NALC Branch Officer's Guide to Finance and … Branch Officer’s Guide to and Administration...

National Association of Letter Carriers

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Finance$NALC Branch Officer’s Guide

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$NALC Branch Officer’s Guideto

and

AdministrationFinance

National Association of Letter Carriers • January 2013

Contents

Chapter 11:

Chapter 2:

Chapter 3:

Chapter 4:

Chapter 5:

Chapter 6:

Branch Officer Duties

NALC Dues

Reporting to the U.S. Dept. of Labor

Reporting to the I.R.S.

Bonding Requirements

Branch Record Keeping

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Dear Branchand State Officers:

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Introduction

4. Reporting to the Internal RevenueService. A brief explanation of certainInternal Revenue Service requirements thatapply to NALC branches: tax exempt status,the tax consequences of various types ofpayments to branch officers or othermembers (salary, lost time, expenses), thefiling of tax returns to report branchincome, and special reporting and tax pay-ment responsibilities for “unrelated busi-ness income.”

5. Bonding Requirements. A brief expla-nation of federal legal requirements thatcertain branch officials be “bonded,” orinsured against acts of fraud or dishonesty.

6. Branch Record Keeping. A discussionof the branch record keeping system,including a suggested filing plan for branchrecords, filing hints, and a “RetentionSchedule” for the different types of branchrecords.

This guide provides information aboutseveral of the most important jobsperformed by branch financial and

administrative officers.

The guide is divided into six chapters, eachwith its own table of contents.

Contents

1. Duties of Branch Financial andAdministrative Officers. A generalintroduction to the roles of branch financialand administrative officers. The majorrequirements of the job are addressed—responsibility, knowledge, and a conscien-tious approach to the job.

2. NALC Dues. An explanation of how NALCkeeps track of membership dues at alllevels, including: branch responsibilities inthe dues tracking system, the dues paid bydifferent types of members, and the fourmethods of dues payment.

3. Reporting to the U.S. Department ofLabor. An explanation of the branch’sresponsibilities for filing certain reportswith the U.S. Department of Labor, includ-ing organizational reports and annualfinancial reports. Also covered are certainadditional requirements of the federalLabor Management Reporting and Disclo-sure Act (LMRDA).

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Contents

Introduction 1-1

A. Responsibility 1-1

B. Knowledge of Requirements 1-2

C. Careful Approach to the Job 1-3

Chapter 1Duties of Branch Financialand Administrative Officers

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INTRODUCTION

This guide offers information and advicefor those NALC branch officers who han-dle the “business” components of local

union leadership: Managing and budgeting thebranch’s finances, tracking membership anddues, keeping the branch books, managingbank accounts, investments and other branchproperty, filing tax returns and other govern-ment reports, and so forth.

No matter how a branch is structured, severalofficers have central financial and administra-tive responsibilities. The President must over-see all aspects of branch operations, includingthese core branch business activities. TheSecretary, Financial Secretary and Treasurer allhave financial and administrative duties, as docombined officer positions such as Secretary-Treasurer. Branch Trustees also have specificduties to safeguard branch property and toaudit the books twice a year, as set forth in theNALC Constitution for the Government ofSubordinate and Federal Branches.

This guide is intended for all of these officers,and for any other branch member who handlesbranch funds or other property or who ischarged with maintaining the branch’s businessoperations.

To manage the branch’s business effectively,officers need to have special qualities and capa-bilities, most importantly: a strong sense ofresponsibility; knowledge of many technicalsubjects; and a very conscientious, well-organ-ized and careful approach to performing thejob. These three areas are discussed brieflybelow.

A. RESPONSIBILITY

A branch financial officer must have a strongsense of responsibility. He or she is entrustedby the membership with the faithful perform-ance of vital duties: Safeguarding the propertyof the branch and its members, collecting anddisbursing branch funds, accurately recordingall financial transactions, reporting to federalgovernment agencies, and so forth.

Fiduciary duties. Because branch officersmanage and handle funds which belong to thebranch and its members, they hold positions oftrust—known in the law as “fiduciary” posi-tions.

There are “fiduciary duties” imposed on unionofficers by law—duties to handle branch moneyand other property honestly and in the mem-bers’ best interests. Federally-imposed fiduciaryduties are set forth in Section 501 of the Labor-Management Reporting and Disclosure Act of1959 (LMRDA), which provides that union offi-cers must:

Hold money and property solely for thebenefit of their union and its members;

Manage, invest, and disburse funds andproperty only as authorized by the union’sconstitution and by-laws or proper resolu-tion of its governing body;

Refrain from financial or personal interestswhich conflict with those of their union;and

Account to their union for any profitsreceived from transacting union business.

NALC Branch Officer’s Guide to Finance and Administration Branch Officer Duties I page 1-1

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3

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Union officials who violate these federally creat-ed fiduciary duties are subject to civil lawsuitsin federal or state court for money damages orother appropriate relief. In addition, there arecriminal penalties for embezzling or stealingbranch property—fines up to $10,000, imprison-ment for up to five years, or both.

B. KNOWLEDGE OF REQUIREMENTS

To perform their jobs successfully, branchfinancial and administrative officers must havegeneral knowledge on a range of technical sub-jects. The business side of leadership is gov-erned by many rules, regulations and require-ments.

Each branch officer cannot be expected to be anexpert on all of those requirements. Nonethelessmany of them are mandatory. So it is necessaryto be aware that certain requirements exist, toknow the basics, and to know how to findanswers in areas that are difficult or unclear.This manual is intended to provide some ofthose answers, and wherever possible it tellshow to obtain extra assistance and information.

The major requirements affecting the branchfinancial officer’s duties are contained in theNALC Constitution, branch by-laws and federallaws. Each of these is discussed briefly below.

The NALC Constitution. Branch officersare responsible for knowing and following theNALC National Constitution and the NALCConstitution for the Government of Subord-inate and Federal Branches. These documentsset forth rules and regulations covering manyaspects of the financial officer’s functions:Branch membership; collection and expendi-

ture of branch funds; financial reporting to themembership and to the U. S. Department ofLabor; bonding of branch officers, and so forth.

Branch By-laws. In addition to the NALCConstitutions, the branch’s by-laws may specifyadditional rules, regulations, and duties forbranch financial officers. The by-laws also mustprovide for the branch’s dues structure. Branchofficers must be thoroughly familiar with all rel-evant portions of the by-laws.

Federal laws. The branch financial officeralso must know and follow the requirements offederal laws. This manual covers importantrequirements of two federal statutes—theLabor-Management Reporting and DisclosureAct (LMRDA) and the Internal Revenue Code.

■ LMRDA: The LMRDA requiresbranches to file certain reports,including annual financial reports,with the U. S. Department of Labor.1

The same law also contains bondingrequirements that apply to officerswho handle branch funds or proper-ty,2 and record-keeping requirementsthat apply to branches.3

■ Internal Revenue Code:Although NALC is considered a tax-exempt organization by the InternalRevenue Service, branches must payemployment taxes on salary and losttime payments, file I.R.S. forms toreport certain expense and per diempayments, file income returns withthe I.R.S. in some circumstances, andeven pay tax on certain types ofbranch income.4


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C. CAREFUL APPROACHTO THE JOB

Branch leaders need both a broad grasp ofbranch goals and an accountant’s eye for accu-rate detail to manage branch finances andadministration successfully. Financial transac-tions must be recorded accurately, governmentreports must be completed properly and filedon time, procedures must be followed faithfully,and all branch business operations must becarefully documented.

In addition, branch officers must have the orga-nizational skills to manage a host of differentadministrative operations and records—includ-ing everything from maintaining financial andmembership records to keeping up with rou-tine correspondence and filing.

NALC continues to enjoy an excellent reputa-tion as a good, honest, democratic, well-runlabor union. Branch officers who manage thebranch’s business operations are largelyresponsible for our well-deserved reputation.

1 See Chapter 3, Reporting to the U. S. Department of Labor.

2 See Chapter 5, Bonding Requirements.3 See Chapter 6, Record Keeping.4 See Chapter 4, Reporting to the Internal RevenueService.


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Contents

Introduction 2-1

A. Keeping Track of Member Dues 2-21. Active Member Dues Reimbursement 2-22. Retired Member Dues Reimbursement 2-43. Semi-Annual Per Capita Tax Call 2-44. Fixed Rate Health Plan Members 2-5

B. Three Types of NALC Duties 2-6

C. The Four NALC Dues Payment Categories 2-61. Active Member Dues 2-62. Retired Member Dues 2-73. Fixed-Rate Health Plan Member Dues 2-74. Life Members (Exempt from Dues) 2-8

D. The Four Ways NALC Members Pay Dues 2-81. Payroll Dues Withholding 2-82. Annuity Dues Withholding 2-113. Direct Payment to the Branch 2-124. Individual Billing by NALC Headquarters 2-13

Appendix 2-15Membership Information on Floppy Disk

Chapter 2NALC Dues

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INTRODUCTION

Collecting and tracking membership dues is avital union function at all levels. All NALCmembers (except life members) must pay duesto maintain membership and its privileges.Dues keep the NALC alive by paying for the fullrange of union activities.

Branch officers need to keep close track oftheir members and their dues payments.Members must keep up their dues payments tomaintain good standing and participate in unionfunctions. Branches must keep their member-ship records current so they can mail newslet-ters, election ballots and other communicationsto local members. And local financial officersmust track dues payments to ensure the branchreceives the income to which it is entitled.

This chapter explains how NALC members jointhe union and pay their dues. It begins byexplaining the various dues-related communica-tions and transfers of dues monies betweenNALC’s headquarters and local branches. Itfocuses on branch responsibilities to verifydues information and notify headquarters ofcertain status changes, and answers a numberof questions frequently asked of the member-ship department at NALC headquarters. Thechapter also explains in detail the dues amountspaid by the different kinds of NALC membersand the several ways members pay their uniondues. There is also a brief appendix on mem-bership information that branches may receiveon CD.

Collecting NALC dues is a cooperative task,requiring the joint efforts of branch and stateassociation financial and administrative officersand NALC’s headquarters membership depart-

ment, which operates under the nationalSecretary-Treasurer’s direction. In the branch,dues amounts received should be verified anddeposited immediately and any problemsshould be reported immediately to the mem-bership department at NALC headquarters.

If you have questions that are not answered inthis material, feel free to call NALC at (202)393-4695 and select Membership Departmentfrom the menu. Headquarters office hours are9:00 a.m. through 4:30 p.m. (EDT) Monday-Friday.

This chapter has four main sections (and anappendix):

A. Keeping Track of Member Dues: Anexplanation of dues monies and relateddues information on individual memberswhich are transmitted between NALC head-quarters and NALC branches, plus informa-tion and advice for branch officers responsi-ble for tracking member dues.

B. Three Types of NALC Dues: Anexplanation of branch dues, state per capitatax and national per capita tax.

C. The Four NALC Dues PaymentCategories: An explanation of the duesamounts payable by different types of mem-bers.

D. The Four Ways NALC MembersPay Dues: A description of the fourmethods by which NALC members paytheir dues.

Appendix: Receiving membership informa-tion on CD.

NALC Branch Officer’s Guide to Finance and Administration NALC Dues I page 2-1

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A. KEEPING TRACK OFMEMBER DUES

Most NALC dues are collected either by thePostal Service through payroll deductions or bythe U.S. Office of Personnel Managementthrough retirement annuity deductions.NALC’s national headquarters collects the fulldues amounts from USPS and OPM along withcomputer tapes containing information abouteach member whose dues are paid by thesemethods.

NALC’s membership and computer depart-ments process this information, collect nationalper capita tax from the total dues received, andthen pass on the proper dues amounts and indi-vidual member dues information to the appro-priate branches and state associations.

This section describes briefly the dues moniesand accompanying information that is transmit-ted between NALC headquarters and NALC’sbranches and state associations. For detailedexplanations of how the dues collection processworks, see “D. The Four Ways NALC MembersPay Dues.”

National communications to branches:Branches receive the following dues moniesand dues- related communications from NALCheadquarters:

Dues deposit and computer listing foractive members paying dues through pay-roll withholding, every two weeks.

Electronic dues deposit and computer list-ing for retired members paying duesthrough annuity withholding, every calen-

dar quarter—in February, May, Augustand November.

Per capita tax call (bill) for all memberswho pay their dues through direct pay-ments to the branch, semi-annually inJune and December.1

Dues deposit and an accompanying listingof individuals within the branch’s jurisdic-tion who are members of NALC only forthe purpose of enrollment in the NALCHealth Benefit Plan (employees of the fed-eral or District of Columbia government),annually in November.

A branch will not receive certain of these com-munications if it does not, for example, chargeany local dues to retirees or have any direct-paying members.

NALC state associations are reimbursed activedues once per month, retiree dues for memberson annuity withholding quarterly, semi-annuallyfor direct paying members, and fixed-ratehealth plan member dues annually in November.

Branch officer responsibilities for handlingthese membership monies and information areexplained below.

