Rescission of Labor Organization Annual Financial Report for Trusts In Which A Labor Organization Is Interested, Form T-1, 74356-74371 [2021-28266]

Agencies

• DEPARTMENT OF LABOR
• Office of Labor-Management Standards

[Federal Register Volume 86, Number 248 (Thursday, December 30, 2021)]
[Rules and Regulations]
[Pages 74356-74371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28266]


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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: Final rule.

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SUMMARY: This rule rescinds the final rule published in the Federal 
Register on March 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) withdraws the rule 
implementing the Form T-1, because it has determined that the 2020 
rulemaking record, particularly its analysis of the burden and the 
benefit of the rule, was insufficient as a matter of policy to justify 
the trust reporting requirements set forth in the 2020 Form T-1 rule. 
Further, by requiring reporting on entities not controlled or dominated 
by

[[Page 74357]]

labor unions, the Department has determined that the trust reporting 
required under the rule is overly inclusive and is not necessary to 
prevent the circumvention and evasion of the Title II reporting 
requirements.

DATES: This rule is effective on January 31, 2022.

FOR FURTHER INFORMATION CONTACT: Karen Torre, Chief of the Division of 
Interpretations and Regulations, 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 
``[t]he 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 this title and such 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.''
    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 and their labor relations consultants, and the officers, 
employees, and representatives of these entities. The LMRDA's various 
reporting provisions for labor organizations, their officers, and their 
employees 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. While the vast 
majority of union officers and employees do their work diligently and 
without incident, unfortunately civil and criminal violations sometimes 
occur and, when they do, the union is the victim. Timely and complete 
reporting helps detect instances of labor organization officers, 
employees, or others embezzling or otherwise making improper use of 
such funds and obtain relief for the benefit of the labor organization 
and its members when such improper use occurs.

B. The LMRDA's Reporting and Other Requirements

    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

[[Page 74358]]

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 the Secretary 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.
    The phrase ``trust in which a labor organization is interested'' is 
defined the LMRDA. It ``means a trust or other fund or organization (1) 
which was created or established by a labor organization, or one or 
more of the trustees or one or more members of the governing body of 
which is selected or appointed by a labor organization, and (2) a 
primary purpose of which is to provide benefits for the members of such 
labor organization or their beneficiaries.'' 29 U.S.C. 402(l)

III. Rescission of 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,\1\ 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,'' 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 Form T-1 for each significant 
trust in which it was interested. Id. at 58524.
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    \1\ The Form LM-2 Instructions define a ``subsidiary'' of a 
labor organization: Within the meaning of these instructions, a 
subsidiary organization is defined 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. A subsidiary organization is considered to be 
wholly financed if the initial financing was provided by the 
reporting labor organization even if the subsidiary organization is 
currently wholly or partially self-sustaining. https://www.dol.gov/sites/dolgov/files/olms/regs/compliance/GPEA_Forms/2020/efile/LM-2_instructionsRevised2020.pdf.
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    To address the statutory requirement that trust reporting be 
``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. A labor organization would be required to report on 
an entity only if both sets of criteria were met.
    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:

    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 (the 
second set of criteria for trust status, set forth above) 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

[[Page 74359]]

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, 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). Following an ensuing lawsuit, 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.
    Following dicta in 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 the Employee Retirement Income Security Act 
of 1974 (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 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, constituted a subsidiary 
organization (i.e., a separate organization that is wholly owned, 
controlled, and financed by a single labor organization), 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 
2020 Form T-1 final rule on March 6, 2020. 85 FR 13414.
    Under the 2020 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 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

[[Page 74360]]

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 Form 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 
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 the other unions. Id.
    On May 27, 2021, the Department published an NPRM to withdraw the 
March 6, 2020 final rule. 85 FR 13414. The Department stated its view 
that the trust reporting required under the rule is overly broad and is 
thus not necessary to prevent the circumvention and evasion of the 
Title II reporting requirements. Moreover, upon further consideration, 
the Department expressed concern that the 2020 rulemaking record was 
insufficient to justify the separate trust reporting requirements as 
set forth in the 2020 Form T-1 rule.

