
In its final rule, the Department stated that the rule helped bring the 
reporting requirements for labor organizations and section 3(l) trusts 
in line with contemporary expectations for the disclosure of financial 
information and prevent the circumvention or evasion of the LMRDA's 
reporting requirements through funds over which labor organizations 
exercise domination. 85 FR 13415.
    Like the 2008 rule, exemptions are provided for a trust that is a 
political action committee (``PAC'') or a political organization (the 
latter within the meaning of 26 U.S.C. 527). No T-1 form is required 
for federal employee health benefit plans subject to the provision of 
the Federal Employees Health Benefits Act (FEHBA), any for-profit 
commercial bank established or operating pursuant to the Bank Holding 
Act of 1956, 12 U.S.C. 1843, or credit unions. 85 FR 13418. Similar to 
the 2008 rule, but unlike the 2003 or 2006 rules, the 2020 T-1 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''). Id. 
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. Id.
    Unlike the 2008 rule, the 2020 rule 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. Id. Also unlike the 2008 rule, the 2020 rule 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. Id. 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. Id. 
The 2020 rule also allows 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. Id.

B. Reasons for the Proposal To Rescind the March 6, 2020 Form T-1 Final 
Rule

    The Department is proposing to rescind the 2020 Form T-1 rule for 
two reasons. First, the Department believes that the trust reporting 
required under the rule is overly broad, as it includes exclusively 
employer-funded trusts. Employer-funded trusts are not funds of a labor 
organization, subject to the LMRDA's Title II reporting requirements. 
Accordingly, required reporting of such employer-funded trusts is not 
necessary to prevent the circumvention and evasion of the Title II 
reporting requirements. Second, the Department has reviewed the 2020 
rulemaking record and is concerned that the separate reporting 
requirements set forth in the 2020 Form T-1 rule are not justified in 
light of the burden they impose.
The 2020 Form T-1 Rule Is Overbroad
    Under the Act, the Secretary has the authority to ``issue, amend, 
and rescind rules and regulations prescribing the form and publication 
of reports required to be filed under this title and such other 
reasonable rules and regulations (including rules concerning trusts in 
which a labor organization is interested) as he may find necessary to 
prevent the circumvention or evasion of such reporting requirements.'' 
29 U.S.C. 438. The Secretary's regulatory authority thus includes the 
reporting mandated by

[[Page 28509]]