1. Active Member DuesReimbursement

Every two weeks NALC sends branches a duesdeposit for active members who pay their duesthrough USPS payroll deductions. Along withthe electronic reimbursement, NALC headquar-ters encloses a computer-printed listing show-ing the information about branch members and


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their deductions which was provided by a USPScomputer tape. The listing is explained by anenclosed letter.

Branch responsibilities—verify depositand listing: Branch officers receiving the bi-weekly notice of electronic deposit of duesmust check it and the accompanying member-ship listing carefully for accuracy.

The listings contain key information that everybranch needs to verify its active membershipand income. So each new listing must be scru-tinized carefully and then retained for branchrecords.

a. Verify dues amounts: The listingshould be checked for inaccuracies in the duesamount withheld from each member’s pay-check. If an amount is incorrect the branchshould notify the membership departmentimmediately, providing the member’s name andsocial security number or NALC MembershipID number and the correct dues amount. If thedues amount for all members should bechanged (due to a general change in branchdues), headquarters should be notified in writ-ing. Changes in dues withholding are proc-essed once every four weeks, during even-num-bered pay periods (except pay periods 2 and 26).

b. Verify dues from new members:The branch must keep records on each newmember, including the date the member joinedand the date his or her Form 1187 was submit-ted to USPS personnel officials. If the branchdoes not begin receiving withheld dues and alisting entry for the new member within a rea-sonable period (2-3 pay periods), the branchmust contact local USPS personnel officialsfirst. If delays cannot be resolved locally, call or

write NALC’s membership department with thenames and dates the forms were submitted.

c. No dues deducted—branch mustcollect: Sometimes no dues are deductedfrom the member’s paycheck—usually becausehe or she was not in a pay status. In this situa-tion the dues listing “flags” the member as “NOPAY” (no pay from which to deduct dues), “NODED” (no deduction made) or “NO T/C” (notime card). In these cases the branch shouldcollect the entire bi-weekly dues amount direct-ly from the member, because NALC headquar-ters has subtracted and retained the member’snational and state per capita tax from thebranch reimbursement check.

d. Transfer to new branch: The activedues listing also contains special “flag” notationsshowing members who have transferred fromand to the branch. When an active membertransfers out of the branch, the Postal Serviceautomatically transfers all dues deductions fromthe losing to the gaining branch. The losingbranch’s listing will flag the member “TR TO.”

When a member transfers in, the gainingbranch’s listing will flag the new branch mem-ber “TR FRM.” Dues deductions are trans-ferred in with the new member, but USPS doesnot change the member’s dues amountsaccordingly. The gaining branch should notifyheadquarters immediately if a change in dues isrequired as a result of the transfer.

e. Terminations of active membership:The listing will also show flag notations such asseparated, cancelled and death. Branches mustnote these changes in branch records; NALCheadquarters automatically removes these indi-viduals from its membership rolls.


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Retiring members are flagged “RET.” For moreinformation on signing retiring members up forannuity dues withholding see “D. The FourWays NALC Members Pay Dues” on page2-8.

2. Retired Member DuesReimbursement

Every calendar quarter NALC headquartersdeposits branch retired member local duesreimbursements, accompanied by listings con-taining information about members’ duesdeductions. The deposits are made and listingssent in February, May, August and Novemberand cover deductions during the current quar-ter. For more information on annuity dueswithholding, see, “D. The Four Ways NALCMembers Pay Dues.”

Note—branches charging retirees nolocal dues: Branches that do not chargeretired members local dues do not receivequarterly listings or deposits because theyrequire no dues reimbursement. However,upon request NALC headquarters will sendthose branches an annuity withholding listingfor informational purposes. The listing willshow branch members’ deductions for nationaland state per capita tax during the latest calen-dar quarter.

Branch responsibilities—verify depositand listing: Branch officers receiving thequarterly local dues electronic deposit shouldverify the accompanying listing carefully foraccuracy. The branch must ensure that itsmembership list is current and that it is receiv-ing the correct amounts of retiree dues. Thelistings should be retained for branch records.

In verifying the listings, branch officers shouldlook out for these problems:

a. Incorrect amounts: Check forincorrect or inconsistent dues amountswithheld (keeping in mind that one-timeadjustments are often made during the months of January, April, July and October for members who are just beginning deduc-tions and owe some back dues). To make corrections or inquiries, call or send a shortnote to the membership department giving the retiree’s name, social security number orNALC Membership ID number and the amountof dues members should pay.

b. “Unsuccessful” listing: If OPM could not make the deduction for any reason,the retiree will appear on a separate sheetentitled “Unsuccessfuls.” Because OPM doesnot furnish detailed explanations of suchnotations, the branch must check with themember and inform the membership depart-ment of the member’s status. The member-ship department sends a bill to the branch for the per capita tax due from the retired member.

3. Semi-annual Per Capita Tax Call

In June and December of every year, NALCheadquarters sends each branch which hasdirect-paying members a bill for their nationaland state per capita tax. The bill is for sixmonths’ payment in advance—that is, one-halfof the annual national and state per capita taxamounts, per direct-paying member. The billindicates how many members are being billedfor active member dues and how many arebeing billed for retired member dues. Formore information on direct-paying members,


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see page 2-8, “D. The Four Ways NALCMembers Pay Dues.”

Member roster: Enclosed with the bill aretwo copies of a computer-printed roster show-ing the names of all of the branch’s direct-pay-ing members and the amount of per capita taxbilled for each. The roster also lists the namesof two types of members for whom headquar-ters is not billing the branch:

Life members: The roster lists life mem-bers to help branches keep their member-ship records up to date.

Members with missing dues deductions:When a member’s dues which shouldhave been deducted by the USPS or OPMhave not been received by NALCheadquarters, the member’s name is list-ed on the roster with the classification “W”or “Q”. This is done to request informa-tion from the branch about the member’sstatus. The branch should inform head-quarters of the member’s status when itreturns the verified roster (see below).

Branch responsibilities—verify, correct and pay: Branch officers mustverify the roster and bill. The roster should be checked against branch membershiprecords and then retained. Then the branchmust report any inaccurate information to the NALC membership department on a corrected roster enclosed with its per capita tax payment.

It is particularly important for branch officers tonotify NALC headquarters about changes inthe personnel status of direct-paying mem-bers—separations, cancellations, retirements,

etc.—because the membership department has no other way to maintain accurate infor-mation on such members. When a direct paying member retires, the branch must send the member a Form 1189 and ensure the form is completed and sent to NALC head-quarters. (A branch need not pay per capita taxfor a deceased member.)

After verifying the roster, the branch must writea check for the per capita tax due—payable tothe national Secretary-Treasurer—and send itto NALC headquarters along with the correct-ed roster. If the check is for less than theamount billed, the branch’s roster correctionsmust explain the difference.

4. Fixed Rate Health Plan Members

Once a year in November, NALC sends an elec-tronic deposit and an accompanying listing ofindividuals within the branch’s jurisdiction whoare members of NALC only for the purpose ofenrollment in the NALC Health Benefit Plan(mostly employees of the federal or District ofColumbia government). For more informationon these members and their dues, see below,“D. The Four Ways NALC Members PayDues.”

Information about these members is given to NALC headquarters by the NALC HealthBenefit Plan, so branches have no respon-sibilities for verifying their status. The branch receives $12.00 of the $36.00 in totaldues paid by each such member annually. (See Article 22, Section 4a. of the NALCConstitution.) A branch that needs infor-mation about these members should contactthe NALC headquarters finance department.


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B. THREE TYPES OF NALCDUES

There are three types of NALC dues, each onepayable to a different level of the union’s organ-ization—national per capita tax, state associa-tion per capita tax and branch dues. “Per capitatax” means “dues per member.”

Note that branches and state associations neednot charge separate dues to their members.Members pay dues to those levels of the uniononly where the branch or state association hasestablished a dues structure.

National Per Capita Tax. The amount ofnational per capita tax is determined by the del-egates to the NALC National Convention andstated in the NALC Constitution (Article 7,Section 2 and Article 22, Section 3). Thenational per capita tax increases each year inthe first full pay period in January. The increaseis tied to the rise in letter carrier wages (Article7, Section 2(a)).

State Association Per Capita Tax. Thestate per capita tax amount is set by the mem-bership of each NALC State Association andstated in its by-laws.

Branch Dues/Minimum. Minimum NALC branch dues are determined by the delegates to the National Convention and stated in the NALC Constitution (Article 7,Section 2a. and c. and Article 22, Section 3).Branches that charge dues at all must charge at least this minimum amount. Branches may,if they wish, provide in their by-laws thatbranch dues will be higher than this minimumamount.

C. THE FOUR NALC DUESPAYMENT CATEGORIES

Different types of NALC members may pay dif-ferent amounts of union dues. The rules onwho pays what amounts are contained in theConstitution and are explained in more detailhere. (Different types of NALC members alsohave different membership rights in the union.The various membership categories are definedin the NALC Constitution.)

For the purposes of the national dues collectionsystem, all NALC members fall into one of thefollowing four NALC dues payment categories:

1. Active Member Dues2. Retired Member Dues3. Fixed-Rate Health Plan Member Dues4. Life Members (Exempt From Dues)

1. Active Member Dues

All active employees of the Postal Service whoare members of the NALC must pay activemember dues, which have three components—national per capita tax, state association percapita tax and branch dues (where applicable).

For the purposes of the national per capita tax,NALC headquarters defines “active USPSemployee” as any person who is currently onthe Postal Service employee rolls—includingcraft, supervisory, and all other USPS employ-ees—whether probationary, part-time flexible,part-time regular, full- time regular or salaried.A USPS employee who is receiving workers’compensation and not working currently,remains an active employee until he or she isseparated from the employee rolls. This cate-


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gory also includes regular branch memberswho the NALC Executive Council has deter-mined were unjustly separated from the PostalCareer Service.

This category does not include members whowere separated from the Postal Service due toan occupational injury or disease covered bythe Office of Workers’ Compensation Programs(OWCP); those members pay retired memberdues, explained below.

2. Retired Member Dues

All retired USPS employees who were mem-bers of the NALC at the time of retirement, andall USPS OWCP departees who were membersof the NALC at the time of leaving PostalService employment, and continued their mem-bership thereafter, must pay retired memberdues.

Note that there is a continuation of member-ship requirement for members who pay retired member dues. To qualify for such dues, one must be a NALC member at the timeof retirement or OWCP separation, and main-tain continuous membership in the union there-after. Other categories of employees maybecome members of NALC after leaving activeUSPS employment, but they may not payretired member dues. Rather, they pay fixed-rate health plan member dues. See No. 4 below.

Retired member dues have three compo-nents—national per capita tax, (traditionally amuch lesser amount than paid by active mem-bers), plus state per capita tax and branch dueswhere applicable. For several decades thenational per capita tax for retired members hasbeen only $7.00 per year.

Definitions: NALC headquarters defines thetypes of members who pay retired memberdues as follows:

“Retired USPS employee” means a formerPostal Service employee who has gainedannuity eligibility under a retirement pro-gram administered by the U.S. Office ofPersonnel Management (OPM)—eitherthe Civil Service Retirement System(CSRS) or the Federal EmployeesRetirement System (FERS). This defini-tion includes disability retirees.

“USPS OWCP departee” means a personwho was an active employee of the PostalService, and was separated from thePostal Service employee rolls due to acompensable injury or occupational dis-ease covered by the Office of Workers’Compensation (OWCP). This definitiondoes not include an employee who is stillon the USPS employee rolls although notworking due to an OWCP-compensableinjury. Such a member must pay activemember dues until he or she is separatedfrom the Postal Service.

3. Fixed-Rate Health Plan MemberDues

NALC members in this dues payment categorypay only national per capita tax in the amountstated in Article 22, Section 3 of the NALCConstitution. These members pay no state percapita tax and no branch dues. However, a por-tion of their national per capita tax is distributedby NALC headquarters to branches and stateassociations in accordance with the NALCConstitution. For more information see“Individual Billing by NALC Headquarters,”


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below in this chapter.

The individuals who pay fixed-rate health planmember dues include: (a) active or retiredemployees of the United States Government(non-postal) or the District of ColumbiaGovernment who have enrolled in the NALCHealth Benefit Plan; (b) USPS retirees orOWCP departees who have enrolled in theNALC Health Benefits Plan after leaving PostalService employment, and who were not NALCmembers at the time of enrollment. These peo-ple become associate members of NALC andpay fixed rate health plan member dues be-cause any person enrolled in the NALC HealthBenefit Plan must become a member of theunion and pay dues while enrolled. Survivorannuitants enrolled in the Plan represent theonly exception to this rule; they need not payNALC dues.

4. Life Members (Exempt from Dues)

NALC’s life members are not required to paydues. The NALC Constitution (Article 2,Section 5) provides that an individual who hascompleted fifty (50) years of membership in theNALC shall, upon request directed by his orher Branch Secretary to the National Secretary-Treasurer, be issued a Life Membership Card(“Gold Card”) which entitles the member to allthe rights and privileges of NALC membershipwithout payment of dues, per capita tax, or spe-cial assessments.