B. Reasons for Rescission of the March 6, 2020 Form T-1 Final Rule

    In its NPRM, the Department proposed to rescind the 2020 Form T-1 
rule for two reasons. First, the Department stated its view that the 
trust reporting required under the rule is overly broad, as it includes 
trusts that are exclusively funded by employers. Accordingly, required 
reporting of such employer-funded trusts is not necessary to prevent 
the circumvention and evasion of a union's Title II reporting 
requirements. Second, the Department reviewed the 2020 rulemaking 
record and stated its concern that, as a matter of policy, the 
reporting requirements set forth in the 2020 Form T-1 rule are not 
justified in light of the burden they impose.
    The Department received nine comments in response to the proposal, 
with six comments supporting the rescission. Out of the three 
opposition comments, only one was substantive in nature. As explained 
below, the Department adopts its proposal to rescind the Form T-1, 
based upon the rationales provided in the NPRM. First, the Department 
will explain why the reporting requirements set forth in the 2020 Form 
T-1 rule, as a matter of policy, are not justified in light of the 
heavy burden they impose and the negligible benefits they offer. 
Second, the Department will explain why, even if the benefits could be 
said to justify the burdens, the Form T-1 rule is fatally over-
inclusive, in that it requires reporting on entities that could not be 
used to circumvent and evade the LMRDA reporting requirements and is 
therefore outside the rulemaking authority established by the LMRDA.
Stated Benefits of 2020 Rule Do Not Support Form T-1 Rule in Light of 
Burden Imposed
    As a matter of policy, the Department finds that the 2020 Form T-1 
final rule's stated benefits fail to justify the extensive costs 
imposed. More specifically, the Form T-1 requirements capture largely 
redundant information already captured by the Form 990 filed with the 
Internal Revenue Service (IRS) \2\ and the existing Forms LM-2, LM-10, 
and LM-30 reporting regimes under LMRDA sections 201, 202, and 203. 
Accordingly, even to the extent that the 2020 Rule may have provided 
some intangible benefits, as a matter of policy, the Department now 
views those benefits as outweighed by the tangible and concrete costs 
imposed by the 2020 Rule. Moreover, the information collected is not 
necessary for preventing circumvention and evasion of the LMRDA's 
reporting requirements. Finally, the burdens on the agency are 
substantial and will divert necessary resources from more core 
activities under the statute. The Department thus rescinds the Form T-1 
with today's rule.
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    \2\ See https://www.irs.gov/charities-non-profits/annual-filing-and-forms.
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    As discussed in the NPRM to rescind, the 2020 rule imposed 
significant, quantifiable 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 251,257 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 
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.\3\ 85 FR 13437. Multiple commenters--in connection with 
both the current NPRM and the 2020 NPRM--agreed with the Department's 
current policy judgment, that the burden created by the 2020 Form T-1 
is unacceptably high in relation to the rule's benefits. As one 
commenter indicated, over $15 million in costs imposed upon plans (and 
then reimbursed by the unions) in the first year would be ``depriving 
[union members and fund participants] of benefits that would otherwise 
be paid to or on their behalf, benefits needed especially during the 
``economic uncertainty due to the COVID-19 pandemic.'' One training 
fund commenter also disputed the estimates of annual burden hours. The 
commenter estimated that it would take twice as long as the Department 
determined to acquire and report the information, stating that the 
estimates fall short especially for unions facing the significant 
difficulties associated with determining whether they need to file and 
who will file in multiple union situations.
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    \3\ 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.

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[[Page 74361]]

    These burdens are in addition to existing Form LM-2 recordkeeping 
and reporting burdens, and union members ultimately bear these costs.
    In the 2020 rule, the Department declared, ``[t]he 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.'' 85 FR 13414, 13433. 
When attempting to articulate the benefits, the Department did not 
articulate with specificity the benefits that would justify the policy 
underlying the new Form T-1. The preamble discussed the need ``to curb 
embezzlement'' and ``to safeguard democratic procedures'' and ``to 
promote labor organization self-government'' and to ``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.'' Id. The narrative did not, however, 
adequately explain how these intangible benefits justified the burden 
imposed by the Form T-1's reporting requirements, given that the Form 
T-1 would provide a largely redundant reporting regime to the existing 
Form 990, as well as the existing Form LM-2, LM-10, and LM-30 reporting 
regimes under LMRDA sections 201, 202, and 203.
    For example, as stated in the NPRM to rescind, the 2020 rule failed 
to adequately demonstrate how the Form T-1 would actually provide 
benefits in terms of detecting and deterring fraud. To the extent that 
the 2020 rule cited examples that purportedly demonstrate how the Form 
T-1 would help detect and deter fraud or prevent 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.
    A general criticism by commenters was that the 2020 Form T-1 rule 
suffered from a lack of supporting evidence and examples, a position 
with which the Department now agrees, even concerning its primary 
example, UAW-Fiat Chrysler of America (FCA). While the 2020 rule relied 
heavily on UAW-FCA convictions as grounds for adopting the Form T-1, 
after consideration, the Department now believes, as both a matter of 
policy and a factual consideration, that the cited cases do not provide 
support for the 2020 rule. That those convictions were secured without 
a Form T-1 reporting regime instead demonstrates that the ability to 
obtain necessary results to adequately protect against bribery and 
other violations of the labor-management process already exists, 
undermining the need to impose the additional costs of compliance with 
the Form T-1. Thus, rather than reinforcing the rationale behind the 
2020 rule, that argument substantially undercuts the purported need for 
the new reporting burden.
    Indeed, in recent years and as discussed in the 2020 rule, the 
Department played a key role in investigating and in securing over a 
dozen indictments and convictions in the UAW-FCA National Training 
Center (NTC) bribery and embezzlement scheme, all without the Form T-1. 
See 85 FR 13421. Working jointly with the Department of Justice and 
others, the Department of Labor helped secure 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. The 2020 rule offered no explanation as to what additional 
benefit, if any, the Form T-1 would have provided in this context. 
Indeed, OLMS already has a well-established history of effectively 
enforcing the LMRDA by combatting labor-management fraud without a Form 
T-1. See the OLMS enforcement results for the period 2001-present: 
https://www.dol.gov/agencies/olms/criminal-enforcement. As discussed 
below more fully, having to invest in the collection and enforcement of 
an unnecessary Form T-1 report may actually be detrimental to detecting 
fraud, because it would require that the Department redirect limited 
resources away from proven, effective means of uncovering and 
prosecuting such instances of possible financial corruption.
    While the 2020 rule acknowledged existing transparency safeguards, 
it stated that the Department needed to ``add necessary safeguards 
intended to deter circumvention or evasion of the LMRDA's reporting 
requirements.'' See 85 FR 13420. However, upon review, existing OLMS 
reporting requirements already provide sufficient information that 
enables OLMS to detect financial misconduct and deter circumvention or 
evasion of the existing reporting requirements. The Form T-1 added 
substantial burdens but no readily discernible benefits to the agency's 
responsibility to deter circumvention or evasion of the statute's 
reporting requirements. Since the LMRDA Section 202 and 203 reporting 
requirements would require disclosure of the FCA and similar 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 FCA and will continue to have that authority to 
investigate similar matters, all without a Form T-1. See 29 U.S.C. 432-
433 and 531.\4\ Further, even if the Form T-1 provided a marginal 
increase in transparency, the clear, quantified burdens would far 
outweigh such intangible and small benefits.
---------------------------------------------------------------------------