the Act and discretionary authority to require reporting on trusts 
falling within the statutory definition of a trust ``in which a labor 
organization is interested.'' 29 U.S.C. 402(l). The Secretary's 
discretion to require separate trust reporting applies to trusts if: 
(1) The union has an interest in a trust as defined by 29 U.S.C. 402(l) 
and (2) reporting is determined to be necessary to prevent the 
circumvention or evasion of Title II reporting requirements. 29 U.S.C. 
438. As both the Department and the court recognized, this is a two 
part requirement. See AFL-CIO v. Chao, 409 F.3d 377, 386-87 (D.C. Cir. 
2005) (discussion of two-part test).
    A key feature of the Secretary's discretionary authority to require 
trust reporting is the requirement that the Secretary conclude that 
such reporting is ``necessary'' to prevent circumvention or evasion of 
a labor organization's requirement to report on its finances under the 
LMRDA. The Department now believes that the 2020 Form T-1 rule was 
overly broad, requiring financial reporting by many trusts, including 
trusts funded by employers pursuant to collective bargaining 
agreements, without an adequate showing that such a change is necessary 
to prevent circumvention or evasion of the reporting requirements.
    In particular, the rule provided that, for purposes of evaluating 
whether payments to a trust indicate that the union is financially 
dominant over the trust, payments made by employers to set up trusts 
under Section 302(c) of the LMRA, 29 U.S.C. 186(c) (Taft-Hartley funds) 
should be treated as funds of the union. Taft-Hartley funds are created 
and maintained through employer contributions paid to a trust fund, 
pursuant to a collective bargaining agreement, and must have equal 
numbers of union and management trustees, who owe a duty of loyalty to 
the trust. Taft-Hartley funds are established for the ``sole and 
exclusive benefit of the employees'' and are exempt from the statutory 
prohibition against an employer paying money to employees, 
representatives, or labor organizations. See 29 U.S.C. 186(a) and 
(c)(5).
    The Department recognizes that section 3(l) ``trusts in which a 
union is interested'' term is sufficiently broad to encompass Taft-
Hartley plans funded by employer contributions. However, as explained 
above, this is only the first part of the section 208 analysis. The 
second part of the analysis requires that the Secretary determine that 
the reporting is necessary to prevent circumvention or evasion of the 
reporting of union money subject to Title II.
    As explained in the 2020 Form T-1 rule, section 201 of the LMRDA 
requires that unions ``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.'' 85 FR at 13414 (citing 29 U.S.C. 431(b)). 
Further, section 201 requires that such information shall be filed ``in 
such detail as may be necessary to disclose [a labor organization's] 
financial condition and operations.'' 85 FR at 13414 (citing Id.). 
Significantly, each financial transaction to be reported is one that 
reflects upon the union's financial condition and operations, not the 
financial condition and operations of another entity.
    Thus, under the Act, the Secretary may require trust reporting when 
he concludes it is necessary to prevent the circumvention or evasion of 
labor organization's Title II reporting requirements. See 29 U.S.C. 
208. The Title II reporting requirements for a labor organization 
require it ``to disclose its financial condition and operations.'' 29 
U.S.C. 201(b)(emphasis added). Consequently, trust reporting is 
permissible to prevent a labor union from using a trust to circumvent 
reporting of the labor union's finances.
    Like the 2008 Form T-1 rule, the 2020 Form T-1 rule did not 
adequately address the ``need'' part of the two-part test when it 
presumed that employer contributions establish labor union financial 
domination of a trust. Indeed, after review, the Department proposes 
that the money contributed by the employer to a Taft-Hartley fund not 
be considered the property of the union, and thus its disclosure would 
not ``disclose [the union's] financial condition and operations.'' 29 
U.S.C. 201(b). Conversely, a union's nondisclosure of such funds would 
not be an evasion of the union's reporting requirement. The Department 
now proposes that such ordinary employer funds, not within the control 
of the union, would in no instance be reported by a union under the 
LMRDA reporting requirements. Such payments are generally paid by the 
employer to the Taft-Hartley trust for the sole and exclusive benefit 
of the employees, and it appears that the payment and use of these 
moneys would not ordinarily relate to the condition and operations of 
the union. And in addition, by definition, Taft-Hartley funds may not 
have union managerial dominance because ``employees and employers are 
equally represented in the administration of such fund[s], together 
with such neutral persons as the representatives of the employers and 
the representatives of employees may agree upon.'' See 29 U.S.C. 
186(c)(5)(B). Disclosure of such funds is thus unnecessary to ensure 
that unions comply with their own financial reporting requirements 
under the LMRDA. Consequently, the Department now proposes to rescind 
the 2020 Form T-1 rule as overly broad, as it applies to Taft-Hartley 
plans, by requiring reporting in instances where a union is not in a 
position to use a trust to circumvent or evade its reporting 
requirement.
    In an apparent acknowledgement that the 2020 Form T-1 rule, as it 
relates to the Taft-Hartley plans, was premised upon policies in 
addition to preventing circumvention of Title II reporting, the final 
rule stated that, ``[b]y 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.'' 85 FR at 13419. By emphasizing that the 2020 Form T-1 would 
establish reporting for ``trusts'' comparable to the reporting for 
``union funds,'' the rule appears to have provided for more general 
reporting than would be ``necessary to prevent'' the circumvention of 
LMRDA reporting requirements. Therefore, since the statute calls for 
trust reporting just to prevent the circumvention or evasion of the 
union's reporting requirements, the financial transparency goal here 
exceeds what the statute demands.
    The 2020 final rule states that the Form T-1 ``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.'' 85 FR 13418. However, the rule provided no evidence 
that labor organizations were transferring their own funds to Taft-
Hartley trusts, and, by definition, Taft-Hartley funds do not have 
union managerial dominance. Thus, it is not apparent how such funds 
would meet the Form T-1 dominance test. In an apparent acknowledgment 
of this dilemma, the Department argued in the 2020 Final Rule that 
``the money an employer contributes to such trusts

[[Page 28510]]

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.'' 85 FR 13418. Assuming this is so, 
these underlying wages and benefits would not have been reported on a 
Form LM-2. Therefore, it is not apparent that payment of these 
potential wages and benefits to a trust involves the circumvention or 
evasion of Title II reporting. Thus, with respect to these funds, it is 
not clear from the final rule how the Form T-1 will ``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.'' 
(emphasis added) 84 FR 25416.
    In AFL-CIO v. Chao, the Court of Appeals for the D.C. Circuit held 
that the 2003 Form T-1 ``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.'' AFL-CIO v. Chao, 409 F.3d at 389. The Department 
proposes that the 2020 Form T-1 rule may be overly broad in the same 
manner, requiring many labor organizations to file the Form T-1 for 
independent Taft-Hartley trusts, even where there is no apparent means 
by which the union could use the trust as a means of circumventing or 
evading its Title II reporting requirements.
    Furthermore, the Department rescinded the Form T-1 in 2010 for the 
same lack of statutory authority. See 75 FR 74938. While the 2020 rule 
acknowledged this issue, the rule did not adequately address this legal 
concern. Indeed, in an acknowledgment that employer contributions to a 
trust do not constitute the circumvention or evasion of labor 
organization funds, the 2020 rule argued that Form T-1 reporting for 
Taft-Hartley trusts could prevent the circumvention of employer or 
labor organization officer or employee reporting under LMRDA Sections 
202 and 203. See 85 FR 13422. However, the 2020 rule provided no 
support for this conclusion. Moreover, the logical conclusion of such 
argument is that the employer should file the trust report, not the 
labor organization.
Rulemaking Record Does Not Support 2020 Form T-1 Rule in Light of 
Burden Imposed
    The 2020 rule imposed significant burdens on Form LM-2 filing labor 
organizations. The Department estimated that there will be at least 810 
Form LM-2 organizations filing a Form T-1 report. 85 FR 13437. In the 
first year of reporting Form T-1 filers would spend approximately 
121.38 hours per report, which results in a total of 251,256.6 burden 
hours. 85 FR 13433. In subsequent years, Form T-1 filers would spend 
approximately 84.12 hours per report, which would result in 174,128.4 
additional burden hours. Id. The total expected first-year costs of the 
Form T-1 are $15,009,801, and in subsequent years the total cost would 
be $10,385,820.\1\ 85 FR 13437. These burdens add to existing Form LM-2 
recordkeeping and reporting burdens, and the union members ultimately 
bear these costs. Despite the burden imposed by the 2020 rule, the 
Department did not engage in an in-depth study into whether the Form T-
1 would provide needed or desired information to labor organization 
members or help detect or deter labor-management fraud. Upon review, 
the Department is concerned that the 2020 rule's record did not provide 
sufficient evidentiary support to justify the significant reporting 
burden imposed on labor organizations. The Department invites comment 
on this point.
---------------------------------------------------------------------------