D. THE FOUR WAYS NALCMEMBERS PAY DUES

Each member must pay all of his or her dues inone of these four ways:

1. Payroll Dues Withholding2. Annuity Dues Withholding3. Direct Payment to the Branch4. Individual Billing by NALC

Headquarters

The overwhelming majority of members paytheir dues through the first two methods. Thissection describes how each dues paymentmethod works, and which types of NALC mem-bers pay dues through each of the four meth-ods. In some cases, two members in the samedues payment category may pay their dues bydifferent methods.

1. Payroll Dues Withholding

Who pays dues this way: Since January 1,1977, the NALC Constitution has required allnew active Postal Service members to pay all oftheir NALC dues—national, state, and branch—through automatic deductions from their USPSpayroll checks. Almost all active Postal Servicemembers pay dues this way; only a handful paytheir dues directly to the branch.

How the process works: The payroll duesdeduction process has four steps

a. Initiation—the Form 1187b. USPS withholdingc. NALC headquarters membership action,

dues retention and reimbursementd. Branch verification

a. Initiation—the Form 1187: Theprocess begins when a new member and abranch officer complete and submit a Form1187, “U. S. Postal Service, Authorization forDeduction of Dues.” Each branch should keepa supply of 1187 forms on hand at all times;


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they are available free from the supply depart-ment at NALC headquarters.* Note, the socialsecurity number must be entered. NOTE:Presently there is a separate Form 1187 forTransitional Employees which may be revisedfor City Carrier Assistant (CCA) use. However,at the time this guide went to press, details ofCCA dues withholding and cancellation processhad not been worked out.

Most branches ask new letter carriers to joinNALC at the first opportunity—during a pres-entation at the new carrier orientation meeting.Those who do not join immediately should beapproached repeatedly by stewards and branchofficers about joining the union.

The Form 1187 serves two functions. First, it isan official application for NALC membership.Second, it authorizes the Postal Service todeduct full active NALC dues—national percapita tax, state per capita tax and branch dues—from a member’s paychecks. As the formindicates, by submitting the 1187 an employeeagrees to the deduction of NALC dues for aperiod of one (1) year. The agreement is auto-matically renewed at the end of each one-yearperiod unless it is revoked by the employee.Any active employee of the U. S. Postal Servicewho joins the NALC regardless of craft or posi-tion must sign Form 1187 and pay full activedues.

The branch must sign the form, have it date-stamped and mail the original to HumanResources Shared Services Center (HRSSC).The NALC copy must be mailed to headquar-ters, the third copy is to be retained for thebranch records and the last copy should begiven to the employee for his or her ownrecords.

b. USPS withholding: At the HRSSC USPSofficials enroll the employee in the dues with-holding program and begin the process todeduct NALC dues, once each pay period, fromhis or her pay. The dues deductions shouldbegin within two or three pay periods. If it doesnot the branch should contact NALC’sMembership Dept.

After bi-weekly deductions are made, the PostalService sends an electronic deposit to NALCheadquarters for the total amount deducted forall members nationwide. Accompanying thedeposit is an electronic file containing informa-tion about each member on the payroll dueswithholding program, including name, NALCMember ID number, post office finance num-ber, the amount deducted, anniversary date(date of processing by the employer), and addi-tional information about personnel actionswhich occurred since the last deduction—suchas new employees, separations, cancellations,retirements, or deaths. The roster should bechecked for accuracy and problems communi-cated to the NALC’s Membership Dept. NOTE: Branch secretaries and membersshould always call the NALC MembershipDepartment to verify anniversary dates.

c. NALC headquarters membershipaction, dues retention and reimburse-ment: NALC headquarters takes the followingsteps when a Form 1187 is submitted for a newmember and payroll dues deductions begin.

Membership action: Headquartersadds the employee to its computerizedmembership rolls.

Receipt of deducted dues: Head-quarters processes the computer tape and


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records dues payments in each member’sindividual membership file. Upon receiptof a new member’s first dues deduction,the member is added to the mailing list forthe Postal Record.

National per capita tax retention:For each branch NALC headquarters calculates, in accordance with theConstitution, how much of the duesdeductions represents national per capitatax; headquarters retains that amount.

State per capita tax reimburse-ment: Headquarters also calculates howmuch of the bi-weekly dues deductionsrepresent state per capita tax. Each monthheadquarters reimburses those amountsto state associations which charge percapita tax to their active members.

Branch dues reimbursement: Bi-weekly branch dues reimbursements andaccompanying listings are explained aboveunder “Active Member Dues Reimburse-ment,” on page 2-2 above.

Note on electronic deposit: Early inJanuary 2013 all branches and state associa-tions not currently on electronic deposit werenotified that effective March 31, 2013 checkswill no longer be issued.

d. Branch verification: See page 2-3above, “Branch responsibilities–verify depositand listing.”

Cancellation of Active Membership andDues Deductions

An active member may cancel membership and

payroll dues deductions only by completing andsubmitting a Form 1188. The cancellation isprocessed by the Postal Service only if it isdate-stamped in personnel within the windowperiod of not more than 20 days and not lessthan 10 days prior to the member’s anniversarydate (date of processing by employer). ContactNALC’s Membership Department for theanniversary date.

Transfer to another craft: NALC has areciprocal agreement with the American PostalWorkers Union, the National Postal MailHandlers Union and the National Rural LetterCarriers Association, under which each unionagrees to cancel the dues deductions of a mem-ber who transfers to a craft represented by theother union. Should your branch no longerhave a copy of the Reciprocal Agreement, freecopies are available upon request through theNALC Supply Department. Under this agree-ment, when, for instance, a clerk transfers tothe letter carrier craft and joins NALC, APWUwill upon request from the NALC, cancel theAPWU member’s dues and membership.However, the NALC union representative mustindicate the member is transferring from anotherunion, (naming the union) and wishes to canceldues to that union.

Upon written request from the branch, NALCwill consider refunding the dues a new membercontinued to have deducted for his or her previ-ous union while awaiting a cancellation.

Promotion to supervisor, transfer topostal police: As a result of a special excep-tion set forth in the USPS Employee and LaborRelations Manual, members promoted to super-visory positions may cancel their dues deduc-tions at any time by completing and submitting


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to USPS a Form 1188. The form must indicatethe new job title and date of promotion. A mem-ber who transfers to a postal police positionmay cancel dues deductions by mailing a writ-ten request to the membership department; noForm 1188 is needed.

2. Annuity Dues Withholding

Who Pays Dues This Way: The NALCConstitution provides that all members whoretire after October 1, 1982, who wish to retaintheir membership, must complete and submit aForm 1189 to NALC. (See Article 2, Section1e.) The Form 1189 authorizes the Office ofPersonnel Management (OPM) to deductNALC dues from a retired member’s annuitychecks. (Some members who retired beforeOctober 1, 1982 pay their retired member duesdirectly to the branch, rather than throughannuity withholding; see below.)

Note that an already-retired member currentlypaying dues directly to the branch may switchvoluntarily to annuity dues withholding by com-pleting and submitting a Form 1189 to NALC.For branches, annuity dues withholding is anefficient and nearly effortless method for col-lecting retiree dues. Branches should encour-age direct-paying retired members to sign upfor annuity dues withholding.

How the Process Works: The annuitydues withholding process has five steps:

a. Initiation—the Form 1189b. NALC headquarters actionc. OPM withholdingd. Headquarters dues retention and reim-

bursemente. Branch verification

a. Initiation—the Form 1189: Theprocess begins when a retired or retiring mem-ber completes a Form 1189 and submits it tothe branch. A Form 1189 is a “Request andAuthorization” for payment of NALC duesthrough annuity deductions. NALC headquar-ters automatically sends a letter and Form 1189to every active member flagged “RET” on thedues withholding listing.

A member completes his or her portion of theForm 1189 after receiving a CSA (Civil ServiceAnnuity) number from the Office of PersonnelManagement (OPM)—which assigns the num-ber to those who apply for retirement undereither the Civil Service Retirement System orthe Federal Employees Retirement System.The member then submits the 1189 to thebranch, which enters the annual branch duesamount and signs the form. The branch sendsthe completed original to the NALC headquar-ters (not to OPM), keeps one copy in thebranch files and gives another to the member.

b. NALC headquarters action: NALC’smembership department adds the member’sname to the annuity dues withholding program.Then each quarter it sends the Office ofPersonnel Management a computer tape listingall NALC members on the annuity dues with-holding program and giving instructions on theamounts of each member’s dues deductions.Dues for retirees are withheld monthly fromannuity checks.

All changes take time: Any changes oradjustments in annuity dues withholding—such as additions, deletions or changes in dues amounts—can be made only quarterly. It may take as long as 4 1/2 months for a mem-ber to be added to OPM’s dues withholding


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program—or to implement any other change in the withholding program. The membershipdepartment sends OPM new instructions forannuity dues withholding on November 15,February 15, May 15 and August 15. OPMimplements those instructions a month and ahalf later—on January 1, April 1, July 1 andOctober 1.

c. Office of Personnel Management(OPM) withholding: Acting on NALC’sinstructions, OPM deducts dues from retiredmembers’ annuity checks each month. ThenOPM sends NALC headquarters an electronicdeposit for the total and a computer tape containing information about each member’sdeductions.

d. Headquarters dues retention andreimbursement: NALC headquarters takesthe following steps upon receiving the depositand list from OPM:

Recording of dues payments:Headquarters records the deductions ineach member’s individual file.

National per capita tax retention:For each branch, NALC headquarters cal-culates, in accordance with theConstitution, how much of the duesdeductions represents retired membernational per capita tax, and retains thatamount.

State per capita tax reimburse-ment: Headquarters also calculates thestate per capita tax portion of withhelddues. Every calendar quarter NALCheadquarters sends each NALC stateassociation which charges its retired

members per capita tax (many do not) anelectronic reimbursement.

Branch dues reimbursement: See“Retired Member Dues Reimbursement,”on page 2-4.

e. Branch verification: See “Branchresponsibilities—deposit and verify,” on page 2-4.

Cancellation of Retiree Membershipand Dues Deductions

A retired member who wishes to cancel duesdeductions must mail a written request to theheadquarters membership department. Thecancellation will be effective with the next quar-terly deduction.

3. Direct Payment to the Branch

Who Pays Dues This Way: “Direct-pay-ing” members, that is, NALC members whopay all their dues—branch, state and national—directly to their branch are:

a. A very few active Postal Servicemembers: A few active members who joinedthe NALC many years ago still pay dues direct-ly to the branch rather than through payrollwithholding. In addition, members who areclassified “active” because they are still on thePostal Service employee rolls, but who are notworking due to OWCP-covered disability, alsopay dues directly to the branch. Since theyreceive no USPS paychecks, they cannot paydues through payroll withholding.

b. A minority of NALC’s retired USPSmembers: Members retiring prior to October1, 1982 were not required to enroll in the annu-


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ity dues withholding program; some of thoseretired members still pay their dues directly tothe branch.

c. OWCP Departees: Members separatedfrom the Postal Service due to OWCP-covereddisability receive no OPM annuity checks; theymust pay their dues directly to the branch.

The number of direct-paying members isshrinking steadily because the NALC Consti-tution requires all new active members to paydues through payroll withholding and all retir-ing members to pay dues through annuity with-holding.

How the Process Works: The process ofcollecting NALC dues from direct-paying mem-bers has six steps:

a. Branch collectionsb. Semi-annual per capita tax callc. Branch verificationd. Branch payment to NALC headquar-

terse. NALC headquarters actionf. State per capita tax reimbursement

a. Branch collections: Branches must collect total NALC dues—branch, state, andnational—from their direct-paying members.State and national per capita tax must be col-lected at least every six months, in time forNALC’s semi-annual per capita tax calls.

b. Semi-annual per capita tax call:NALC bills branches semi-annually, in June andDecember, for the national and state per capitatax of their direct-paying members. See above,“A. Keeping Track of Member Dues.”

c. Branch verification: See page 2-5,“Branch Responsibilities–verify, correct and pay.”

d. Branch payment to NALC headquar-ters: See page 2-5.

e. NALC headquarters action: Whenheadquarters receives the check and roster corrections from the branch, it records thenational and state per capita tax payments and any new membership information in itsmembership files. If headquarters notes a discrepancy between its own information about a member and information provided by the branch, it contacts the branch for clarification.

If a branch fails to pay per capita tax on behalfof direct-paying retired members, the nationalunion deducts the payment due from thebranch’s active member dues reimbursementchecks. This is done in pay period No. 7 for theJanuary-June term and pay period No. 20 forthe July-December term.

f. State per capita tax reimbursement:NALC headquarters reimburses the state percapita tax portion of branch payments to theproper state association semi-annually.

4. Individual Billing by NALCHeadquarters

Who Pays Dues This Way: Only thosemembers who are in the “Fixed Rate HealthPlan Member Dues” category are billedindividually for their dues by NALC head-quarters.