    \4\ 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. 
For example, the NTC filed a Form 990 with the Internal Revenue 
Service (IRS) 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). 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.
---------------------------------------------------------------------------

    Moreover, in terms of the benefits of general transparency to union 
members and union self-governance, the Department now believes that the 
2020 rule did not provide sufficient reason to establish that the 
information provided by the Form T-1 would be significantly greater 
than what members currently enjoy. Consequently, the Department now 
believes that the Form T-1 established a redundant reporting regime.
    More precisely, the rule did not identify any significant, concrete 
benefits gained through general transparency that were not already 
largely available through existing, publicly-available sources. Even 
without the 2020 rule, union members will continue to definitively 
benefit from transparency via mechanisms outside of the Form T-1 
reporting regime. Members will continue to receive detailed information 
about their union's finances, including the identity and contact 
information of their 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, such as 
the Form 990 filed with the IRS, which provides reporting comparable to 
the Form T-1.\5\ The IRS Form 990 requires comprehensive reporting of 
financial information such as assets, liabilities,

[[Page 74362]]

officer and director payments, leases, and other financial 
transactions.\6\ This form provides 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.
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    \5\ See https://www.irs.gov/charities-non-profits/annual-filing-and-forms.
    \6\ See id. The Form 990 includes simplified filing options for 
smaller organizations that require less disclosure of financial 
information than their more detailed versions or the Form T-1. The 
Form 990-N is for organizations with annual gross receipts that are 
normally $50,000 or less. However, the Form T-1 does not have an 
assets schedule and a very small entity or an entity with less than 
$50,000 in gross receipts is unlikely to have transactions to 
itemize on the Form T-1. Therefore, the Department has concluded 
that the marginal potential benefit gained from additional 
information about these smaller entities on a Form T-1 does not 
justify the burden imposed by the Form T-1.
---------------------------------------------------------------------------

    Additionally, the examples provided in the 2020 rule illustrate the 
redundancies. In particular, the 2020 rule cited examples of fraud 
involving apprenticeship and training plans and other ERISA-covered 
entities, all of which EBSA uncovered with its existing enforcement 
authority pursuant to ERISA. See 85 FR 13419-20. The 2020 rule provided 
other examples and hypothetical situations as purportedly demonstrating 
the need for the Form T-1 to detect and deter fraudulent activity. 
However, upon additional review, these examples do not 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 would already recognize this financial 
connection more directly via the IRS Form 990, Schedule L (Transactions 
with Interested Persons).\7\ The Form 990 actually provides greater 
transparency in this regard than would the Form T-1, because Schedule L 
of the 990 directly relates to payments to interested parties, whereas 
the Form T-1 would rely on union members to make inferences and then 
conduct separate inquiries to establish union connections to the 
recipients of trust payments. This greater transparency on the Form 990 
undercuts this rationale as a basis for supporting a Form T-1 reporting 
requirement.
---------------------------------------------------------------------------

    \7\ See: https://www.irs.gov/forms-pubs/about-schedule-l-form-990.
---------------------------------------------------------------------------

    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.\8\ 
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. After the rescission of the Form T-1 
provided for by this rule, the Department will continue to require 
unions to identify their trusts on the Form LM-2 report, along with 
information that would enable the public to locate the Form 990 or 
other reports covering such trusts.
---------------------------------------------------------------------------

    \8\ Like the Form 990 and Form 5500, the Form 1065 is an 
information return used to report the income, gains, losses, 
deductions, credits, and other information from the operation of a 
partnership. A partnership does not pay tax on its income, but 
passes through any profits or losses to its partners. Partners must 
include partnership items on their tax or information returns. 
https://www.irs.gov/forms-pubs/about-form-1065. The term 
``partnership'' includes a limited partnership, syndicate, group, 
pool, joint venture, or other unincorporated organization, through 
or by which any business, financial operation, or venture is carried 
on.
---------------------------------------------------------------------------

    In sum, the Department does not identify any significant benefits 
derived from the Form T-1, but, even if the 2020 rule provided some 
benefits that might be used by union members and the Department to 
prevent circumvention or evasion of Title II reporting obligations, the 
concrete, quantified burdens outweigh such marginal benefits. The 
following observations about the 2020 rule's burdens support that 
conclusion and, thus, support rescission.
    First, the 2020 rule's failure to consistently apply exemptions 
increases the burdens associated with the rule without providing 
commensurate benefits. In particular, the 2020 rule did not adequately 
explain why the Form T-1 exempted unions from submitting Form T-1 
reports covering trusts that already file the EBSA Form 5500 \9\ 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.
---------------------------------------------------------------------------

    \9\ See https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500.
---------------------------------------------------------------------------