    \1\ The 10-year annualized cost of the rule would be $10,285,704 
at a 3 percent discount rate and $9,608,788 at a 7 percent discount 
rate. 85 FR 13438.
---------------------------------------------------------------------------

    First, in issuing the 2020 rule the Department did not undertake a 
study to determine whether the 2020 rule was necessary to prevent 
circumvention or evasion of Title II reporting obligations, whether the 
Form T-1 would detect or deter fraud, or whether the 2020 rule's 
rulemaking record established what members may want or need or even 
offer suggestions as to how members would use the information to self-
govern their unions.\2\ In terms of benefits to union members, they 
will continue to receive detailed information about their union's 
finances, including the identity and contact information of the union's 
trusts, through the annual Form LM-2 report available on the OLMS 
website. In particular, members will see whether the trust already 
files a report with another agency. Indeed, the 2020 rule discusses 
primarily apprenticeship and training and similar Taft-Hartley funds. 
However, such trusts typically already file detailed disclosure 
reports, such as the Form 5500 with the Department's Employee Benefits 
Security Administration (EBSA) and Form 990 with the Internal Revenue 
Service (IRS), which provide comparable reporting to the Form T-1.\3\ 
Both IRS Form 990 and EBSA form 5500 require comprehensive reporting of 
financial information such as assets, liabilities, officer and director 
payments, leases, and other financial transactions.\4\ These forms 
provide the type of financial information that interested parties such 
as union members could use to monitor the use of trust funds in order 
to prevent circumvention or evasion of Title II reporting obligations 
and to detect and deter fraud. Thus, the Department now believes that 
the Form T-1 may have established a largely redundant reporting regime.
---------------------------------------------------------------------------

    \2\ See the Department's rescission of Form LM-2 changes, in 
2009, based, in part, on the lack of a study into the potential 
benefits and burdens of earlier, 2003 Form LM-2 changes prior to 
promulgating even more expansive Form LM-2 reporting requirements in 
2009. See 74 FR 52406-09.
    \3\ See https://www.irs.gov/charities-non-profits/annual-filing-and-forms
    \4\ See id.; see also https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500.
---------------------------------------------------------------------------

    Further, the 2020 rule did not adequately explain why the Form T-1 
exempted the EBSA Form 5500 and certain IRS filings, such as those 
filed by political organizations under 26 U.S.C. 527, but not trusts 
that file the Form 990 with the IRS. The 2020 rule focused on the 
unique nature of the union reporting required under the LMRDA, and the 
Department continues to hold that IRS Form 990 by labor organizations 
does not provide a substitute for Form LM-2, LM-3, and LM-4 reporting 
by labor organizations. However, trusts are not labor organizations, 
and the Department is, therefore, concerned that the 2020 rule did not 
provide a justification as to why such reporting--as well as the other 
types of reporting exemptions that the 2020 rule provided--is not a 
sufficient substitute for Form T-1 reporting. See 85 FR 13425-26.
    Second, adding to the burden on the filing unions, the information 
necessary to complete the report is in the control of the trust, not 
the reporting union, notwithstanding that many if not most of the 
trusts on which they are required to report are operated jointly with 
employers. Furthermore, trusts are under no legal obligation to provide 
their records to the union for the sake of the union's reporting 
requirement. The 2020 rule offered no factual support suggesting that 
trusts, whose trustees may have a fiduciary obligation to the

[[Page 28511]]