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How the Process Works: The individualbilling process has three steps:

a. Health Benefit Plan enrollmentb. NALC headquarters billingc. Receipt of payment and reimbursement

a. Health Benefit Plan enrollment: TheNALC Health Benefit Plan regularly informsNALC headquarters of all new and continuingenrollees in the Plan.

b. NALC headquarters billing:Headquarters determines which of thoseenrollees fall into the Fixed Rate Health PlanMember Dues category. It then bills each onedirectly for annual national per capita tax at theflat rate stated in Article 22, Section 3 of theNALC Constitution. The amount is $36.00 peryear.

c. Receipt of Payment andReimbursement: When headquartersreceives payment of the national per capita tax,it reimburses portions of it to: (1) the branchhaving zip code jurisdiction over the member’sworkplace (or if retired, the zip code areawhere the retired member lives); (2) the stateassociation with which the branch is affiliated;and (3) the NALC Health Benefit Plan. (SeeArticle 22, Section 4 of the NALC Constitution.)

Branch reimbursement checks and listings aremailed each November to each branch whichhas these types of active members workingwithin its jurisdiction or retirees residing withinits jurisdiction. State associations receive theirreimbursement checks and listings at the sametimes.


1. See “3. Direct Payment to the Branch” on page 2-12 formore information.

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Appendix:Membership Informationon CD

NALC headquarters offers a service calledNALC*LINK, which provides branches withinformation about their members on CD.Branches pay a subscription fee to receive thedisks, and update their computerized member-ship databases without having to enter datamanually.

A branch subscribing to NALC*LINK willreceive a CD monthly containing all changes inbranch membership—additions, deletions,retirements and so forth. The CD will includenames, addresses, NALC Member ID numbers,etc., for each member whose status haschanged—including all active, retired and lifemembers. The CD information is delivered in

ASCII (universal text) format, which is readableby all leading word-processing and databaseprograms.

Upon subscribing to NALC*LINK the branchalso receives a CD-based master membershiplist containing headquarters’ most currentinformation on all of its members—active,retired and life. The branch can then add themonthly change data to this baseline informa-tion to update its membership database.

In addition, a branch may request at any time afull membership roster on electronic media oron paper, or a set of mailing labels for all mem-bers.

For more information or to sign up forNALC*LINK services, write to the office ofNALC’s national Secretary-Treasurer.


*Any branch needing updated social security numberinformation may write to the Office of NALC’s NationalSecretary/Treasurer. Information will be sent viaregistered mail in order to protect from identity theft.

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Contents

A. The LMRDA and Reporting Requirements 3-1Branch reporting requirements 3-1

B. LM-1—Labor Organization Information Report 3-1Amended filings 3-1

C. LM-2, LM-3 & LM-4—Annual Financial Report 3-1Which branches must file 3-1Filing required every year 3-1Which form to File 3-2Expenses 3-2Answer for the branch only 3-3Changes in constitution or by-laws 3-3Form T-1 3-3

D. Assistance and Forms 3-3

E. Terminal Reports 3-4

F. Reports as Public Information 3-4

G. Union Members’ Right to Information 3-4Access to Labor Department reports 3-4Access to branch records 3-4

H. Enforcement and Penalties 3-4Civil enforcement 3-4Criminal penalties 3-5

Chapter 3Reporting to theU.S. Department of Labor

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A. THE LMRDA ANDREPORTING REQUIRE-MENTS

The Labor-Management Reporting and Disclos-ure Act of 1959—also known as LMRDA or theLandrum-Griffin Act—regulates certain activi-ties of unions, their officers and members. Forinstance, the Act covers bonding1, financialtransactions, administrative practices, constitu-tions and by-laws, selection of union officers2,members’ rights within their unions, and soforth. The LMRDA has applied to NALC since1971.

Branch reporting requirements: Thischapter focuses mostly on the LMRDA’s report-ing requirements as they apply to NALC branch-es. Branches must fill out certain governmentforms and submit them to the U.S. Departmentof Labor at U. S. Department of Labor, Office ofLabor-Management Standards, 200 ConstitutionAvenue, NW, Washington, D. C. 20210-0001.

B. LM-1—LABOR ORGANIZA-TION INFORMATIONREPORT

The LMRDA requires each labor organizationto adopt a constitution and by-laws and filethem with the Department of Labor, along withcertain information about the union’s structureand procedures. Branches must comply by fil-ing a Form LM-1, Labor Organization Informa-tion Report, within 90 days after the branch ischartered. Because this requirement is 30years old, every NALC branch has filed anLM-1 already.

Amended filings: A branch must update its

LM-1 filing when certain information changes.

When a branch amends its by-laws duringthe reporting period it must file two copiesof the new by-laws with its next financialreport (LM-2, LM-3 or LM-4.)

The branch must file an amended FormLM-1 to update the information on filewith the Labor Department if there havebeen any changes in the reported prac-tices and procedures which are not con-tained in the union’s constitution andbylaws. The amended Form LM-1 must befiled within the time limit for filing theunion’s next annual financial report.3

C. LM-2, LM-3 OR LM-4—ANNUAL FINANCIALREPORT

The LMRDA requires every labor organiza-tion, including NALC branches, to file a finan-cial report every year with the U.S. Departmentof Labor. Branches do so by filling out and sub-mitting an annual financial reporting form sup-plied by the Department—a Form LM-2, LM-3or LM-4.

Which branches must file: Every branchmust file unless it has no local financial activity.A branch has no financial activity only if it: (1)charges no local dues to members, (2) has nodirect-paying members, and (3) has no otherfinancial activity—no branch income, bankaccounts or expenditures.4

Filing required every year: A financialreport must be filed every year, within 90 daysafter the end of the branch’s fiscal year. Most

NALC Branch Officer’s Guide to Finance and Administration Reporting to DOL I page 3-1

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branches use a “fiscal year”—a reporting peri-od for branch finances—which is the same asthe calendar year: January 1 throughDecember 31. The choice of an appropriate fis-cal year is a matter of convenience and up toeach branch. Some branches use a differentfiscal year—for example, July 1 through June30.

Which form to file. The LM Form a branchmust file depends on the income the branchreceives during its fiscal year.

■ Form LM-4: Total annual receipts lessthan $10,000.

■ Form LM-3: Total annual receipts$10,000 to $249,999. Electronic filingrecommended.

■ Form LM-2: Total annual receipts$250,000 or more. Must be filed elec-tronically.

Form LM-4 is an abbreviated two-page reportwhich requires the reporting of a limited num-ber of information items and only five financialdetails. Form LM-3 is a four-page report whichrequires the reporting of certain information,has more financial items than the LM-4, but hasno supporting schedules (as contained in themuch more onerous Form LM-2.) The FormLM-2 is much more detailed than Forms 3 and4 and imposes a huge bookkeeping burden onunions to report the details of their officers’ andemployees’ activities, in Schedules 11 and 12.For example, each branch officer or employeemust estimate, to the nearest 10 percent, theportion of his or her paid time devoted to eachof five functional activities: RepresentationalActivities; Political Activities and Lobbying;Contributions, Gifts and Grants; GeneralOverhead; and Union Administration.

Expenses—Identifying recipients andpurposes of major disbursements. TheLM-2 form also requires a union to providedetailed explanations when it disburses $5,000or more during the year to a single individualor entity. The required information includes thefull name and address of the payee, the type ofbusiness or job classification, the purpose of thedisbursement, and its date and amount.Amounts that are individually under $5,000 butcumulatively exceed $5,000 in total paymentsfor the year must be separately aggregated andreported. However, the date of disbursementand purpose of disbursement are not reportedfor aggregated amounts.

■ Accounting method: Although an LM-2 filer may continue to maintain its bookson a cash basis, it must include in theform’s Statement A certain items that arebased on the accrual method of account-ing—receivables, loans receivable andpayable, mortgages payable and tradeaccounts payable.

■ Electronic Filing: Improved. ElectronicForms System (EFS) allows a labororganization with a web-enabled comput-er to acquire, complete, sign and file areport without purchasing a digital signa-ture or downloading special software.More at www.dol.gov.

NOTE: Any branch presently filing the LM-3but nearing the $250,000 annual threshold maywish to obtain professional assistance to ensurethe branch’s ability to comply with the LM-2 fil-ing regulations. These branches should have anaccounting professional review their accountingsystems and recommend any changes neededfor the required compliance should the


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branch’s income climb to the $250,000 mark orabove.

Answer for the branch only. Keep inmind when answering questions on the LMforms that you are answering for your branchrather than for the national union. For instance,you would answer “No” to the questionwhether your labor organization has a politicalaction committee, because COLCPE is a nation-al PAC.

Changes in constitution or by-laws. Oneach of the three annual financial reports (LM-2, LM-3 and LM-4), one question asks: Duringthe reporting period, did your organizationhave any changes in its constitution and bylaws(other than rates of dues and fees) or in prac-tices/procedures listed in the instructions? (Ifthe constitution and bylaws have changed,attach two new dated copies, if practices/proce-dures have changed, see the instructions.) Thisquestion is Item 18 on the Form LM-2, Item 21on the LM-3 and Item 9 on the LM-4. Answerthe question “Yes” only if the branch bylaws (orone or more of the listed practices or proce-dures listed in the instructions) have changedduring the reporting period—do not answer“Yes” only to report a change in NALC’s nation-al Constitution or national Constitution for theGovernment of Subordinate and FederalBranches. The branch, whether it answers thisquestion “Yes” or “No,” should always explain,under the item “Additional Information,” thatNALC’s national headquarters reports changesin the national constitutions when filing its ownForm LM-2, and sends copies of them to theDepartment of Labor.

Form T-1. A branch with total annual receiptsof $250,000 or more must file the Form T-1 for

each trust in which it is interested, if theunion’s financial contribution to the trust, or acontribution made on the union’s behalf, was$10,000 or more during the reporting year andthe trust had $250,000 or more in annualreceipts. The T-1 is an abbreviated version ofthe LM-2 and requires similar informationregarding payments to officers and employees.

D. ASSISTANCE ANDFORMS

For assistance in completing the LM-2, LM-3 orLM-4 form, contact the nearest OLMS office atthe U. S. Department of Labor. OLMS fieldoffices are listed on the Department’s website,www.dol.gov/esa/olms/contacts, and arelocated in the cities listed below. Consult yourlocal telephone directory listings under UnitedStates Government, Labor Department, Officeof Labor-Management Standards, for theaddress and telephone number of the nearestfield office.

Atlanta, GA Los Angeles, CABaltimore, MD Miami, FLBirmingham, AL Milwaukee, WIBoston, MA Minneapolis, MNBuffalo, NY Nashville, TNChicago, IL New Orleans, LACincinnati, OH New York, NYCleveland, OH Philadelphia, PADallas, TX Pittsburgh, PADenver, CO Puerto RicoDetroit, MI St. Louis, MOHonolulu, HI San Francisco, CAHouston, TX Seattle, WAKansas City, MO Tampa, FLLas Vegas, NV Washington, DC


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E. TERMINAL REPORTS

When a branch goes out of existence—eitherthrough merger or dissolution—a “terminalreport” on the branch’s finances must be filedfor the fiscal year during which it ceased toexist. The terminal report must be filed within30 days after the branch ceases to exist. AForm LM-2, LM-3 or LM-4 may be used as aterminal report; see the instructions accompa-nying the forms for more information.

F. REPORTS AS PUBLICINFORMATION

The LMRDA provides that LM reports “shallbe public information.” Under the law any per-son may examine and obtain copies of anyunion’s reports and accompanying documentsfiled with the Department of Labor. All reportsare made available at the Department’s website,www.dol.gov, and at the OLMS office inWashington, D. C., and most OLMS fieldoffices have duplicate copies of all reports filedby unions within their respective geographicjurisdictions. The OLMS offices will allowinspection upon request, and will furnish copiesof reports for a small copying charge.

G. UNION MEMBERS’ RIGHTTO INFORMATION

The LMRDA gives union members access tothe information reported by their unions to theDepartment of Labor, and to union records sup-porting the reported information. There aretwo main requirements:

1. Access to Labor Departmentreports. The branch must make available toany branch member a copy of all LM reportsfiled with the Labor Department, plus copies ofall additional documents filed with thosereports. This can be done at the regular branchmembership meeting after the reports are filedby handing out photocopies of the reports anddocuments filed with them. Or, an announce-ment may be made at the meeting or in thebranch’s publication that copies will be providedto members upon request.

2. Access to branch records. In addi-tion, the branch must permit any member for“just cause” to examine any of the branch’s offi-cial records “necessary to verify” its reports tothe Labor Department.

H. ENFORCEMENT ANDPENALTIES

The LMRDA provides for enforcement of itsrequirements through administrative action bythe Department of Labor and also provides forcriminal penalties for willful violations of thelaw.