    The 2020 rule focused on the unique nature of union financial 
reporting required under the LMRDA. The Department continues to hold 
that IRS Form 990 reporting by labor organizations does not provide a 
substitute for Form LM-2, LM-3, and LM-4 reporting by labor 
organizations, since the LM reports provide information tailored to the 
unique labor-management purposes of the LMRDA. See 68 FR 58375, 58395 
(2003). However, the 2020 rule did not provide an adequate 
justification as to why such Form 990 reporting is not a sufficient 
substitute for Form T-1 reporting. See 85 FR 13425-26.
    Commenters largely agreed with the Department's reasoning, set 
forth in the NPRM, that the inclusion of a Form 5500 exemption and a 
Form 990 non-exemption, was unexplained and unsupported. One commenter 
confirmed that ``a majority (if not all) of the trusts that will be 
reported under the rule are tax exempt entities that are required to 
file an annual Form 990 with the Internal Revenue Service.'' As the 
commenter explained, in the 2020 rule, the Department did not indicate 
what information was needed beyond what would be contained in the Form 
990, and because there was no evidence of need beyond that information, 
``any burden imposed by the rule is unwarranted.''
    The Department drew an arbitrary and unexplained line between Form 
5500 and the Form 990. To be consistent, the Department should have 
also exempted Form 990 filers; however, such an exemption would 
encompass nearly the entire universe of Form T-1 filers. Thus, if it 
had included a Form 990 exemption, the resulting Form T-1 would then 
have failed to capture any reportable activity and the Form 990 would 
have captured that activity--as it does without the rule. Such an 
underlying failure supports the withdrawal of this fundamentally flawed 
form.
    Even when the Department used an existing form to create an 
exemption from the 2020 rule, the exemption was inconsistent with other 
Department policies. As one union commenter noted, the Form 5500 
exemption failed to protect trusts from undue burdens, particularly 
apprenticeship and training plans. ERISA gives the Department the 
ability to exempt filers from the long Form 5500 when it is 
``unnecessarily burdensome and costly,'' which EBSA has done by 
allowing certain apprenticeship and training plans to file

[[Page 74363]]

a short notice instead. Thus, in recognizing the Form 5500 as a nearly 
identical form, OLMS has through the Form T-1, the commenter argued, 
indirectly required the sort of financial reporting that EBSA has 
already decided is not necessary due to the burden it creates.
    Second, adding to the burden on the filing unions, the information 
necessary to complete the report is not in the control of the reporting 
union; it is in the control of the trust. Notwithstanding that many, if 
not most, of the trusts on which unions are required to report are 
operated jointly and equally with employers, the unions alone are 
forced to seek trust cooperation when such trusts are under no legal 
obligation to cooperate. The union has no ability to compel the trust 
to provide its 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 have a fiduciary obligation to 
the trust participants and beneficiaries and not to the union, would 
agree to provide their records to the union. Compiling such records and 
providing them to the union could 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 why trustees would 
approve complying with union requests, and it is equally unclear how a 
union could compel a trust that refuses to provide records to provide 
them.
    In that regard, a number of union commenters indicated that the 
Department has underestimated the costly complications that arise from 
requiring labor organizations to acquire and accurately report 
information from trusts that are not required to comply with the LMRDA, 
making such a rule unjustified. One commenter indicated that the trust 
may simply choose not to comply. As the commenter explained, the trust 
is under no obligation to fulfil the union's request, and, therefore, 
the union may through no fault of its own be unable to comply with the 
Form T-1 reporting requirements despite a desire to do so. A trust 
could reasonably refuse to provide the union with the information 
requested based on its fiduciary obligation to beneficiaries if it were 
to ``determine that it is not an appropriate use of resources to track 
the necessary information or to turn that information over to the 
union.'' \10\ Another commenter cited how the preamble for the 2020 
Form T-1 justified the Form T-1 reporting using cases where the 
administrators of plans on which unions would be required to report 
were guilty of `` `preparing and filing false tax returns . . . and 
deliberately providing misleading and incomplete testimony.' '' The 
very premise of the Form T-1, the commenter reasoned, is flawed because 
the information supplied by the ``assertedly corrupt plans cannot be 
relied upon.''
---------------------------------------------------------------------------

    \10\ While the 2020 rule argued that such concerns of fiduciary 
obligation would be resolved by the union fully compensating the 
trust for the resources and time it spent, a trust might nonetheless 
refuse to comply. Staff time and resources would nonetheless be 
delayed in real time, being kept from their usual usage in 
furtherance of the trust's business of providing benefit to its 
members for the sake of another entity's legal obligation. A trustee 
with a fiduciary obligation could reasonably decline to comply 
merely so that staff and resources were not diverted from their 
duties. In other words, while the union might be able to compensate 
for lost time, and despite the longstanding adage to the contrary, 
money is not time. Work hours will be consumed, which could result 
in a trust being delayed in meeting its own financial filing 
obligations, such as completing the IRS 990 or the Form 5500. The 
trustee faced with the complicating factors could choose to avoid 
the complications and delays entirely.
---------------------------------------------------------------------------

    One commenter indicated how auditing the Form T-1 will be 
practically impossible because the officers will not possess knowledge 
of the accuracy and completeness of information provided by the trust 
(assuming it agrees to provide information) and the union will not 
possess the underlying financial records that support the information 
the union was given by the trust. In such situations, the commenter 
argues, it is likewise unclear how labor organization officers are thus 
reasonably held ``responsible for maintaining records in sufficient 
detail to verify, explain, or clarify the accuracy and completeness of 
the reports,'' as the final rule required.
    A union officer must sign the Form T-1 and do so under penalty of 
perjury; however, as another commenter stated, officers would be forced 
to certify, under oath, as to their knowledge of the accuracy and 
completeness of information provided by a trust, even though they lack 
a sufficient basis to vouch for its accuracy. Ignoring these concerns, 
as the commenter put it, ``grossly discounts the costs of filing Form 
T-1 reports on apprenticeship plans.''
    Third, in the NPRM, the Department considered and still considers 
the Form T-1 reporting regime as imposing substantial and unjustified 
burdens from the perspective of multiple labor unions filing for a 
single shared trust. The Department rejects this outcome as a matter of 
policy in light of the substantial burdens labor unions will face to 
submit these redundant reports, which in turn will impose significant 
costs on the Department in terms of time and agency resources necessary 
to review those redundant reports. And even if, instead of multiple 
unions filing redundant, and thus unnecessary, forms for a single 
trust, the Department determined a means by which just a single union 
would file for the others, the result would be an arbitrary choice. The 
Department would be forcing one union to take on all the legal 
obligations associated with the completion and signing of the form, 
even in situations where it would be especially arbitrary to do so, 
such as when the selected union has no more a share of authority over 
the trust than any of the other, non-filing unions. This outcome would 
also impose costs on the Department in terms of needing to review 
redundant reports, which the Department now finds that, as a matter of 
policy, are not justified in light of those resource costs.
    The 2020 rule acknowledged this problematic dynamic. The rule 
includes a provision allowing one union to file the Form T-1 report for 
the other unions. However, the Department now considers that solution 
unworkable as a matter of policy. As one commentator explained, 
different unions will interpret the Form T-1 reporting requirements 
differently and may therefore ``refuse to cede control of the reporting 
requirement to another for fear the report would be done incorrectly,'' 
resulting in the filing of duplicative reports despite the purported 
workaround. Furthermore, the due date for the Form T-1 for different 
unions may be different because the contributing unions are not on the 
same fiscal year and thus unions are unlikely to ``risk noncompliance 
and substantial penalties by agreeing to let another union file on its 
behalf'' on a date after the first date any union related to a 
particular trust would be obligated to file the Form T-1 were it solely 
responsible for filing. Another commenter indicated also how the burden 
on a minimally contributing union in such joint situations is patently 
unfair, their officers then being as ``personally responsible for the 
filing of a report and to require them to maintain data necessary to 
verify the reported information for at least five years . . . [even] in 
situations where the labor organization's contribution is minimal.''
    Another concern is that, with many trusts that have multiple, non-
affiliated unions contributing, the individual unions would likely be 
unable to determine if they together with the others effectively 
``dominate'' the fund. As one commenter indicated, unions in such 
arrangements ``will commonly not know the extent of another labor