trust, would agree to provide their records to the union. Compiling 
such records and providing them to the union would constitute a 
significant annual expense and a significant amount of lost time that 
should be devoted to the administration of the trust. It is unclear how 
a union could compel a trust that refuses to provide records, and thus 
it is equally unclear why trustees would approve complying with union 
requests.
    Additionally, upon further review, the Department now considers the 
Form T-1 reporting regime as almost unworkable from the perspective of 
the filing labor unions and the Department, since it may result in 
multiple unions filing for a single trust or determining which union 
would file for the others, thereby taking on the legal obligations 
associated with the form. The 2020 rule acknowledged this problem by 
including a provision allowing one union to file the Form T-1 report 
for the other unions, but the Department now considers this solution as 
unworkable. The Department invites comment on this point, as well as 
the points of the preceding paragraphs.
    Third, in terms of detecting and deterring fraud or preventing the 
circumvention and evasion of Title II reporting obligations, the 2020 
rule did not sufficiently demonstrate how the Form T-1 would further 
these goals. Initially, as explained above, because of the redundant 
nature of much of this reporting, it is not apparent that the Form T-1 
would provide any additional information necessary for OLMS to track 
fraud. Existing reporting regimes already provide valuable information. 
Further, OLMS has a well-established history of effectively enforcing 
the LMRDA and combatting labor-management fraud. See the OLMS 
enforcement results: https://www.dol.gov/agencies/olms/enforcement. 
Indeed, in recent years and as discussed in the 2020 rule, the 
Department played a key role in securing over a dozen indictments and 
convictions in the UAW-Fiat Chrysler of America (FCA) National Training 
Center (NTC) scandal, without the Form T-1. See 85 FR 13421. While the 
2020 rule relies heavily on these UAW-Fiat Chrysler of America 
convictions as grounds for adopting the Form T-1, after consideration, 
the Department now believes that those cases do not provide support for 
the 2020 rule and that, instead, the ability to obtain such results 
without the Form T-1 undercuts the ``need'' for imposing a new 
reporting burden. Working jointly with the Department of Justice and 
others, the Department of Labor secured convictions of management and 
union officials associated with the NTC, pursuant to the Taft-Hartley 
Act, for unlawful employer payments to UAW officials. See 29 U.S.C. 
186. Since the LMRDA Section 202 and 203 reporting requirements would 
require disclosure of these payments, and require the parties to file 
reports pursuant to the Department's Form LM-30 Labor Organization 
Officer and Employee Report and Form LM-10 Employer Report, the 
Department already had investigatory authority and access to necessary 
financial information to effectively investigate this matter. See 29 
U.S.C. 432-433 and 531. Additionally, the general public, including 
members of labor organizations, already has access to reports 
containing similar, if not identical, information that would be 
included on the Form T-1, and the Department already has the necessary 
investigatory authority to identify and eradicate the specific fraud 
that the Form T-1 is meant to combat. For example, the NTC filed a Form 
990 that listed three of the six UAW officials who took unlawful 
payments from FCA under Part VII (Compensation of Officers, Directors, 
Trustees, Key Employees, Highest Compensated Individuals, and 
Independent Contractors), and the trust should have reported payments 
to two other UAW officials' sham charities on Schedule I (Grants and 
Other Assistance to Organizations, Governments, and Individuals in the 
United States).\5\ Moreover, the 2020 rule also cited examples of fraud 
involving apprenticeship and training plans and other ERISA-covered 
entities, which EBSA uncovered with its existing enforcement authority 
pursuant to ERISA. See 85 FR 13419-20.
---------------------------------------------------------------------------

    \5\ See OLMS FY 18 Annual Report. While the Form 990s filed by 
the trust did not properly report these payments, the Department of 
Justice secured indictments covering conspiring to defraud the 
United States by preparing and filing false tax returns for the NTC 
that concealed millions of dollars in prohibited payments directed 
to UAW officials.
---------------------------------------------------------------------------

    The 2020 rule provided other examples and hypothetical situations 
as purportedly demonstrating the need of the Form T-1 to detect and 
deter fraudulent activity. However, upon additional review, these 
examples do not seem to demonstrate a need for the Form T-1. For 
example, the 2020 rule offered a hypothetical example of a trust making 
a $15,000 payment to a printing company owned by a union official. In 
such a situation, the ownership of the printing company would not 
actually appear on the Form T-1, but the 2020 rule postulated that 
members or the public would notice the connection. See 85 FR 13418-19. 
It is just as likely, however, that union members or the public may 
already recognize this financial connection more directly via the IRS 
Form 990, Schedule L (Transactions with Interested Persons).\6\ Thus, 
the Form 990 actually provides greater transparency in this regard than 
would the Form T-1, which undercuts this rationale as a basis for 
supporting a Form T-1 reporting requirement.
---------------------------------------------------------------------------

    \6\ See: https://www.irs.gov/forms-pubs/about-schedule-l-form-990.
---------------------------------------------------------------------------

    Additionally, the 2020 rule reviewed Form LM-2 reports from FY 17 
and offered examples purportedly justifying the rule, but after careful 
consideration, the Department believes that such examples do not 
adequately support the rulemaking. See 85 FR 13419. For example, the 
2020 rule cited a local union that made expenditures to a credit union. 
However, the 2020 rule exempted credit unions from the Form T-1 
reporting requirements because existing law already provides detailed 
transparency and oversight. The 2020 rule also mentioned a local union 
making payments to a trust that constitutes an information technology 
(IT) service corporation established by the local union to provide it 
with IT services. But after further review, the local union reported on 
its Form LM-2 that the trust already files the IRS Form 1065. Another 
example discussed payments from a union to a labor college; but the 
labor college files a Form 990, which provides the necessary 
transparency the Form T-1 sought.
    Further, the Department believes that full implementation and 
enforcement of the Form T-1 would actually deprive the Department of 
resources needed to administer and enforce effectively the LMRDA, since 
the Department would need to expend significant resources creating and 
maintaining an electronic Form T-1; provide compliance assistance to 
unions and trusts on such filing and related recordkeeping 
requirements; and pursue delinquent Form T-1 reports, particularly for 
unions unable to obtain timely (if at all) the necessary information 
from the trust. The Department invites comment on this point and the 
points of the preceding paragraphs.
    Therefore, in light of the foregoing concerns, the Department 
proposes to rescind the rule implementing the Form T-1 because it 
believes that, as it concerns Taft-Hartley plans, the trust reporting 
required under the rule is overly broad and thus not necessary to 
prevent the circumvention and evasion of the Title II reporting 
requirements.