1. Civil enforcement. The LMRDA givesOLMS powers to enforce the Act’s reportingprovisions. OLMS has authority to make inves-tigations concerning compliance with thereporting requirements of the LMRDA. Thismay involve audits of union finances and otherrecords. The Secretary of Labor may file a civilaction in Federal District Court to restrain viola-tions and bring about compliance with theLMRDA.


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2. Criminal penalties. The following actsare made criminal offenses under the LMRDA:(a) willfully failing to file a report and keeprequired records; (b) knowingly making a falsestatement or representation of a material fact orknowingly failing to disclose a material fact in areport or other required document; (c) willfullymaking a false entry in, or withholding, con-cealing, or destroying documents required tobe kept. A person convicted of such an offenseis punishable by a fine of up to $10,000, impris-onment for up to one year, or both.


1 Bonding is addressed in Chapter 5 of this Guide.2 The LMRDA’s provisions regulating union elections areincorporated into NALC Regulations Governing BranchElection Procedures, a comprehensive guide to branchelections available in booklet form from the NALCHeadquarters supply department.

3 The Form LM-1 asks in Item 18 about a list of unionpractices and procedures. To fill it out, a branch indicateswhere those topics—e.g., authorization for disbursementof funds, procedure for calling union meetings—are cov-ered in the NALC Constitution or branch by-laws. If anitem is not covered by the Constitution or by-laws, thereporting branch must attach a description of the proce-dures in question. If one of these items changes later,then the branch must file an amended LM-1 and attach anew description of the changed procedure.

4 NALC’s national headquarters files a simplified FormLM-4 with the Department of Labor on behalf of thosebranches which have no annual receipts or other finan-cial activity. The branch need not file.

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Contents

Introduction 4-1

A. Branch Tax-Exempt Status 4-2

B. Tax Consequences of Branch Payments to Individuals 4-21. Who Is a “Branch Employee”?—

A Crucial Tax Law Question 4-22. Salary 4-53. Lost Time 4-84. Expenses: An Overview 4-85. Expenses Paid Under Accountable Plans 4-106. Per Diem Allowances Under an Accountable Plan 4-137. Payment Under Nonaccountable Plans 4-158. Expenses—Comprehensive Example 4-16

C. Payments of $600 or More to Non-employees: Form 1099-MISC 4-18

D. Return of Organization Exempt from Income Tax: Form 990 4-18

E. Exempt Organization Business Income Tax Return: Form 990-T 4-19

Chapter 4Reporting to theInternal Revenue Service

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Introduction

NALC branches are considered exempt fromfederal income tax by the Internal RevenueService.1 However, this does not mean thatbranches operate in a tax-free world untouchedby the I.R.S. or state tax authorities. Branchesmust pay employment taxes on salary or losttime paid to their officers or other members.And members receiving salaries, lost time orcertain types of expense payments must reportthe income and pay taxes on it.

In some circumstances a branch must report itsown income to the Internal Revenue Serviceeven though it is not taxable. Moreover, theexemption from tax does not extend to all typesof branch income—certain types of income aretaxable.

NALC officials are responsible for tax compli-ance in two ways. First, they are fiduciaries whomust ensure that branch funds are handled incompliance with the tax laws.2 Second, whenNALC officers, stewards, delegates, etc. receivepayments from the union it is essential thatthey comply as individuals with the tax rules.At the very least, a failure to comply can reflectpoorly on the branch and undermine the mem-bers’ trust in NALC.

This chapter briefly describes some of the mostimportant tax rules that apply to NALC branch-es. It was created to help branch officers under-stand their basic tax obligations so they mayseek more complete information and advicefrom I.R.S. forms and printed instructions, fromthe Internal Revenue Service, or from a profes-sional accountant or tax advisor.

The first section of this chapter explains the

tax-exempt status of branches under the groupruling obtained by NALC headquarters. Thesecond section outlines the tax rules governingthe different types of payments made bybranches to their officers or other members–salaries, lost time and payments for union-related business expenses. A third sectionaddresses the I.R.S. Form 1099-MISC and thevarious circumstances under which a branchmust issue the form to members or other indi-viduals paid by the branch.

The fourth section discusses the three Form990s (Form 990, Form 990EZ and Form 990-N)and how to determine which form to file.

The fifth section discusses the requirement thatbranches with over $1,000 in annual “unrelatedbusiness income” file Form 990-T, ExemptOrganization Business Income Tax Return, withthe I.R.S. and pay any tax due.

IMPORTANT NOTE: The limits noted inSection D: Return of Organization Exempt fromIncome Tax: Form 990 changed over the 2008-2010 tax years. This is important to note shouldyour branch be notified by the I.R.S. to file apast Form 990. Additionally, some NALCbranches lost their tax-exempt status for not fil-ing a Form 990 and may be in the process ofseeking reinstatement as a tax-exempt organi-zation. The deadline to seek reinstatement wasDecember 31, 2012. For more information seethe I.R.S. website at www.dol.gov. This briefguide offers only basic information and not acomplete statement of the federal or state taxrules that apply to NALC branches. It is eachbranch’s own responsibility to obtain detailedinformation about its tax obligations and tocomply with the tax laws. The branch shouldconsult federal and state tax forms and instruc-

NALC Branch Officer’s Guide to Finance and Administration Reporting to IRS I page 4-1

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tions, the I.R.S. and state tax authorities, or aprofessional accountant or tax advisor.

A. BRANCH TAX-EXEMPTSTATUS

NALC has obtained at the national level a groupruling from the Internal Revenue Service underwhich the National Association and all of itsaffiliated branches are exempt from federalincome tax. In order to qualify for inclusion inNALC’s group exemption, a branch must haveobtained an Employer Identification Number(EIN) from the Internal Revenue Service evenif it has no employees. Most branches have hadan EIN for many years; call the office of thenational Secretary-Treasurer if you do notknow your branch’s EIN.

To maintain the group exemption letter, theNational Association must file an annual reportwith the I.R.S. showing certain types of newinformation about NALC branches. TheNational Association must also make an annualfiling with the Department of Labor. So branch-es should advise the national Secretary-Treasurer promptly if the branch changes itsmethod of operation. For example, if the branchchanges its name, address, or EIN, or if it incor-porates (so as to buy real estate, e.g.), NALCheadquarters should be notified.

B. TAX CONSEQUENCES OFBRANCH PAYMENTS TOINDIVIDUALS

Introduction

Many branches pay salaries, lost time, reim-bursed expenses or per diems to individual offi-

cers, stewards, convention delegates or othermembers. This section is intended to helpNALC branches making such payments, as wellas those officers and members receiving thepayments, to understand the basic tax require-ments that apply to these payments.

A branch’s tax obligations are imposed by fed-eral and state law and are a very serious matter;the penalties for failure to comply can besevere. Neither NALC branches nor their offi-cers, stewards, or members are exempt fromthese rules on account of NALC’s status as atax-exempt, non-profit organization.

Starting with subsection B.2 below, this materi-al addresses the different types of paymentsthat a branch may make to an officer, stewardor other member. For each type of payment,the material identifies the tax consequences tothe branch and the tax consequences to theindividual paid.

The tax treatment of all such paymentsdepends upon the “employment” relationship,under tax law, between the branch and the indi-vidual who receives a branch payment. So it isessential for the branch to know whether theI.R.S. considers the recipient an “employee” ofthe branch.

1. Who is a “Branch Employee”?—A Crucial Tax Law Question

The tax consequences of branch payments toan officer, steward or other member depend onwhether the union member is considered an“employee” of the branch under tax law. TheI.R.S. considers each individual paid by thebranch to be one of the following:


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■ An “employee:” An individual who per-forms services (duties or work) for thebranch in an employment relationship;or

■ A “non-employee” or “independent con-tractor”: An individual who performsservices for the branch in other than anemployment relationship—in otherwords, a non-employee. (The I.R.S.term “independent contractor” makeslittle sense when discussing NALCbranches and the payments they maketo officers, stewards or other members,so this material uses the term “non-employee” instead.)

It is important to understand this distinction,because the tax consequences of branch pay-ments to individuals are very different depend-ing on whether or not the recipient is an“employee” under tax law.

There are no hard and fast rules telling uswhich members are considered branch employ-ees under tax law and which are not. Rather,the I.R.S. will use certain established criteria toanalyze the individual facts of each case anddetermine whether or not there is an employ-ment relationship.

Generally, a member is considered an employ-ee of a branch when the branch has the right tocontrol and direct the member who performs theservices, not only as to the result to be accom-plished by the work, but also as to the detailsand means by which that result is accom-plished. This is the so-called “common lawtest.” Here are several important factors tend-ing to indicate that an individual is an employeeunder tax law:

■ The member’s compensation ismeasured by the hour, week, or monthrather than by the job;

■ The member is required to performthe services personally, without the abil-ity to delegate the task to somebodyelse;

■ There is a continuing working rela-tionship between the member and thebranch;

■ The branch supplies materials orfacilities used by the member in per-forming the services, such as an office,office supplies, a telephone, etc.;

■ The branch provides instructions ortraining to the member; and

■ The member performs the servicesin question solely for the branch (andnot to others).

Few branches employ full-time workers; mostdepend on the efforts of part-time workers—either paid or volunteer–to keep the local unionrunning. When the branch does make pay-ments to members for their services, in manycases the members are considered part-timeemployees of the branch under tax law, eventhough they are also full-time employees of thePostal Service. In other words, a member can bean employee both of the Postal Service and of abranch, and will receive a Form W-2 at year endboth from the Postal Service (for the compen-sation received from the Postal Service) andfrom the branch (for the compensationreceived from the branch).


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Although the employment status of a unionactivist is governed by the facts of each case,I.R.S. rulings have reached consistent conclu-sions about the status of three types of unionworker: officers, shop stewards, and conventiondelegates. The I.R.S. has consistently consid-ered branch officers and shop stewards to beemployees of the branch. However, the I.R.S.has found that the employment status of con-vention delegates depends on whether the par-ticular delegate provides services to the branchother than attending the convention. The I.R.S.rulings regarding these categories of unionworker are explained briefly below.

a. I.R.S: Local union officers are con-sidered to be employees. On numerousoccasions spanning several decades, the I.R.S.has concluded that members acting as unionofficers are employees of the union withrespect to the services they perform as officers.So branches should expect the I.R.S. to findthat elected branch officers who sit on abranch’s executive board are employees of thebranch with respect to the services they renderto the branch. This is true even though the offi-cer may work full- or part time for the PostalService.

b. I.R.S: Shop stewards are consid-ered to be employees. The I.R.S. has alsoruled that shop stewards are employees of alocal union, because the stewards’ handling oflabor relations matters is necessary to thelocal’s operation and subject to the control ofthe local union. So branches should expect theI.R.S. to find that NALC shop stewards,whether they are appointed by the branch pres-ident or elected by the members, are consid-ered employees of the branch with respect tothe work they do for the branch. This is true

even though the steward may do most of his orher union work while on the Postal Service’sclock, because the steward’s work as a unionrepresentative is subject to the control anddirection of the branch. And any branch pay-ment to the steward for working as a union rep-resentative likely will be considered payment tothe branch’s part-time employee.

c. I.R.S: Convention delegates not nec-essarily employees. The I.R.S. has foundthat a union member who serves as a delegateto a union convention is not considered anemployee solely as a result of attending the con-vention and participating in its business. So ifan NALC state or national convention delegateis neither an officer nor steward and if he orshe provides no other services to the branch,then the delegate will most likely be considereda non-employee under tax law. On the otherhand, where a delegate is a branch officer orsteward, or he or she provides other services tothe branch in an employment relationship, thenthe I.R.S. will likely find that the pre-existingemployment relationship extends to any pay-ments made for attending the convention.

d. Other members. Some members mayprovide services to a branch in a capacity otherthan officer or steward. For example, an editorof a branch newsletter who is neither an electedofficer nor a steward may spend time writingand editing the newsletter at the branch office.Or another member may assist the editor bylaying out the newsletter on a home computer.Or a member may organize the branch’s annualdrive for Muscular Dystrophy Association dona-tions.

The I.R.S. is likely to rule that members whoprovide such services to the branch qualify as


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part-time employees of the branch. Typically,even if a member’s participation is sporadic, heor she will be considered an employee becausehe or she works under the control and direc-tion of the branch.

In rare cases, a member’s performance of serv-ices for a branch may properly be considered toestablish a non-employee/independent contrac-tor relationship, rather than an employmentrelationship, with the branch. For example, if amember runs a house painting business avail-able to the general public in his off hours, hisagreement to paint the branch office in returnfor a fixed payment might be considered toestablish an independent contractor relation-ship with the branch.

e. Summary. Under the tax laws, NALCbranch officers and stewards will likely be clas-sified as employees of the branch for whichthey perform union work. Members who per-form union work for a branch in a capacityother than officer or steward will likely be con-sidered to be employees except in unusual cir-cumstances. A convention delegate will betreated as an employee only if he or she is anofficer or steward or otherwise performs workfor the branch establishing an employment rela-tionship.