[[Page 74364]]

organization's involvement or contribution to the entity.''
    The Department believes that this, and the other practical 
complications mentioned above, could result in a substantial number of 
delinquencies, many through no fault of the unions. Such a result would 
force the Department to direct substantial amounts of valuable, scarce 
resources to investigate these delinquencies, even where the Department 
reasonably predicts that the substantial of such cases would not 
involve efforts to circumvent or evade Title II reporting requirements, 
but rather, technical or procedural missteps resulting from unworkable 
policy decisions. Further, the Department would need to expend 
significant resources creating and maintaining an electronic Form T-1 
and database; 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 and complete necessary information from the trust. The resources 
would thus inevitably be pulled away from other, well-settled areas of 
enforcement, such as officer elections, alleged financial malfeasance, 
delinquent reporting on unions'' annual financial reports, among many 
others. From the standpoint of promoting sound agency policy decision-
making and resource allocation, the 2020 rule falls far short. Such 
unreasonable policy decisions and the ensuing unjustified costs to both 
the regulated community and Department justify rescission of the 2020 
Form T-1 final rule.
    Consequently, for all the reasons above, the Department rescinds 
the 2020 Form T-1 rule. The reporting requirements set forth in the 
2020 Form T-1 rule are not justified in light of the heavy burden they 
impose and the negligible benefits they offer.
The 2020 Form T-1 Rule Is Overbroad Because It Requires Reporting on 
Certain Trusts That Cannot Be Used To Circumvent or Evade LMRDA 
Reporting
    In addition to the foregoing policy reasons which alone justify 
rescission of the Form T-1, it is also appropriate to rescind the 2020 
Form T-1 rule because it is overbroad and inconsistent with Title II's 
mandate. The only statutory basis for requiring reporting on the 
activities of entities that are not labor organizations as defined by 
the LMRDA is if the Department determines that such reporting is 
necessary to prevent circumvention or evasion of the statute's 
reporting requirements. See 29 U.S.C. 438. The 2020 rule is deficient 
because it requires reporting on certain entities, such as Taft-Hartley 
funds, without the requisite showing that such reporting is necessary 
to prevent circumvention or evasion of the reporting requirements. This 
over-breadth requires the rule to be rescinded. It is not enough that 
the Form T-1 may capture some transactions that could prevent the 
circumvention or evasion of the LMRDA's reporting requirements. The 
rule is defective if it necessarily captures transactions as to which 
there is no statutory basis permitting the capture. American Federation 
of Labor & Congress of Industrial Organizations v. Chao, 409 F.3d 377, 
389 (D.C. Cir. 2005) (finding that although ``[t]here can be little 
doubt that some of the trust reporting the Secretary has required on 
Form T-1 is tied to a union's financial reporting requirements under 
LMRDA Title II,'' and therefore lawful, the rule also ``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,'' and thus must be vacated).
    Under the Act, the Secretary's rulemaking authority is limited. 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 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, 
and only 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 
regulate 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 
financial condition and operations under the LMRDA. The Department now 
believes that the 2020 Form T-1 rule was overly broad, requiring 
financial reporting by many types of 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 provides 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 fund trusts 
under section 302(c) of the Labor Management Relations Act (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 the section 3(l) ``trusts in which a 
union is interested'' term is sufficiently broad to encompass Taft-
Hartley plans. 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

[[Page 74365]]