[[Page 28512]]

Further, the Department also proposes rescission, as it has reviewed 
the 2020 rulemaking record and no longer views the separate reporting 
requirements as set forth in the 2020 Form T-1 rule as justified in 
light of the burden they impose. The Department invites comments on its 
proposal to rescind the 2020 Form T-1 rule.

IV. Specific Proposed Changes to the Form LM-2 Instructions and the 
LMRDA Regulations

A. Changes to the Form LM-2

    To implement the rescission of the Form T-1, the Department 
proposes to make the following changes to the Form LM-2 Labor 
Organization Annual Report:

    1. Section IX--Labor Organizations In Trusteeship: The 
Department proposes to revise this section to remove any reference 
to the Form T-1.
    2. Section XI--Completing Form LM-2: The Department proposes 
changes to the instructions to Item 10 (Trusts or Funds). The 
instructions for Item 10 would be changed to remove any reference to 
the Form T-1, although basic information about the trust would still 
be required, as would a cite to any report filed for the trust with 
another government agency, such as the Department's Employee 
Benefits Security Administration (EBSA) or the Internal Revenue 
Service (IRS).

    The public can view the proposed Form LM-2 changes in the 
accompanying ICR, pursuant to the PRA. See Part V (Regulatory 
Procedures), PRA section.

B. Changes to the LMRDA Regulations

    As described in the below regulatory procedures section, and in 
order to implement the rescission of the 2020 Form T-1 rule, the 
Department proposes to remove the references to the Form T-1 located in 
the Department's LMRDA regulations at 29 CFR part 403. Additionally, as 
described in the below regulatory procedures section, the Department 
proposes to require mandatory electronic filing for labor organizations 
that submit simplified annual reports pursuant to 29 CFR 403.4(b). The 
Department's experience with Form LM-2, LM-3, and LM-4 reporting 
demonstrates that labor organizations can submit such reports 
electronically with little difficulty and with burden reductions for 
the labor organization filers and the Department. Further, the public 
benefits from more timely disclosure on the OLMS website. The 
Department anticipates such benefits for electronic simplified annual 
reports, as well.

V. Regulatory Procedures

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 E.O. 12866 and OMB review.\7\ 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 E.O. 12866. 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).
---------------------------------------------------------------------------

    \7\ 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
    As described in the 2020 Form T-1 final rule, the Form T-1 is 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. Cost savings discussed below concern the costs incurred by 
labor organizations to file the Form T-1 reports in subsequent years 
(assuming that filers have already incurred many of the first year 
costs discussed in the 2020 Final Rule). If the Department rescinds the 
Form T-1, as proposed, the affected labor organizations would save 
these future costs. Using data from LM-2 filings, the Department 
estimated, in the 2020 Form T-1 final rule, 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 Department estimated 
in the 2020 final rule that each affected labor organization would be 
responsible for an average of 2.56 Form T-1 filings. Additionally, each 
affected labor organization would spend approximately 84.12 hours in 
each subsequent year to fill out the Form T-1.\8\ 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.\9\ The weighted average 
hourly wage is $36.53.\10\ 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).\11\
---------------------------------------------------------------------------

    \8\ For more details, see the Paperwork Reduction Act section 
below.
    \9\ 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.
    \10\ 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.
    \11\ 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.
---------------------------------------------------------------------------

    Therefore, the cost for each Form T-1 filer in subsequent years 
would be $12,822 (2.56 x 84.12 x $59.54 = $12,822), which would be 
eliminated if the Department rescinds the Form T-1, as proposed.

[[Page 28513]]

B. Summary of Costs

    The proposed rule would save 810 Form LM-2 filers a total of 
$10,385,820 annually. The 10-year annualized cost is expected to be 
$10,285,704 at a 3 percent discount rate and $9,608,788 at a 7 percent 
discount rate.

C. Benefits

    As explained more fully in the preamble to this proposed rule, the 
Department proposes to rescind the Form T-1, as it proposes that the 
2020 Form T-1 rule does not prevent the circumvention or evasion of the 
LMRDA reporting requirements, nor does it detect or deter labor-
management fraud or corruption. Rather, the Department believes that 
existing reporting requirements adequately address these concerns. 
Further, rescission of the 2020 Form T-1 rule would provide labor 
organizations with additional resources to devote to existing reporting 
requirements.
D. Alternatives
    As potential alternatives to rescinding the Form T-1, the 
Department could maintain the existing Form T-1 or propose a scaled 
back version. The retention of the Form T-1 would retain the burdens 
discussed in the 2020 Form T-1 rule, and the Department now considers 
that these burdens are not justified by the purported benefits. Rather, 
the Department now believes that existing reporting provides much if 
not all of the potential benefits of the Form T-1. Further, while a 
scaled back Form T-1 would reduce such burdens, the Department did not 
consider this approach, since the current Form T-1 already contains 
multiple exemptions and burden-reduction components.