NOTE: Although it cannot be said withcertainty that the I.R.S. will rule the sameway every time, branches should expectthe I.R.S. to continue to follow its own con-sistent past rulings except in unusual cir-cumstances. The material in the remain-der of this section explains how the taxrules will apply in the usual, rather thanexceptional, circumstances. If you areunsure whether a particular member should be

considered a branch “employee” under the taxlaws, it is strongly recommended that you con-sult with a professional accountant or tax advi-sor. A branch can obtain a determination fromthe I.R.S. about a member’s employment statusby submitting a Form SS-8, Determination ofWorker Status for Purposes of Federal Employ-ment Taxes and Income Tax Withholding.

f. Consequences of employment status.Once the branch determines the employmentstatus of each member who receives branchpayments, the branch will know the tax conse-quences of different sorts of payments it maymake to those members. These various types ofpayments—salary, lost time and expenses—arecovered in subsections 2 through 8 below.

2. Salary

a. Definition: The branch pays officers,stewards, or other members for performingservices for the branch. The member is paidperiodically, by the month or year, or in somecases receives a set amount for each branchmeeting that he or she attends. All salary pay-ments should be fixed by the branch’s by-lawsand identified as salary.3

b. Tax Consequences to the Branch

The branch is an employer. When thebranch pays officers, stewards, or others to per-form duties or services for the branch, thebranch becomes an employer in the eyes of theI.R.S. and state tax authorities. Those paid bythe branch become employees. The I.R.S. callsthe money paid wages.

Branch employers are subject to a number ofrequirements:


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Employer Identification Number. Thebranch must have or obtain a federal employeridentification number (EIN) and often a stateincome tax identification number and unem-ployment tax identification number.

Employment/payroll tax obligations. Asan employer, the branch must pay taxes onsalary payments and must withhold and payover amounts withheld from employee “wages.”The branch must:

Pay its share of federal social securitytaxes (“FICA”) on the employee’s wages;

Withhold and pay over the employee’sshare of FICA tax on his or her wages;

Pay the federal unemployment tax(“FUTA”) on the employee’s wages; Paythe state unemployment tax on theemployee’s wages, where applicable;

Withhold and pay over the employee’s fed-eral and state income tax from his or herwages; and

If necessary, pay state workers’ compensa-tion insurance premiums for the employee.

These matters are discussed below.

Federal FICA and FUTA taxes and stateunemployment tax. The branch will pay itsshare of FICA tax and withhold and pay overthe employee’s share to the I.R.S. Currently thebranch’s share is 7.65 percent of the employee’swages, and the employee’s share is also 7.65percent. The 7.65 percent rate for each share isactually comprised of two separate taxes: old-age, survivor, and disability insurance

(“OASDI”) which is currently 6.2 percent (forsocial security), and hospital insurance (forMedicare or “HI”), which is currently 1.45 per-cent.

The branch will also be required to pay FUTAat a maximum rate of 6.0 percent of the employ-ee’s wages. Generally, a branch may reducethis tax rate to account for state unemploymenttaxes paid on the employee’s wages. (Em-ployers are required by many states to pay stateunemployment tax on an employee’s wages.)

All wages are subject to the HI (Medicare) por-tion of FICA without limit. The OASDI (socialsecurity) portion of FICA is imposed on anemployee’s wages up to $113,700 in 2013. (This“earnings ceiling” increases each year.) FUTAis imposed only on the first $7,000 of theemployee’s wages for a calendar year.

In many cases a branch officer is a full-timePostal Service employee and the branch paysthe officer for his or her part-time services tothe branch. In calculating whether an employ-ee’s wages from the branch in a year exceedthe earnings ceiling for OASDI or FUTA, thebranch may not take into account wages paidby the Postal Service. If the member’s com-bined wages from the Postal Service and thebranch exceed the OASDI earnings ceiling forthe year, the member is entitled to a creditagainst income tax for the employee’s share ofOASDI withheld on the amount of wages inexcess of the OASDI earnings ceiling.

Federal and state income tax withhold-ing. A branch is required to withhold federaland state income tax on the employee’s wagesand pay it over to the I.R.S. and the appropriatestate tax authority. Income tax withholding


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4

5

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applies to the first dollar of wages paid by thebranch, and there is no maximum limit.

Workers’ compensation insurance pre-miums. Many states will require a branch toobtain workers’ compensation insurance for itsemployees and to pay the premiums.

In your area there may be additional withhold-ing requirements for payroll, such as county orcity withholding. These payments must bemade to the appropriate authorities—federal,state and local. Each state has its own websitewhere you can obtain this information.

Forms W-4 and W-2. The branch mustobtain an I.R.S. Form W-4 at the beginning ofthe year from each individual to whom it payssalary and must issue an I.R.S. Form W-2 soonafter the end of the year summarizing salaryand withholding information. No wages shouldbe paid to anyone who has not completed andsigned a Form W-4.

I.N.S. Form I-9. The branch must verify thateach new employee is legally eligible to work inthe United States. This will require the branchand the new employee to complete Immigrationand Naturalization Service Form I-9. The formmay be obtained from the I.R.S.

Timely deposits are required of employmentand income taxes. The branch must arrangewith its bank to make deposits of payroll taxesdue on a regular basis. The money must bedeposited soon after it is withheld; the branchmay not hold it and pay at the end of the year.Once deposited, these monies are no longeravailable for branch use; the bank will send thedeposits to the tax authorities. In addition to

depositing employment and income tax, abranch will be required to report periodicallythe amount of employment and income taxwithheld to the relevant governmental agency.

Record-keeping responsibilities also apply to allbranches which are employers. As with allbranch financial records, payroll-relatedrecords must be maintained in good order andkept for five years. (The I.R.S. requires reten-tion of financial records for three years; the U.S.Department of Labor requires retention offinancial records for five years. See Chapter 6,Branch Record Keeping.) Also, if the branch isrequired to file I.R.S. Form 990, 990EZ, or 990-N,Return of Organization Exempt from IncomeTax, the branch must list its salary payments,including payroll taxes paid by the branch, andalso any payments to reimburse members forunion-related business expenses, on the Form.See Section D of this chapter below for moreinformation about the different 990 forms.

More information: For more information onemployer tax rules contact the I.R.S. or visit itswebsite, www.irs.gov, for a free copy of I.R.S.Publication 15, Circular E, Employer’s TaxGuide. Also recommended is Publication 583,Taxpayers Starting a Business, which containsmuch helpful tax information for employers.

c. Tax Consequences to the Individual

Salary from the branch is income. Abranch salary is income to the recipient. Theindividual must report all salary income to theI.R.S. and the appropriate state tax agency andpay any income tax due, after accounting forfederal and state income taxes withheld by thebranch.


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3. Lost Time

a. Definition: Pay to a union official ormember which replaces that individual’s PostalService salary. Lost time is paid to union mem-bers who spend time away from their PostalService jobs doing union business.


The tax consequences to the branch depend on whether the recipient is considered anemployee of the branch under tax law.

Employee recipients. Lost time, when paidto a member who is a branch employee, is con-sidered “wages” by the I.R.S. and thus is identi-cal to salary for all tax purposes. Payroll with-holding by the branch is required. See “Salary,”Section B.2, page 4-5.

Non-employees. Sometimes a branch payslost time to a member who is not an employeeof the branch. For example, in the discussion ofconvention delegates in Section B.1.c. above, itwas noted that a convention delegate whoserves neither as an officer nor steward andwho performs no other services for the branchis not considered to be a branch employee. If abranch pays lost time to such a delegate tocompensate him or her for leave without payfrom the Postal Service to attend the conven-tion, the lost time would not be consideredwages subject to payroll withholding. Rather,the branch would pay the compensation ingross and, if the payments to the delegate were$600 or more during the calendar year, wouldsubmit a Form 1099-MISC to the delegate andto the I.R.S. at year end. (See Section C of thischapter below for more information aboutForm 1099-MISC.)

If a branch pays lost time to a delegate or othermember in the belief that he or she is not abranch employee, it should ask an accountantor other tax professional to confirm its view.


Lost time is income. Payments for lost timeare income to the recipient, whether or not therecipient is a branch employee and whether ornot the amount paid is under or over $600 dur-ing the year. The individual recipient mustreport all salary income to the I.R.S. and theappropriate state tax agency and pay anyincome tax due, after accounting for federal andstate income taxes withheld by the branch.

4. Expenses: An Overview

In addition to salary and lost time, branchesoften pay officers or other members for expens-es they incur in doing the branch’s business.Under tax law these are known as deductible“business expenses,” which must meet twobasic requirements: they must be “ordinary”and “necessary.” The I.R.S. rules explain that:

■ An “ordinary” expense is onethat is common and accepted in yourfield of business, trade or profession.

■ A “necessary” expense is onethat is helpful and appropriate foryour business. An expense does nothave to be indispensable to be con-sidered necessary.

See Section 5(a)(2) below for a further discus-sion of deductible business expenses.


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a. Handling Expenses in the Branch

Fiscal committee recommended. Like alldisbursements of branch funds, branch pay-ments for expenses must be authorized by themembership. In addition, it is recommendedthat each branch have a fiscal committee or sim-ilar small group of officers or other memberswho take responsibility for reviewing allexpense reimbursements and advances, as wellas the other bills submitted to the branch forpayment. The fiscal committee can set guide-lines for expenses—for example, limits on thecosts of entertainment, meal amounts, hotelrooms, tips and the like.

Using a multi-member fiscal committee spreadsfinancial accountability among several officersor members. This helps to guarantee thatbranch spending is authorized and appropriate.

Branch “stands in the shoes of theI.R.S.” When the branch reviews the propri-ety of expenses before making reimbursementsor advances, it “stands in the shoes of theI.R.S.” In other words, the branch must payonly proper, reasonable, union-related businessexpenses which are treated as deductible underI.R.S. rules. If the branch fails to do this jobproperly, both the local union and the individualrecipient may be subjected to tax and penaltieson any improper amounts paid.

b. General Rules on All ExpensePayments

Certain general rules, outlined here, apply to allbranch payments to officers or other membersfor union-related business expenses.

1) Expenses paid to branch employ-ees—Accountable Plans. For tax purpos-es, all expenses paid to an officer, shop stewardor other member considered a branch employ-ee, are made under either an “AccountablePlan” or a “Nonaccountable Plan.”4

■ Accountable Plan—no tax con-sequences. There are no tax liabilityconsequences, for either the branch orthe employee/recipient, resulting fromexpense payments which meet therequirements of an “Accountable Plan.”Generally, under an Accountable Planan employee is required to make a com-plete, detailed, written accounting of hisor her business expenses to the branch,and where the branch provides anadvance for expenses, to return anyexcess advance to the branch. Typicallythis involves submitting a writtenexpense report to the branch showingdates, times, locations, and the natureand business purpose (branch purpose)of all expenses sought to be reim-bursed, with receipts attached. All suchexpenses must qualify as deductibleunder I.R.S. rules.

When the employee/recipient makes aproper accounting of expenses to thebranch, the branch is relieved fromtreating the payments as wages subjectto payroll taxes and withholding, andthe recipient is relieved from reportingthe expense payments as income. Seesubsection 5 below for more informa-tion on Accountable Plans.

■ Nonaccountable Plan—tax con-sequences. All payments which fail to


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meet the requirements of an Account-able Plan are considered to be paidunder a Nonaccountable Plan. Expensepayments to a branch employee madeunder a Nonaccountable Plan are con-sidered wages on which the branchmust withhold and pay employmenttaxes. The payment is income to therecipient. For more information aboutexpenses paid under a NonaccountablePlan, see Section B.7, below.

2) Expenses paid to non-employees—adequate accounting. A branch may pay anon-employee for union-related businessexpenses so long as the expenses meet theI.R.S. deductibility requirements and the indi-vidual makes what is known as an “adequateaccounting.”

■ Adequate Accounting—no taxconsequences. There are no tax pay-ment consequences, for either thebranch or the employee/recipient,resulting from expense payments to anon-employee which meet the require-ments of an adequate accounting. Gen-erally, this means the recipient mustsubmit the same kind of detailed docu-mentation of expenses as required frombranch employees who receive expensepayments under an Accountable Plan.

■ Adequate accounting notmade—tax consequences. Anybranch payments for expenses to a non-employee for which the recipient fails toprovide an Adequate Accounting aretreated as payments under a Non-accountable Plan. The payment isreportable income to the recipient and

the Form 1099- MISC reporting rulesapply to the branch. For more informa-tion about Nonaccountable Plans seeSection B.7 below.

5. Expenses Paid under AccountablePlans

a. Definition: Payments for expenses madeby a branch to its employees, in the form ofreimbursements or advances, pursuant to anAccountable Plan, for actual expenses incurredby the recipients in union-related business. Asnoted above, properly documented, union-relat-ed business expenses paid to a branch employ-ee under an Accountable Plan carry no tax con-sequences to either the branch or the employee.

Reimbursed expenses. Reimbursement isthe simplest way to pay expenses under anaccountable plan. Under this system an officeror other branch employee pays an expense withpersonal funds, and then submits written docu-mentation of the expense to the branch. Thebranch reviews the documentation and, uponapproval, issues a check to reimburse the indi-vidual.