Id.). Significantly, each financial transaction to be reported is one 
that reflects upon the union's financial condition and operations. 29 
U.S.C. 201(b). Consequently, trust reporting is only permissible to 
prevent a labor union from using a trust to circumvent reporting of the 
labor union's finances.
    However, money contributed to a Taft-Hartley plan does not bear on 
the labor union's finances and is not by law required to be reflected 
on a labor union's Title II reporting; accordingly, the T-1 Form cannot 
be deemed necessary to prevent circumvention or evasion of the 
reporting of union money subject to Title II. The 2020 Form T-1 rule 
presumes that employer contributions to Taft-Hartley plans establish 
labor union financial domination of a trust. After review, the 
Department has determined that money contributed by an employer to a 
Taft-Hartley fund is not property of the union. Thus, its disclosure 
does 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 as 
ordinary employer funds--even if placed into such a trust--are not 
within the control of the union, and would in no instance be reported 
by a union under the LMRDA reporting requirements.
    One union commenter in particular agreed with the Department's 
position in the NPRM that the 2020 Form T-1 is overbroad because it is 
not targeted at preventing evasion or circumvention of the labor 
organization's reporting requirement. It argued that the rule attempts 
to ``erase the distinction between benefit plan and labor organization 
reporting,'' in defiance of the will of Congress, which chose to 
address the McClellan Committee concerns regarding labor organization 
pension, health, and welfare fund reporting in the Welfare and Pension 
Fund Act of 1958 and later superseded by ERISA.
    Another union commenter argued that the 2020 Form T-1 is not 
necessary to prevent circumvention or evasion of LMRDA reporting 
requirements because properly structured Taft-Hartley funds are by 
definition not controlled by unions. Because Taft-Hartley fund assets 
are not--and could not be--assets of the union, the Form T-1 cannot be 
said to be necessary to prevent circumvention of union reporting 
requirements.
    Commenters also supported the Department's view that counting 
employer contributions towards union financial dominance is not 
justifiable. As one union commenter stated, ``[e]mployers are separate 
business entities that have their own assets, management, employees, 
and business operations.'' Further, the commenter pointed out, even in 
consideration of an employer's failure to contribute according to the 
terms of a CBA with a union, the union will file a grievance under the 
CBA's arbitration clause or will file a suit under LMRA section 301 for 
violating the contract, demonstrating that the union does not have 
control or authority over the disposition of the employer's assets. 
Rather, ``the dispute is treated [under LMRA Section 301] as one 
involving the employer's breach of its contractual obligation to 
contribute to the fund, not as a dispute over the employer holding on 
to the union's money.'' The commenter went on to explain, as did other 
commenters, that the idea of employer contributions being union 
controlled funds is expressly contradicted by the logic of section 302 
of the LMRA; the employer willfully giving funds to the union in such a 
manner would be illegal, but for the explicit exception made in part 
(c) of that section, which acknowledges such contributions as still 
being employer funds. However, even when employer funds reach the plan, 
as one commenter reminded, under EBSA regulation and advisory opinions 
the assets immediately become assets of the plan. Thus, at no point in 
the lifecycle of the employer's contribution do the funds become 
``union funds.'' See DOL ERISA Advisory Opinion 93-14A; Preamble to 
Prohibited Transaction Exemption 76-1, 41 FR 12740 at 12741 (Mar. 26, 
1976).
    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. One commenter argued specifically that this rationale 
also applied to Labor Management Cooperation Committee funds. Another 
union commenter made the observation that technically (and 
nonsensically) under the 2020 Form T-1, a fund in which 100% of the 
funds came from the employer and was wholly governed by an equal number 
of employers and union officials would nonetheless still be counted as 
proof of ``union dominance,'' a result that simply does not comport 
with the facts. Finally, the 2020 Form T-1 rule's preamble failed to 
establish that the Form T-1 would be ``necessary to prevent 
circumvention and evasion'' of the LMRDA reporting requirements.
    First, the 2020 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, an objection cited by a number of comments. And, of 
course, if a union transferred funds to a Taft-Hartley trust, the 
transaction itself would be reportable on the union's LM report.
    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 2020 Form T-1 
rule is 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.
    Second, the Department argued in the 2020 rule that ``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.'' 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 2020 Form 
T-1 final rule how the Form T-1 would have ``close[d] a reporting gap 
where labor organization finances related to LMRDA section 3(l) trusts 
were not disclosed to members, the public, or the

[[Page 74366]]

Department.'' (emphasis added) 84 FR 25416.\11\
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    \11\ To the extent the rule was premised simply on the 
proposition that workers ought to know what employer payments were 
made to Taft-Hartley funds and whether those payments could be 
characterized as diversions from wages, the Department notes that 
Section 104 of the Act requires that unions ``forward a copy of each 
collective bargaining agreement made by such labor organization with 
any employer to any employee who requests such a copy and whose 
rights as such employee are directly affected by such agreement.'' 
Those collective bargaining agreements set out the measure of 
contributions employers have agreed in bargaining to contribute to 
Taft-Hartley funds.
---------------------------------------------------------------------------