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et seq., 
requires agencies to prepare regulatory flexibility analyses, and to 
develop alternatives wherever possible, in drafting regulations that 
will have a significant impact on a substantial number of small 
entities. The Department has determined that this proposed rule will 
not have a significant economic impact on a substantial number of small 
entities, as the proposed rule contains no collection of information 
and relieves the additional burden imposed upon labor organizations 
through the rescission of the regulations published on March 6, 2020. 
Additionally, the 2020 Form T-1 rule's Final Regulatory Flexibility 
Analysis stated that subsequent year costs would place a significant 
impact on 8.94% of small unions, which is below the threshold to 
constitute a ``substantial'' number of small entities. See 85 FR 13439. 
Therefore, a regulatory flexibility analysis under the Regulatory 
Flexibility Act is not required. The Secretary has certified this 
conclusion to the Chief Counsel for Advocacy of the Small Business 
Administration.

Unfunded Mandates Reform

    This proposed rule does not include any Federal mandate that may 
result in increased expenditures by State, local, and tribal 
governments, in the aggregate, of $100 million or more, or in increased 
expenditures by the private sector of $100 million or more.

Paperwork Reduction Act

A. Summary of the Proposed Rule
    The following is a summary of the need for and objectives of the 
proposed rule. A more complete discussion of various aspects of the 
proposal is found in the preamble.
    The proposed rule would rescind the Form T-1 Trust Annual Report 
established by final rule on March 6, 2020.
    The LMRDA was enacted to protect the rights and interests of 
employees, labor organizations and the public generally as they relate 
to the activities of labor organizations, employers, labor relations 
consultants, and labor organization officers, employees, and 
representatives. Provisions of the LMRDA include financial reporting 
and disclosure requirements for labor organizations and others as set 
forth in Title II of the Act. See 29 U.S.C. 431-36, 441. Under Section 
201(b) of the Act, 29 U.S.C. 431(b), labor organizations are required 
to file for public disclosure annual financial reports, which are to 
contain information about a labor organization's assets, liabilities, 
receipts, and disbursements.
    The Department has developed several forms to implement the union 
annual reporting requirements of the LMRDA. 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. The Form LM-2 Annual Report is the most detailed of the 
annual labor organization reports, and is required to be filed by labor 
organizations with $250,000 or more in annual receipts. The Form LM-2 
requires certain receipts and disbursements to be reported by 
functional categories, such as representational activities; political 
activities and lobbying; contributions, gifts, and grants; union 
administration; and benefits. Further, the form requires labor 
organizations to allocate the time their officers and employees spend 
according to functional categories, as well as the payments that each 
of these officers and employees receive, and it requires the 
itemization of certain transactions totaling $5,000 or more. It must 
include reporting of loans to officers, employees and business 
enterprises; existence of any trusts; payments to each officer; and 
payments to each employee of the labor organization paid more than 
$10,000, in addition to other information. The Secretary also has 
prescribed simplified annual reports for smaller labor organizations. 
Form LM-3 may be filed by unions with $10,000 or more, but less than 
$250,000 in annual receipts, and Form LM-4 may be filed by unions with 
less than $10,000 in annual receipts. A local union that has no assets, 
liabilities, receipts, or disbursements, and which is not in 
trusteeship, is not required to file an annual report if its parent 
union files a simplified annual report on its behalf. In order to be 
eligible for this simplified annual reporting, the local must be 
governed solely by a uniform constitution and bylaws filed with OLMS by 
its parent union and its members must be subject to uniform fees and 
dues applicable to all members of the local unions for which the parent 
union files simplified reports. The parent union must submit annually 
to OLMS certain basic information about the local, including the names 
of all officers, together with a certification signed by the president 
and treasurer of the parent union.
    On March 6, 2020, the Department issued a final rule establishing 
the Form T-1 Trust Annual Report, which prescribes the form and content 
of annual reporting by unions concerning entities defined in Section 
3(l) of the LMRDA as ``trusts in which a labor organization is 
interested.'' 85 FR 13414. The objective of this proposed rule is to 
rescind the Form T-1 Trust Annual Report, as the Department has 
determined that it is overbroad and not necessary to prevent the 
circumvention and evasion of the Title II requirements.
    Further, the Department has reviewed the 2020 rulemaking record and 
no longer views the separate reporting requirements as set forth in the 
2020 Form T-1 rule as justified in light of the burden they impose. The 
rescission of the Form T-1 would constitute a decrease in reporting 
burdens for those labor organizations associated with reportable 
trusts. As detailed in the 2020 Form T-1 rule, the Form T-1 represented 
a total burden, for the

[[Page 28514]]