Advances for expenses. Within certainguidelines, a branch may pay an employee anadvance for reimbursed expenses. For instance,a branch could pay an advance for expenses toits branch president prior to the president’sbusiness trip to an NALC training seminar. Anadvance for expenses may be given for busi-ness travel that will occur in the near future,generally within 30 days of when the expensewill be paid. The amount of the advance maynot exceed the amount of expenses reasonablyexpected to be incurred.5


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Same rules at home or on travel: TheAccountable Plan rules cover all expense pay-ments received by a branch officer, shop stew-ard or other branch employee, whether theindividual incurred expenses at home or whileon travel for union business.

Per diem. There are special I.R.S. rules per-mitting a branch to pay an employee a flat perdiem allowance for union-related business trav-el under an Accountable Plan, rather than pay-ing an advance or reimbursement for docu-mented expenses. Under the per diem rules thebranch and the recipient may avoid tax conse-quences although the employee is not requiredto submit documentation proving the actualamounts spent. Per diem allowances areexplained in detail in section 6 below, Per DiemAllowances Under an Accountable Plan.

1) Three requirements of AccountablePlans: A branch’s arrangement for expensereimbursements and advances paid to itsemployees must meet these three conditions toconstitute an Accountable Plan:

a) Pay only valid, deductible expenses.The reimbursements or advances must bemade only for deductible, union related busi-ness expenses paid by branch employees(i.e., not for personal expenses or nonde-ductible business expenses such as commut-ing expenses);

b) Substantiate with documentation.The employees are required to substantiatethe expenses by submitting detailed, writ-ten records of all expenses to the branchwithin a reasonable time (generally, within60 days of paying the expense under I.R.S.rules6); and

c) Return excess amounts. The employ-ees are required to return any reimburse-ments or advances that exceed the amountthey have substantiated within a reasonabletime.7

An arrangement for advances and reimburse-ments that meets all three of these conditions isreferred to as an Accountable Plan becauseemployees are required to account for theirexpenses to their employer—the NALC branch.An arrangement for advances and reimburse-ments generally will not qualify as an Account-able Plan if, for example, employees are notsubstantiating their expenses with documenta-tion or required to return excess advances tothe branch.

2) Deductibility and substantiation ofexpenses. As noted above, under anAccount able Plan a branch may reimburseonly those valid, union-related businessexpenses which the I.R.S. considersdeductible expenses. Because NALC branch-es are non-profit organizations, they typicallydo not deduct expenses from income in orderto figure their tax liability, as would a profit-making business.

However, deductibility under I.R.S. rules doesdetermine what employee expenses thebranch may pay for under an AccountablePlan, which carries no tax consequences tothe branch or to the employee. Any non-deductible expense paid to an employee wouldbe considered to be paid under a Nonaccount-able Plan, and thus would be wages, subject topayroll taxes and withholding and reportableas income by the employee.

The I.R.S. has many rules, beyond the basic


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“ordinary and necessary” requirement, whichdescribe those expenses which are deductiblefor business purposes, and additional ruleswhich describe the documentation that mustbe provided to substantiate the various typesof deductible expenses. All of those rules can-not be covered here, although travel expensesare explained briefly below for illustrative pur-poses. The branch should seek informationand advice from the appropriate I.R.S. publica-tions,8 from a professional accountant or othertax advisor, or from the I.R.S.

3) Example-travel expenses: Branchescommonly pay for the expenses of their offi-cers, stewards or other employees who travelaway from home on union-related business,such as NALC conventions or training sessions.These expenditures will include the costs oftransportation, lodging, meals, and “incidentalexpenses” such as laundry and tips.

Documentation: To satisfy an AccountablePlan’s requirement to substantiate businesstravel expenses, a branch employee must sub-mit written documentation to the branch prov-ing all four of the following:

a) The amount of each expenditure fortransportation, lodging, meals, and inci-dental expenses;

b) The dates of departure and return,and the number of days spent on busi-ness;

c) The locations of travel; andd) The business purpose for the

travel.

The best way to submit this documentation is

on a standardized expense report form whichsets out lines and columns for the differenttypes of expenditures, their dates and amounts,with receipts attached.


No tax consequences when it is donecorrectly. If a branch pays an employee’sactual union-related business expenses whichhe or she has substantiated under an Account-able Plan, then the branch does not report thepayment on the employee’s Form W-2 and doesnot withhold employment tax on it.

If the employee fails to return any part of anadvance in excess of the amount of expenseshe or she has substantiated to the branch, theexcess is considered paid under a Nonaccount-able Plan. The branch must report the excessas wages on the employee’s Form W-2 andwithhold payroll tax on it. See Section B.7below.

The branch must keep records justifying suchreimbursement payments, along with all otherfinancial records, for five years.


None. An employee need not include in incomea payment for his or her actual union-relatedbusiness expenses under an Accountable Planexcept to the extent that he or she fails to returnany excess of the payment over the amount ofexpenses accounted for. To the extent the reim-bursements received are excluded from income,an employee may not claim a deduction for thereimbursed business expense.


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6. Per Diem Allowances Under anAccountable Plan

An employee may satisfy automatically anAccountable Plan’s requirement to prove theamount of some or all of certain travel expensesif he or she receives a “per diem allowance” in afixed amount per day of travel. The types oftravel expenses that are considered substantiat-ed in this way without providing records andreceipts are: lodging, meals, and incidentalexpenses. Transportation expenses to and fromthe destination cannot be reimbursed with a perdiem allowance.

Generally speaking, a branch may pay per diemallowances only to members who are consid-ered its employees under the tax laws; it mustreimburse a non-employee for his or her actualexpenses.

a. Definition: A per diem allowance has adistinct meaning for tax purposes and refers toallowances that are:

(1) paid to employees at a daily flat rate,

(2) for expenses that are reasonablyexpected to be incurred while theworker is away from home overnighton union business,

(3) in an amount that is reasonably calcu-lated not to exceed the anticipatedexpenses.

Also, the flat rate payment must be made in thecontext of an Accountable Plan. In other words,the branch’s payment must be made pursuantto its arrangement that requires: (1) that theexpenditures be made for union-related busi-

ness expenses; (2) that the employee substanti-ate each element of the expenditure; and (3)that the employee return any portion of anadvance that exceeds the expenses substantiat-ed. As explained below, the “return” require-ment is applied in a special way with regard toper diem allowances.

Establishing branch rules on per diemallowances. The tax treatment of per diemallowances can become complex in certain cir-cumstances. To ensure favorable tax treatmentand avoid any uncertainties, the branch shouldset forth in writing its per diem allowance rulesin consultation with a tax professional.

Automatic substantiation. If a branch paysan employee an advance per diem allowance todefray the cost of lodging, meals, and incidentalexpenses on a business trip, the employee gen-erally does not have to provide any furtherproof of the amount of lodging, meal and inci-dental expenses actually incurred while on offi-cial travel.

No detailed, written documentation of theexpenses is required. Rather, the “amount”requirement of an Accountable Plan is deemedto be met when the other per diem allowancerequirements are met. (The dates, locations,

and business purpose requirements still mustbe proven; see “Proof required” below.)

The amount of expense deemed proven in thisway, however, cannot be more than the“Federal Per Diem Rate” or the “High LowRate” described below.

1) I.R.S. rates. The I.R.S. has establishedtwo schedules of per diem rates which set theupper limit for the amount of travel expenses


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that can be deemed substantiated with a perdiem allowance: the Federal Per Diem Rateand the High-Low Rate.

Federal Per Diem Rate. This is the high-est amount that the federal government will payto its employees for lodging, meals, and inci-dental expenses (or meals and incidentalexpenses only) while they are traveling awayfrom home in a particular area. This scheduleallocates an amount for these expenses for eachcity or county in the United States. If thebranch uses the Federal Per Diem Rate, it mustuse the particular rate applicable to the locationwhere the employee will stop for sleep.

Set forth at the right are the Federal Per Diemrates for several localities in effect sinceOctober 1, 2008. The entire schedule of rates isset forth in I.R.S. Publication 1542, Per DiemRates, and is adjusted periodically.

High-Low Rate. This is a simplified set ofrates which divides the United States into twotypes of locality: high-cost and other localities.A rate of $256 applies to high-cost localities,such as New York and San Francisco, for thecombined daily cost of lodging, meals, and inci-dental expenses. A daily rate of $158 applies toall other localities. The list of high-cost localitiesis set forth in I.R.S. Publication 1542, Per DiemRates. The High-Low Rate is simpler to imple-ment than the Federal Per Diem Rate becausethere are only two rates from which to chooseand the list of high-cost localities is short.

Proof required. The branch need not collectdocumentation of the amounts of expensesactually incurred. However, as noted above, theemployee must provide the branch with general

evidence of the dates, locations, and businesspurpose of the trip within a reasonable time. Ahotel receipt, a copy of a round-trip plane ticket,or other, similar documentation should be suffi-cient.

2) Per Diem Allowance Equal to I.R.S.Rate. There are no tax consequences to thebranch if it pays to an employee, pursuant to anAccountable Plan, an advance per diemallowance exactly equal to the applicable“Federal Per Diem Rate” or “High Low Rate”and collects the required proof of the dates,location and business purpose of the trip. Whenthese requirements are satisfied, the per diemallowance satisfies the requirements of anAccountable Plan.

Sample Federal per Diem Rates(Effective 10/1/2012 – 9/30/2013)

Meals andIncidental Maximum Per

City Lodging + Expenses = Diem Rate

New York City $204–$241 $71 = $275–$312 (1/1–6/30)

Memphis, TN $93 $61 = $154Los Angeles, CA $125 $71 = $196

As to the employee, when these requirementsare satisfied he or she reports neither the perdiem allowance nor the actual expenses on hisor her income tax return, so long as the actualexpenses are equal to or less than the per diemallowance. If the employee’s actual expensesare greater than the allowance and provable byappropriate documentation, he or she may beable to deduct the excess expenses. See Section8 below, “Expenses—ComprehensiveExample.”


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3) Per Diem Allowance Exceeds I.R.S.Rate. Sometimes a branch may decide to payto an employee an advance per diem allowancein an amount greater than the applicableFederal Per Diem Rate or High-Low Rate. Forexample, the branch might decide, given therealities of lodging costs, to pay a per diemallowance for a trip to New York City in theamount of the Federal Per Diem Rate ($275–$312) plus $25, for a total of $300 to $337.

A branch is permitted to establish a per diemallowance in an amount greater than the appli-cable I.R.S. rate if it reasonably calculates thatthe excess amount will be necessary for antici-pated expenses. The excess portion ($25 in theexample), however, is treated as paid under aNonaccountable Plan. It is reported as wageson the employee’s Form W-2 and is subject topayroll withholding. (In this situation theemployee is not required to return the excess$25 paid for each day of business travel; theusual Accountable Plan requirement—thatemployees return excess expense advances tothe branch—does not apply.)

If the employee’s actual expenses exceed theI.R.S. rate in the above example, the employeemay report the amount of expenses in excess ofthe I.R.S. rate on his or her tax return and IRSForm 2106, Employee Business Expenses. (SeePublication 529 for more information.) Theemployee may deduct this excess amount sub-ject to limitations: The portion allocable tomeals and entertainment is reduced by 50 per-cent, and the balance may be deducted only tothe extent that it, together with the employee’sother miscellaneous expenses, exceeds two per-cent of the employee’s Adjusted Gross Income.

7. Payments Under NonaccountablePlans

A. Definition. A branch’s expense paymentarrangements will sometimes fail to qualify asan Accountable Plan (with regard to employ-ees) or an adequate accounting (with regard tonon-employees). This will occur if, for example,the branch reimburses expenses that are notsubstantiated or not related to union business,or the employee is not required to return to thebranch any portion of an expense advance orreimbursement that exceeds the amount sub-stantiated.

Nonaccountable expense allowance.An example of a Nonaccountable Plan forexpenses is an expense allowance in a fixedamount that is payable regardless of whetherthe member actually incurs any union- relatedexpenses. For instance, a branch might paystewards $30 per month as an expenseallowance, but not require any substantiationof actual expenses incurred.


It depends. The tax consequences to thebranch depend on whether the recipient is con-sidered a branch “employee” under I.R.S. rules,and if not, upon the amount paid.

Employee recipients. As noted above, unionofficers and shop stewards will qualify asemployees of their respective branches.Payments made to branch employees under aNonaccountable Plan must be reported aswages on the employees’ Forms W-2 and aresubject to withholding of employment taxes inthe same manner as salary (see Section B.2above).


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Non-employee recipients. If a non-employ-ee has failed to provide an adequate accountingto the branch of his or her expenditures, theconsequences to the branch depend on theaggregate amount paid to that individual duringthe year.

If total payments to the non-employee are lessthan $600, the branch need not withholdemployment taxes and need not report suchpayments to the tax authorities. It is a goodpractice for branches making these unreportedpayments to advise the recipients to make sureto report the payments on their individual taxreturns; see “Tax Consequences to theIndividual” below.