    Further, the Department rescinded the Form T-1 in 2010 because it 
lacked statutory authority, but the 2020 rule did not adequately 
address this legal concern. See 75 FR 74938. Indeed, while 
acknowledging 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 
nonetheless prevent the circumvention of employer or labor organization 
officer or employee reporting under LMRDA Sections 202 and 203. See 85 
FR 13422. However, as noted in the NPRM, 86 FR 28510, the 2020 rule 
provided no evidence that employer or labor organization officials 
circumvented or evaded their reporting requirements through a trust. 
Moreover, none of the comments opposing rescission addressed the issue 
of potential circumvention or evasion of employer or labor organization 
officer or employee reporting requirements.
    Nor did the 2020 rule justify its imposition of the T-1 requirement 
solely on labor organizations. In that regard, one commenter in support 
of rescission agreed with the NPRM's conclusion that if the Department 
were to require reporting on payments made from an employer to a trust 
pursuant to a CBA, then such reporting requirements should be placed on 
the employer, not the labor organization. Because such financial 
reporting should be required of an employer and not the union, any 
failure to report employer payments made to a trust pursuant to a CBA 
could not constitute a union's circumvention or evasion of its LMRDA 
reporting requirements. The same commenter also observed how the 2020 
Form T-1 rule relied in part on the LMRDA's employer reporting 
requirements, and not the union reporting requirements, such as ``when 
the employer diverted unlawfully funds intended for the trust to a 
union official,'' again raising the question of why the filing of the 
Form T-1 reports, at least in the instance of apprenticeship plans, 
fell solely on labor organizations and not employers.
    Further, in addition to the Form T-1 reaching beyond the scope of 
Title II because of its application to Taft-Hartley plans, its 
overbreadth renders the rule unnecessary as a matter of policy, since 
the transparency benefits to the public and enforcement authority for 
the Department already exist concerning such plans. As stated above, 
the public already has access to disclosure for such plans through the 
IRS Form 990 and EBSA Form 5500. Further, the Forms LM-10 and LM-30 
would capture unlawful payments from employers to unions or union 
officials through Taft-Hartley plans, thus ensuring that the Department 
has enforcement authority concerning such payments. In that regard, the 
Department has an extensive and successful enforcement history of over 
60 years without the Form T-1, as evidenced by the FCA enforcement 
activities. See: https://www.dol.gov/agencies/olms/criminal-enforcement.
    Moreover, the 2020 rule focused primarily on capturing non-exempt 
Taft-Hartley plans, and, indeed, the rulemaking record suggested that 
most Form T-1 reports filed would cover Taft-Hartley plans. However, 
even if the Form T-1 would capture some non-Taft Hartley plans, as 
detailed above in the discussion of the Department's policy 
justifications for rescinding the Form T-1, the burden to both the 
regulated community and the Department to comply with and enforce the 
Form T-1 reporting regime do not justify any marginal benefit.
    Consequently, from a policy perspective, the Department will 
rescind the 2020 Form T-1 rule because its application to Taft-Hartley 
plans was overly broad and any marginal, unquantifiable benefit is 
eclipsed by the immense burden imposed. Separately, the Department will 
rescind the 2020 rule because its application to Taft-Hartley plans 
exceeds the Department's scope of authority under Title II. In the 
Taft-Hartley context, a union's reporting (or failure to report) on the 
Form T-1 could not prevent a union's use of a trust to circumvent or 
evade its own reporting requirement because it is the employer's, and 
not the union's, finances that are being contributed to the Taft-
Hartley plan at issue.
Other Comments Regarding the 2020 Form T-1 Final Rule
    First, as one union commenter observed, the rule also set up the 
prospect of creating confusion by failing to provide a de minimis 
exemption for funds. A union's contribution of a single dollar could 
potentially trigger the rule's stringent standards, if that 
contribution, in combination with contributions from other unions, 
establishes financial domination over the trust (as defined in the 
rule), thus requiring reporting on trusts that may be of minimal (or 
no) interest to members. Such minimal contributions may also lead to 
unions filing multiple reports, again for trusts that may not be of 
interest to members. Furthermore, if the contribution is less than 
$10,000, there would be greater confusion than before, because members 
would know that some amount of money was contributed but would not know 
the exact figure, whether $1 or $9,999. The Department agrees that this 
possibility would support a de minimis exemption, and the lack of one 
further demonstrates that the burden of the Form T-1 outweighs its 
potential benefits.
    Two anonymous comments offered general arguments against 
rescission. One argued for greater ``governance'' and 
``accountability'' and in favor of ``total transparency,'' without any 
evidence justifying why existing reporting does not provide the 
necessary governance and accountability. Further, even if true, this 
reasoning does not provide legal support for the Form T-1, as it does 
not demonstrate how the form would prevent the ``circumvention or 
evasion'' of the reporting requirements required by the statute. The 
commenter did not address this point. Nor did the commenter balance 
transparency with burden. The other anonymous comment inquired into 
whether the Department would bring reporting requirements for ``labor 
organizations and section 3(l) trusts in line with [c]ontemporary 
expectations for the disclosure of financial information.'' As stated, 
after further review, the Department has determined that existing 
reporting requirements already provide the necessary disclosures, so 
the duplicative reporting offered by the Form T-1 does not justify the 
significant burdens on unions.
    One commenter, a union member, commented against the rescission of 
the Form. The commenter argued that rescission would serve as ``a 
disadvantage in combating corruption and a hinderance [sic] to self 
governance,'' and the commenter supported this argument by providing 
three real examples in which the commenter asserted that the 2020 Form 
T-1 would have been helpful. However, as the commenter indicated, each 
entity discussed in the examples, which included two ``betterment 
funds'' and a market recovery fund, filed the Form 990, a form that, as 
the Department concluded, and many commenters

[[Page 74367]]

concurred, provides the necessary transparency. Moreover, it appears 
that the union ``betterment fund'' constitutes a wholly-owned 
subsidiary of the member's union, which the union already reports on 
its annual Form LM-2 report. As for the market recovery fund mentioned 
by the commenter, it appears from a review of the commenter's union's 
Form LM-2 report that the fund constitutes a union fund that the union 
already reports on the Form LM-2. Thus, the Form T-1 would not have 
covered those funds. Further, the Form LM-2 actually provides greater 
detail than the Form T-1 would have provided, and OLMS retains 
authority to pursue an amended Form LM-2 report if the union did not 
submit it accurately. OLMS also retains investigative authority, in the 
event union officials committed fraud in maintaining the fund. The Form 
T-1 would also have not covered the management-side ``betterment 
fund,'' since it would not appear to meet either the Form T-1's union 
managerial control or financial domination test.
    The commenter also indicated that he ``attempts to keep track of 
the union's financial affairs,'' and the Form T-1 would ``help rank-
and-file members to put the pieces of [the] financial puzzle 
together.'' The Department appreciates the commenter's input but 
respectfully disagrees. A separate trust is not, per se, part of the 
union's financial affairs, unless the trust is being used to circumvent 
or evade the union's reporting. The commenter did not describe how the 
Form T-1 would serve such a purpose, nor how existing reporting 
requirements, such as the Form 990, are inadequate to provide general 
trust transparency (even assuming that the LMRDA authorizes such 
transparency, which it does not). As shown, the 2020 rule's rulemaking 
record does not reflect the benefits of the Form T-1 that would justify 
the significant, additional burden on unions, particularly since union 
trusts typically already file the Form 990, generally providing similar 
if not greater detail than does the Form T-1. The Department reiterates 
that greater transparency alone is not sufficient to justify LMRDA 
section 208 rulemaking. Instead, there must be a showing that the 
report is necessary to prevent circumvention and evasion of the 
statutory reporting requirements.
    Finally, the commenter, seemingly acknowledging the costs of the 
Form T-1, suggested that the union could offset those costs by forgoing 
purportedly wasteful expenses. Even assuming that unions could or 
should curtail certain expenses, an assumption not supported by the 
rulemaking record, this fact would not independently justify the cost 
and burden of the Form T-1 in light of the limited benefits that the 
Form would provide.
    Therefore, in light of the foregoing concerns, the Department 
rescinds the rule implementing the Form T-1 because, after reviewing 
the 2020 rulemaking record as well as the current rulemaking record, it 
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. 
Further, 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.

