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Federal Register / Vol. 86, No. 248 / Thursday, December 30, 2021 / Rules and Regulations
the rule helped bring the reporting requirements for labor organizations and section 3l trusts in line with contemporary expectations for the disclosure of financial information and prevent the circumvention or evasion of the LMRDAs 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 T1 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 T1 rule includes an exemption for section 3l 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 T1 and a copy of the audit. Id.
Unlike the 2008 rule, the 2020 rule exempts unions from reporting on the Form T1 their subsidiary organizations, retaining the requirement that unions must report their subsidiaries on the unions Form LM2
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 LM2
report, and also state in their Form LM
2 report that the parent union will file a Form T1 report for the trust. Id. The 2020 rule also allows a single union to voluntarily file the Form T1 on behalf of itself and the other unions that collectively contribute to a multipleunion trust, relieving the Form T1
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
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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 T1 rule.
B. Reasons for Rescission of the March 6, 2020 Form T1 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 unions 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 T1 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 T1, based upon the rationales provided in the NPRM. First, the Department will explain why the reporting requirements set forth in the 2020 Form T1 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 T1 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 T1 Rule in Light of Burden Imposed As a matter of policy, the Department finds that the 2020 Form T1 final rules stated benefits fail to justify the extensive costs imposed. More specifically, the Form T1 requirements capture largely redundant information already captured by the Form 990 filed with the Internal Revenue Service IRS 2 and the existing Forms LM2, LM10, and LM30 reporting regimes 2 See https www.irs.gov/charities-non-profits/
annual-filing-and-forms.

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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 LMRDAs 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 T1 with todays rule.
As discussed in the NPRM to rescind, the 2020 rule imposed significant, quantifiable burdens on Form LM2
filing labor organizations. The Department estimated that there will be at least 810 Form LM2 organizations filing a Form T1 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 T1 are $15,009,801, and in subsequent years the total cost would be $10,385,820.3 85 FR 13437.
Multiple commentersin connection with both the current NPRM and the 2020 NPRMagreed with the Departments current policy judgment, that the burden created by the 2020
Form T1 is unacceptably high in relation to the rules 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 COVID19
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.
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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