National Association of Letter Carriers, Rolando, Frederic

April 2, 2010 The Honorable Denise Boucher Director of the Office of Policy, Reports and Disclosure Office of Labor-Management Standards U.S. Department of Labor 200 Constitution Avenue NW, Room N-5609 Washington, DC 20210 RE: RIN 1215-AB75; Notice of Proposed Rulemaking, Rescission of Form T-1 On behalf of the National Association of Letter Carriers, AFL-CIO, (NALC), I hereby submit the following comments on the Department's proposal to revise certain financial reporting requirements under the Labor Management Reporting and Disclosure Act. That proposal, published in the Federal Register on February 2, 2010, (hereafter "Notice of Proposed Rule Making" or "NPRM") calls for, among other things, the rescission of the 2008 Form T-1 rule and reinstatement of subsidiary organization reporting on the Form LM-2. NALC supports the proposal to rescind the 2008 Form T-1 rule and reinstate the reporting of subsidiary organizations on the Form LM-2. Restoring the prior status quo concerning the financial disclosure of subsidiary entities will eliminate the financial and logistical burdens on NALC and its staff associated with the preparation of the LM-2 and Form T-1 under the 2008 Form T-1 rule. As discussed more fully below, we believe that the Department’s proposal appropriately reverses an earlier attempt by the Department to impose overbroad and unnecessary reporting requirements in favor of the prior reporting rules. We have included in our comments below suggested clarifications which we believe are fully consistent with the letter and spirit of the Department’s proposal. About NALC Founded in 1889 and headquartered in Washington, D.C., the NALC is a labor union with over 290,000 members who are actively employed as letter carriers by the U.S. Postal Service or retired from such employment. As the sole bargaining agent of city delivery carriers employed by the Postal Service, the NALC negotiates a nationwide collective bargaining agreement with postal management and administers the agreement. The current National Agreement with the Postal Service was ratified in September, 2007 with a 90% approval vote. In addition, the union represents both its active and retired members in the Congress and the Executive Branch with respect to legislative and administrative matters affecting the interests of its membership and the Postal Service. NALC's national officers consist of ten resident officers who work at the union's national headquarters in Washington D.C., or its Ashburn, VA location, three national trustees, and 15 national business agents, all of whom are elected for four year terms. Each of the business agents' offices, which are located throughout the United States, employs two to three full-time regional administrative assistants, plus numerous part-time representatives and arbitration advocates. In addition to the resident officers, there are over 100 employees at NALC's national headquarters and about 350 employees at the union’s Ashburn, VA location where it operates the NALC Health Benefit Plan (see discussion below). Slightly more than 2,200 local unions, known as "branches," are affiliated with NALC. Branches represent letter carriers in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam. Approximately seventy-five of those branches presently satisfy the criteria for filing Form LM-2 with the majority of the remaining branches filing Form LM-3. Although the Postal Service, under federal law, is an open shop, approximately 215,000 of the nation's city delivery carriers (92% of the bargaining unit) have voluntarily joined the NALC. Rescission of 2008 Form T-1 NALC supports the Department’s proposal to rescind the 2008 Form T-1 reporting requirements. As discussed in detail by the Department in its NPRM, the existing rule would require unnecessary, expensive, and in some cases duplicative reporting that would not qualitatively improve the transparency of reporting regarding the union’s finances. We agree with the Department’s conclusion that the 2008 Form T-1 reporting requirements were overly broad and that the Form T-1 is not necessary to prevent the circumvention and evasion of the Title II reporting requirements. The 2008 Form T-1 would have compelled burdensome reporting by unions with reportable trusts, and did not distinguish those organizations that are not wholly controlled nor wholly financed by labor organizations. By contrast, by returning to the prior reporting methodology, the proposal appropriately distinguishes between funds controlled by labor organizations from those that are not and would provide for more complete disclosure on one LM-2 filing. Reinstatement of Subsidiary Organization Reporting on the LM-2 Subject to our comments below, NALC supports the Department’s proposal to return to subsidiary reporting on the Form LM-2 or LM-3, whether by consolidating the financial information of the subsidiary with the union’s financial information on the LM-2 or LM-3 form or by the proposed alternative of filing a separate financial statement certified by a public accountant. We also agree with the Department’s conclusion that a third option previously available, the filing of a separate report by the subsidiary, would create unnecessary burdens on the filers as well as on union members and the public in reviewing these reports. We believe the inclusion of subsidiaries with the LM-2 provides the most complete, transparent method for assisting union members’ understanding of the financial transactions of the unions. Request