estimated 810 Form LM-2 filers affected by the rule, of approximately 
251,257 hours in the first year and 174,128 in the subsequent years. 85 
FR at 13433. Additionally, the projected total cost on filers in the 
first year was approximately $15 million in the first year and 
approximately $10.4 million in subsequent years. 85 FR at 13437. The 
proposed rule eliminates these burdens and costs for future years. The 
proposed rule would also eliminate any first-year costs that unions 
have not yet incurred.
B. Overview of Trust Reporting on Form T-1
    Every labor organization whose total annual receipts are $250,000 
or more and those organizations that are in trusteeship must currently 
file an annual financial report using the current Form LM-2, Labor 
Organization Annual Report, within 90 days after the end of the labor 
organization's fiscal year, to disclose their financial condition and 
operations for the preceding fiscal year. The current instructions 
state that receipts of an LMRDA section 3(l) trust in which the labor 
organization is interested (as described in Information Item 10) should 
not be included in the total annual receipts of the labor organization 
when determining which form to file, unless the 3(l) trust is a 
subsidiary organization of the union. See Form LM-2 Instructions, Part 
II: What Form to File.
    The current Form LM-2 consists of 21 questions that identify the 
labor organization and provide basic information (in primarily a yes/no 
format); a statement of 11 financial items on different assets and 
liabilities (Statement A); a statement of receipts and disbursements 
(Statement B); and 20 supporting schedules (Schedules 1-10, Assets and 
Liabilities related schedules; Schedules 11-12 and 14-20, receipts and 
disbursements related schedules; and Schedule 13, which details general 
membership information).
    The Form LM-2 requires such information as: Whether the labor 
organization has any trusts (Item 10); whether the labor organization 
has a political action committee (Item 11); whether the labor 
organization discovered any loss or shortage of funds (Item 13); the 
number of members (Item 20); rates of dues and fees (Item 21); the 
dollar amount for seven asset categories, such as accounts receivable, 
cash, and investments (Items 22-28); the dollar amount for four 
liability categories, such as accounts payable and mortgages payable 
(Items 30-33); the dollar amount for 13 categories of receipts such as 
dues and interest (Items 36-49); and the dollar amount for 16 
categories of disbursements such as payments to officers and repayment 
of loans obtained (Items 50-65).
    Schedules 1-10 requires detailed information and itemization on 
assets and liabilities, such as loans receivable and payable and the 
sale and purchase of investments and fixed assets. There are also nine 
supporting schedules (Schedules 11-12, 14-20) for receipts and 
disbursements that provide members of labor organizations with more 
detailed information by general groupings or bookkeeping categories to 
identify their purpose. Labor organizations are required to track their 
receipts and disbursements in order to correctly group them into the 
categories on the current form.
    The Form T-1 provides similar but not identical reporting and 
disclosure for section 3(l) trusts, currently including subsidiaries, 
of Form LM-2 filing labor organizations. The Form T-1 requires 
information such as: Losses or shortages of funds or other property 
(Item 16); acquisition or disposal of any goods or property in any 
manner other than by purchase or sale (Item 17); whether or not the 
trusts liquidated, reduced, or wrote-off any liabilities without full 
payment of principal and interest (Item 18); whether the trust extended 
any loan or credit during the reporting period to any officer or 
employee of the reporting labor organization at terms below market 
rates (Item 19); whether the trust liquidated, reduced, or wrote-off 
any loans receivable due from officers or employees of the reporting 
labor organization without full receipt of principal and interest (Item 
20); and the aggregate totals of assets, liabilities, receipts, and 
disbursements (Items 21-24). Additionally, the union must report 
detailed itemization and other information regarding receipts in 
Schedule 1, disbursements in Schedule 2, and disbursements to officers 
and employees of the trust in Schedule 3.
    Although the Form T-1 has a higher reporting threshold for receipts 
and disbursements than does the Form LM-2, it provides nearly identical 
information regarding receipts and disbursements as does the Form LM-2. 
For example, unions must itemize receipts of trusts with virtually 
identical detail on Form T-1, Schedule 1, as does the Form LM-2 on its 
Schedule 14. Further, the information required on Form T-1 Schedules 2 
and 3 correspond almost directly to the information required on Form 
LM-2 Schedules 15-20 and 11-12, respectively, although the format does 
not directly correlate. However, as discussed earlier, Form T-1 does 
not provide as much detail regarding assets and liabilities of trusts 
as the Form LM-2 requires. For example, although Form T-1 Items 16 and 
17 correspond directly to Form LM-2 Items 13 and 15, and the 
information required in Form T-1 Items 18-20 is required in a different 
format in Form LM-2, Schedules 2 and 8-10, there is also significant 
information required on the Form LM-2 and not on the Form T-1. Chief of 
the material excluded on the Form T-1 is the detailed information 
regarding assets and liabilities required by Form LM-2, Schedules 1-10. 
In sum, under the proposed rule unions would need to report such 
information on the Form LM-2, while they would not need to do so under 
the existing Form T-1.
    Additionally, the Department provided the public with separate 
burden analyses for the Form LM-2 and the Form T-1, in addition to the 
other forms required to be filed with the Department under the LMRDA. 
These analyses include the time for reviewing the respective set of 
instructions, searching existing data sources, gathering and 
maintaining data needed, creating needed accounting procedures, 
purchasing software, and completing and reviewing the collection of 
information. This proposed rule eliminates the need for a Form T-1 
burden analysis, as it proposes to eliminate that form and its separate 
reporting regime. Thus, many of the areas analyzed in other LMRDA 
reporting and disclosure burden analyses are not relevant to this 
discussion, as the existence and basic structure and procedures of the 
present Form LM-2 reporting regime is not amended by this proposed 
rule.
C. Methodology for the Burden Estimates
    Initially, as stated above, this document proposes a reduction of 
burden hours for respondents included within ICR 1245-0003, as a result 
of the proposed rescission of the Form T-1. The proposed rescission of 
the Form T-1 would result in a reduction of 174,128.4 hours in future 
years that an estimated 2,292 Form LM-2 filers would incur. 85 FR 
13433. Additionally, the proposed rule would eliminate the total cost 
to filers of $10,385,820 in subsequent years. See 85 FR at 13437.
    The accompanying ICR discusses changes to the other LMRDA forms and 
instructions included within ICR 1245-0003, such as proposed mandatory 
electronic filing for Forms LM-15, 15A, 16, 30, and Form S-1 as well 
clarification concerning the OLMS use of email addresses for the 
signatories of each of the forms included within the