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

A. Changes to the Form LM-2

    The Department received no comments upon, and therefore implements, 
the following changes to the Form LM-2 Labor Organization Annual 
Report, which implement the rescission of the Form T-1:
    1. Section IX--Labor Organizations In Trusteeship: The Department 
revises this section to remove any reference to the Form T-1.
    2. Section XI--Completing Form LM-2: The Department changes the 
instructions to Item 10 (Trusts or Funds). The instructions for Item 10 
are 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 Form LM-2 changes in the accompanying 
Information Collection Request (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 also removes 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, and as proposed, 
the Department will now 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. The Department did not receive any comments on 
mandatory electronic filing.

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.\12\ 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).
---------------------------------------------------------------------------

    \12\ 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

[[Page 74368]]

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 rule).\13\ As a result of the Department 
rescinding the Form T-1, 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 one Form T-1). The Department estimated 
in the 2020 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.\14\ 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.\15\ The weighted average 
hourly wage is $36.53.\16\ 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).\17\
---------------------------------------------------------------------------

    \13\ To the extent they have not already incurred those costs, 
the savings set out in text would be greater.
    \14\ For more details, see the Paperwork Reduction Act section 
below.
    \15\ 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.
    \16\ 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.
    \17\ 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.

B. Summary of Costs

    This final 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 final rule, the 
Department rescinds the Form T-1, as the 2020 Form T-1 final rule was 
duplicative of other existing reporting requirements, did not prevent 
the circumvention or evasion of the LMRDA reporting requirements, and 
provided no evidence that it detected or deterred 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 provides labor organizations with 
additional resources to devote to existing reporting requirements.

D. Alternatives and Comments Received

    As mentioned in the NPRM concerning 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.
    The Department did not receive any comments that specifically 
address the NPRM's regulatory impact analysis.\18\
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    \18\ One comment in support of rescission contended that the 
Form T-1 rule's estimates of the burden hours for the form should 
have been doubled or more, and the commenter noted the logistical 
difficulty of getting information from the interested trust to the 
labor organization.
---------------------------------------------------------------------------

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 final rule will not 
have a significant economic impact on a substantial number of small 
entities because the final rule contains no new collection of 
information. Rather, it only relieves the additional collection burden 
imposed upon labor organizations through the rescission of the 
regulations published on March 6, 2020.
    The 2020 Form T-1 rule's Final Regulatory Flexibility Analysis 
(FRFA) considered whether it would place a significant impact on a 
substantial number of small business entities. That rulemaking analysis 
considered a labor organization a ``small business entity'' if they had 
average annual receipts of less than $8 million.\19\ Based on previous 
standards utilized in other regulatory analyses, the threshold for 
significance was set at 3% of annual receipts, while a substantial 
number of small entities would be 20 percent. The 2020 Form T-1 final 
rule at the time would have impacted 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 
had annual receipts less than $8 million. There were 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 a 7.30 percent impact.
---------------------------------------------------------------------------

    \19\ See https://www.sba.gov/document/support--table-size-standards.
---------------------------------------------------------------------------

    Thus, the rule would have impacted 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). Both these figures would have been below the threshold 
to constitute a ``substantial''

[[Page 74369]]

number of small entities. See 85 FR 13439. Given that this rulemaking 
merely eliminates even those non-substantial costs, this rule cannot 
constitute a substantial cost.
    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 final 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 Final Rule

    The following is a summary of the need for and objectives of the 
final rule. A more complete discussion of various aspects of the 
proposal is found in the preamble.
    The final rule rescinds 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 final 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 constitutes 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 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. This final rule eliminates these burdens and costs for future 
years. This final 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

[[Page 74370]]

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 require 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 on the Form LM-2, 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 among 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 2020 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 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 final 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 rescission of the Form T-1. The rescission of the Form T-1 
results 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 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, which the Department will 
implement as proposed. These changes include mandatory electronic 
filing for the simplified annual reports and 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 
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. The Department did not receive any comments on these 
proposed changes.

D. Conclusion

    As this final 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 and revise the PRA 
clearance to address the clearance term. 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 (this link will be updated 
following publication of this rule) 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.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule would not constitute 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,

[[Page 74371]]

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 amends 29 CFR parts 403 and 408 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. Amend Sec.  403.2 by removing paragraph (d).

0
3. Amend Sec.  403.4 by revising paragraphs (b)(3) and (b)(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 this paragraph (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. Amend Sec.  403.5 by removing paragraph (d).


Sec.  403.8   [Amended]

0
5. Amend Sec.  403.8 by removing 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 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 22nd day of December, 2021.
Jeffrey R. Freund,
Director, OLMS.
[FR Doc. 2021-28266 Filed 12-29-21; 8:45 am]
BILLING CODE 4510-86-P