for Clarification Regarding the Reporting of Subsidiaries The Department has not proposed specific exclusions to the subsidiary filing requirements as part of its proposed revisions to the Form LM-2 instructions except for Political Action Committees (“PAC’s”). Previously, in connection with the 2008 T-1 rule, NALC proposed, and the Department agreed to, a reporting exclusion for health plans that participate in the Federal Employees Health Benefit Program under the Federal Employees Health Benefit Act (FEHBA), 5 U.S.C. § 8901, et seq. We believe that the rationale for exempting these plans, where they are sponsored by labor organizations, is equally applicable to the Department’s current proposal. Since 1960, the NALC has sponsored the NALC Health Benefit Plan (the "HBP”), a federal employees health benefit plan established and maintained by contract between the NALC and the U.S. Office of Personnel Management (OPM) pursuant to the FEHBA. The funds received by FEHB plans for the payment of benefits and for its operations consist of premium payments shared between the federal employing agencies and by enrolled federal and postal employees. Premium payments are collected by OPM and paid in bi-monthly installments to HBP and the other plans. As an FEHB plan, the HBP is subjected to significant federal government oversight and multi-layer financial reporting. After the Department considered the existing reporting requirements of the HBP and our written objections to duplicative reporting and privacy rule considerations for health plans such as HBP, the Department published a specific exemption for FEHBA entities in its rules and instructions for the 2008 Form T-1. In its comments accompanying the publication of the final T-1 rule, the Department explained the rationale for the exemption as follows: The labor organization with a FEHBA-governed plan argues that an exception to coverage under this rule is warranted because FEHBA plans are already subject to significant federal oversight and reporting requirements. In particular, the commenter argues, the oversight is equivalent to, and perhaps more than, the federal reporting requirements, oversight, and government regulations that are applicable to other entities, such as political action committees or section 527 organizations, that were specifically exempt from compliance in the proposed rule. According to the commenter, FEHBA plans are subject to stringent requirements contained in the contracts with OPM, which are reviewed and approv[ed] on an annual basis. In addition, FEHBA plans must file detailed financial reports with OPM on a quarterly and annual basis, and are subject to annual auditing requirements as well as periodic audits by OPM and the OPM Office of the Inspector General in order to ensure the plan's compliance with contract requirements and federal law. The Department finds persuasive these reasons offered by the first commenter for an exception to compliance with this rule for FEHBA-covered plans. The Department concludes that the interest of members of labor organizations in having access to meaningful information regarding the trusts in which their labor organization has an interest is served by the rigorous federal oversight already in place under FEHBA, without need for additional compliance with this rule. So long as the interests of labor organization members who want to be familiar with the investments and expenditures of their labor organization's trust is satisfied, the Department may reduce the potentially overlapping regulatory burden to covered entities by creating this exception for FEHBA-covered plans. The exception is noted both in the instructions for filing the Form T-1 and the regulatory text (revising 29 CFR 403.8). 73 Federal Register at 57430 (October 2, 2008). While the current NPRM proposes to rescind the 2008 Form T-1, the proposed definition of organizations required to report as a subsidiary does not expressly address FEHB plans. Nonetheless, the factors recognized by the Department in 2008 to justify an exemption of FEHB plans from the T-1 are equally applicable to subsidiary reporting on the LM-2. Accordingly, the Department should continue to recognize the unique nature of federal employee health plans in this respect and continue the reporting exemption for FEHBA plans. Finally, we request that the Department reconsider its proposed requirement that an audit report submitted for a subsidiary match the same fiscal year end as that of the reporting labor organization. It is not uncommon for a subsidiary to have a different fiscal year end than the reporting labor organization. The Department’s proposal would require either that the subsidiary request IRS approval to change its fiscal year end to match the labor organization’s fiscal year end, or that a separate audit report be prepared in order to match the accounting year end of the reporting labor organization. Accordingly, to avoid these additional burdens, we request that the Department consider permitting an audit report for the subsidiary’s year end that falls within the reporting period of the labor organization. The Department previously permitted this reporting option in connection with the Form T-1 rule. In sum, subject to our comments regarding subsidiary reporting, NALC supports the Department’s proposal to rescind the 2008 Form T-1 and return to the reporting of subsidiaries on the LM-2. NALC would welcome the opportunity to meet with representatives of the Department to discuss its proposal further. Sincerely, Fredric V. Rolando, President