[[Page 28515]]

ICR. As explained in the ICR, the Department does not believe that such 
revisions will result in a change to the burden estimates, since 
electronic filing does not result in greater burden than paper filing 
and filers already provide email addresses as part of the electronic 
filing process.
D. Conclusion
    As the proposed rule requires a revision to an existing information 
collection, the Department is submitting, contemporaneous with the 
publication of this document, an ICR to remove the Form T-1 and its 
associated burden from OMB Control Number 1245-0003. A copy of this 
ICR, with applicable supporting documentation, including among other 
items a description of the likely respondents, proposed frequency of 
response, and estimated total burden may be obtained free of charge 
from the RegInfo.gov website at https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=1245-0003 or from the Department by 
contacting Andrew Davis on 202-693-0123 (this is not a toll-free 
number)/email: [email protected].
    Agency: DOL--Office of Labor-Management Standards (OLMS).
    Type of Review: Revision of a currently approved collection.
    OMB Control Number: 1245-0003.
    Title of Collection: Labor Organization and Auxiliary Reports.
    Affected Public: Private Sector--businesses or other for-profits 
and not-for-profit institutions.
    Estimated Number of Respondents: 33,021.
    Estimated Number of Annual Responses: 35,297.
    Frequency of Response: Varies.
    Estimated Total Annual Burden Hours: 4,644,849.
    Estimated Total Annual Other Burden Cost: $0.
    The Department invites comments on all aspects of the PRA analysis. 
Written comments must be submitted on or before July 26, 2021. The 
Department is particularly interested in comments that:
     Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     the accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used, and the agency's estimates evaluate 
associated with the annual burden cost incurred by respondents and the 
government cost associated with this collection of information;
     enhance the quality, utility, and clarity of the 
information to be collected; and
     minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submissions of responses.
    Comments submitted in response to this document will be considered, 
summarized and/or included in the ICR the Department will submit to OMB 
for approval; they will also become a matter of public record. 
Commenters are encouraged not to submit sensitive information (e.g., 
confidential business information or personally identifiable 
information such as a social security number).

Small Business Regulatory Enforcement Fairness Act of 1996

    This proposed rule would not constitute a major rule as defined by 
section 804 of the Small Business Regulatory Enforcement Fairness Act 
of 1996. This proposed 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

29 CFR Part 403

    Labor unions, Reporting and recordkeeping requirements, Trusts.

29 CFR Part 408

    Labor unions, Reporting and recordkeeping requirements, Trusts and 
trustees.

    Accordingly, the Department proposes to amend part 403 of 29 CFR 
Chapter IV 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.


Sec.  403.2  [Amended]

0
2. In Sec.  403.2, remove paragraph (d).
0
3. Amend Sec.  403.4 by revising paragraphs (b)(3) and (6) introductory 
text to read as follows:


Sec.  403.4  Simplified annual reports for smaller labor organizations.

* * * * *
    (b) * * *
    (3) The national organization with which it is affiliated assumes 
responsibility for the accuracy of a statement filed electronically, 
through the electronic filing system made available on the Office of 
Labor-Management Standards website, covering each local labor 
organization covered by Sec.  403.4(b) and containing the following 
information with respect to each local organization:
    (i) The name and designation number or other identifying 
information;
    (ii) The file number which the Office of Labor-Management Standards 
has assigned to it;
    (iii) The mailing address;
    (iv) The beginning and ending date of the reporting period which 
must be the same as that of the report for the national organization;
    (v) The names and titles of the president and treasurer or 
corresponding principal officers as of the end of the reporting period;
* * * * *
    (6) The national organization with which it is affiliated assumes 
responsibility for the accuracy of, and submits with its simplified 
annual reports filed electronically pursuant to Sec.  403.4(b)(3) for 
the affiliated local labor organizations, the following certification 
properly completed and signed by the president and treasurer of the 
national organization:


Sec.  403.5  [Amended]

0
4. In Sec.  403.5, remove paragraph (d).


Sec.  403.8  [Amended]

0
5. In Sec.  403.8, remove paragraph (b)(3).

PART 408--LABOR ORGANIZATION TRUSTEESHIP REPORTS

0
6. The authority citation for part 408 continues to read as follows:

    Authority:  Secs. 202, 207, 208, 73 Stat. 525, 529 (29 U.S.C. 
432, 437, 438); Secretary's Order No. 03-2012, 77 FR 69376, November 
16, 2012.

0
7. Revise Sec.  408.5 to read as follows:


Sec.  408.5  Annual financial report.

    During the continuance of a trusteeship, the labor organization 
which has assumed trusteeship over a subordinate labor organization, 
shall file with the Office of Labor-Management Standards on behalf of 
the subordinate labor organization the annual financial

[[Page 28516]]

report required by part 403 of this chapter, signed by the president 
and treasurer or corresponding principal officers of the labor 
organization which has assumed such trusteeship, and the trustees of 
the subordinate labor organization on Form LM-2.

    Signed in Washington, DC, this 19th day of May 2021.
Jeffrey R. Freund,
Director, OLMS.
[FR Doc. 2021-10975 Filed 5-26-21; 8:45 am]
BILLING CODE P