If total payments to the non-employee are $600or more, the branch need not withhold employ-ment taxes but must file a Form 1099-MISCwith the I.R.S. and give a copy to the individual.See Section D of this chapter below.


All payments are income to the individ-ual. Regardless of whether the recipient is con-sidered to be a branch employee, and regard-less of the amount received, the I.R.S. treatsevery dollar of a payment under aNonaccountable Plan or when there has notbeen adequate accounting as income that mustbe reported on the recipient’s income taxreturn. Please note that this rule applies equallyto payments of less than $600 made to a non-employee.9

Deductibility. However, the individual may beable to deduct some or all of his or her actualunion-related business expenses under certaincircumstances. How this is done depends on

whether the I.R.S. considers the individual to bean employee of the branch or self-employed asan independent contractor.

An individual considered an employee of thebranch may deduct union-related businessexpenses provided he or she can substantiatethe actual expenses with records indicating theamount, dates, location, and business purpose ofthe expenditures. Such deductions must bereported on Form 2106, Employee BusinessExpenses and carried forward to Form 1040’sSchedule A, Itemized Deductions, Line 21,Unreimbursed Employee Expenses, as a “mis-cellaneous” deductible expense. The deductionsfor meal and entertainment expenses are limit-ed to 50 percent of such expenses, and the totalmiscellaneous expenses are deductible only tothe extent that they exceed 2 percent ofAdjusted Gross Income.

If the individual is considered a non-employee(“self-employed” is the I.R.S. term), the deduc-tions may be made on Form 1040’s Schedule C,Profit or Loss from Business. The non-employeedeductions are not subject to the 2 percent ofAdjusted Gross Income floor.

8. Expenses—Comprehensive Example

The Franconia, Virginia branch decides to sendits president, who is considered a branchemployee although she receives no branchsalary, to attend a six-day NALC leadershiptraining seminar in Memphis, Tennessee.Pursuant to a written Accountable Plan, thebranch decides to provide the president with anadvance per diem allowance for lodging, meals,and incidental expenses in the amount of theapplicable Federal Per Diem Rate, plus $26, for


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six days. This amount is reasonably calculatednot to exceed anticipated expenses. Becausethe Federal Per Diem Rate for Memphis is$154, the amount of the per diem allowance is$180 per day, or $1080 for six days.

Also pursuant to the branch’s Accountable Plan,the Franconia branch provides the presidentwith an advance travel allowance of $600 to payfor round-trip airline fare between Franconiaand Memphis.

The president pays $500 for her airline ticket.Due to illness, she is able to attend the trainingseminar for only four days. For each of thesedays, she actually spends $140 on lodging,meals and incidental expenses.

The advance travel allowance for air transporta-tion of $600 is governed by the regularAccountable Plan rules described in Section B.5above, rather than by the per diem allowancerules described in Section B.6. The presidentmust provide documentation to the branchwithin 30 days after returning10 to substantiatethe following four elements of the trip: amountof expenditure ($500), dates of travel, location oftravel (Memphis) and business purpose for thetravel (to attend NALC educational session).The president also must return to the branchthe $100 excess of the advance over the ticket’scost within 30 days after completing the travel.11

If these requirements are met there are no taxconsequences to the branch or to the presidentregarding the advance for air fare.

Regarding the advance per diem allowance inthe amount of $1,080, the president is entitledto the simplified record-keeping rules govern-ing per diem allowances. Under the Account-able Plan’s requirement to return excess allow-ances, the president must return to the branch

$360 for the two days of the seminar which shewas unable to attend.

As for the four days of attendance, the presi-dent is relieved from proving the amount of herdaily expenses to the branch up to the amountof the Federal Per Diem Rate of $154. The pres-ident, however, must provide records to thebranch which prove the dates, locations, andbusiness purpose of the trip. (The president hasalready provided this information in connectionwith the substantiation of the air ticketexpense.)

The portion of the per diem allowance equal tothe Federal Per Diem Rate of $154 is treated aspaid under an Accountable Plan and causes notax consequences to either the branch or thepresident. By the same token, the presidentcannot claim on her income tax return anydeduction for her expenses up to the amount ofthe Federal Per Diem Rate for the four days ofattendance ($154 x 4 = $616).

The president is not required to return to thebranch the excess of the actual per diemallowance over the Federal Per Diem Rate forthe four days of attendance ($26 X 4 = $104).However, the $104 is treated as paid under aNonaccountable Plan, and thus has tax conse-quences to both the branch and the president.The branch must reported it as wages on thepresident’s Form W-2 and the payment is sub-ject to payroll withholding. The president mustinclude the $104 excess in income.

On each day of the training seminar the presi-dent actually spent $160, which is $6 more thanthe applicable Federal Per Diem Rate of $154. Ifthe president has sufficient records to substan-tiate the amount, dates, location, and businesspurpose of her expenditure of $160 on each of


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the four days, she may deduct a portion of theexcess $24 ($6 X 4) amount on her income taxreturn. In this way the president will reduce thetax on the excess per diem allowance ($104)that she is required to include in income.

The president’s deduction of the $24 excessexpenses is limited. First, the portion of the $24spent on meals or entertainment is reduced by50 percent. Second, the balance is subject tothe 2 percent floor on miscellaneous itemizeddeductions.

C. PAYMENTS OF $600 OR MORE TO NON-EMPLOYEES: FORM 1099-MISC

Branches must issue a Form 1099-MISC (Mis-cellaneous) to an individual, and report to theI.R.S. all such forms issued, in two main circum-stances. The first is where the branch makes apayment under a Non-accountable Plan to amember who is not considered an employeeunder I.R.S. tax rules. (See the material in Sec-tion B of this chapter for more information.)

The second situation involves a branch paymentto somebody who is not a member, for servicesrendered to the branch. Examples include pay-ments of branch rent to an individual landlordfor the branch office, payments to a carpenter tobuild cabinets in the branch office, or paymentsto a computer programmer to set up thebranch’s membership database. The 1099-MISCmust be issued only for services rendered, andnot when payments are made to purchasegoods.$600 or more. The Form 1099-MISC must beissued only when total payments to the individ-

ual are $600 or more during the tax year. Copiesof a branch’s Forms 1099-MISC must be gath-ered and filed with the I.R.S. together with aForm 1096, Annual Summary and Transmittal ofU.S. Information Returns, annually by March 1.

D. RETURN OF ORGANIZATION EXEMPTFROM INCOME TAX:FORM 990

1. Who Must File

All branches, even those receiving no incomeand having no assets must file some type ofForm 990.

2. Which Form Must Be Filed

In late 2008, the IRS changed the gross receiptand total asset amounts defining which Form990 an organization must file. The amountchanged over the following two years. It isimportant that NALC branches check the IRSwebsite at www.irs.gov to ensure the branch isfiling the appropriate Form. The followinglimits define which Form 990 a branch shouldfile for the 2012 tax year:

a. Form 990-N (also known as the e-Postcard): Branches with gross receipts nor-mally equal to or less than $50,000.

b. Form 990EZ: The branch may file the990EZ (rather than the more complicated 990)if its gross receipts during the year are morethan $50,000, but less than $200,000 and itstotal assets at the end of the year are less than$500,000.


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c. Form 990: A branch must file the longerForm 990 for 2012, if its gross receipts are$200,000 or more or if its assets at the end ofthe year are $500,000 or more. Filing require-ments for 2010 and before were different.

If a branch receives the wrong Form from theIRS, the form must be partially completed andreturned to the I.R.S. in order to remove thebranch from the I.R.S. mailing list and to avoidfollow-up inquiries. See the instructions on theform.

For a more detailed explanation, study theForm 990, Form 990EZ, or Form 990-N instruc-tions. As noted in Section B.2.b above, a branchmust list salary expense, including payroll taxesthat it paid, and reimbursements made to mem-bers for union-related business expenses. Ifmore help is needed the branch should obtainprofessional advice from an accountant, taxadvisor or the Internal Revenue Service.

3. Time of Filing

The Form 990, 990EZ, or 990-N must be filedby the 15th day of the fifth month after thebranch’s annual accounting period (fiscal year)ends. For branches that use a calendar yearaccounting period, the deadline is May 15th.(Extensions are available if properly and timelyfiled.)

4. Penalties

A penalty of $20 per day, up to a total of $10,000,may be charged if the Form 990 is filed late orif an incomplete return is submitted. There alsoare penalties—fines and imprisonment—forwillfully failing to file and for filing fraudulentreturns and statements.

E. EXEMPT ORGANIZATIONBUSINESS INCOME TAXRETURN: FORM 990-T

Certain types of branch income are not exemptfrom income tax, regardless of the branch’s sta-tus as a “tax-exempt organization.” The InternalRevenue Code requires branches with “unrelat-ed business income” of $1,000 or more for theyear to file a tax return-Form 990-T, ExemptOrganization Business Income Tax Return—andpay any tax due.

1. What is “Unrelated BusinessIncome”? Generally, “unrelated businessincome” of a branch is income from:

a. A business (generally, a money-makingactivity)

b. Regularly carried on, which is

c. Unrelated to the branch’s “exempt pur-poses.” (Generally, a branch’s tax-exemptpurposes include such things as organiz-ing, representation, education of unionmembers, fraternal activities, etc.)

A more precise definition and instructions forcalculating the amount of unrelated businessincome are contained in federal tax law and reg-ulations, and in I.R.S. Publication 598, Tax onUnrelated Business Income of Exempt Organi-zations, available free from the I.R.S. Unfortun-ately, this material is complicated and not easilysummarized.

However, we can offer here some very basicguidelines on what is income from an “unrelat-ed trade or business” of a branch. For moreinformation branches should obtain profession-al tax advice.


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Not taxable. The following items are general-ly not considered “unrelated business income”of branches, and thus do not constitute taxableincome which must be reported on the Form990-T:

a. Union dues, assessments, initiation orreinstatement fees, and fines;

b. Interest or dividend income earned frombranch savings or other accounts orfrom other investments of branch funds.

Taxable. On the other hand, the items belowmay be considered “unrelated businessincome,” and are therefore reportable on theForm 990-T and taxable if the branch hasincome of $1,000 or more from these sources:

a. The excess of advertising income froma branch publication over the cost ofthe publication;

b. Rental income from “debt-financedproperty,” such as a branch-ownedbuilding subject to a mortgage.

2. Time of Filing

The Form 990-T must be filed by the 15th dayof the fifth month after the branch’s annualaccounting period (fiscal year) ends. Forbranches that use a calendar year accountingperiod, the deadline is May 15th. A branch sub-ject to tax for “unrelated business income” isalso required to make quarterly estimated taxpayments.

3. Penalties

There are penalties for late filing of the Form990-T and late payment of tax on “unrelatedbusiness income.” In addition, interest ischarged on taxes paid after their due date.


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1 NALC, its state associations and branches are consid-ered tax-exempt organizations under Section 501(c)(5)of the federal tax law, the Internal Revenue Code.

2 See Chapter 1 for a discussion of branch officers’ fiduci-ary duties under federal labor law.

3 Branches may choose which types of payments theywish to make to -officers, stewards, or other members,as long as all payments are properly authorized by themembers-through the by-laws or through votes in mem-bership meetings. So, for example, a branch maychoose whether to pay its president salary, lost time orreimbursed expenses (or some combination of these).The branch by-laws or other official branch documents,such as a motion or resolution recorded in the minutes,must state clearly what type of payment is being author-ized. The Internal Revenue Service probably will rulethat a payment is wages (same as salary) unless it isauthorized in writing as another type of payment.

4 Although there are no consequences in terms of liabilityfor payment of taxes, branches must report payments ofsalary and expenses to union officers and employees;see section D of this chapter below. In addition, branch-es must report salary and expense payments to theirofficers and employees on the annual financial report tothe U.S. Department of Labor-the Form LM-2, LM-3 orLM-4. See Chapter 3 for more information.

5 These rules must be followed in order to satisfy I.R.S.rules and also avoid the treatment of expense advancesas reportable loans under the Labor-ManagementReporting and Disclosure Act (LMRDA).I.R.S. rules require an advance for expenses to be madewithin a reasonable time—generally 30 days—beforethe expenses are expected to be paid or incurred. Underthe LMRDA, an advance for expenses is considered tobe a reportable loan unless: (1) the amount of theadvance does not exceed the reasonably anticipatedexpenses of official travel to take place in the nearfuture, and (2) the amount of the advance is fully repaidor fully accounted for by vouchers or paid receipts with-

in 30 days after the completion or cancellation of thetravel. See the U.S. Department of Labor instructionsfor Form LM-2 or Form LM-3. (Within certain guide-lines, a union also may avoid reporting as loans “stand-ing advances” made to union officers or employees whomust travel frequently on union business.) See Chapter3 for more information about reporting to the U.S.Department of Labor.

6 An expense advance for business travel must be fullyrepaid or substantiated with documentation within 30days after the travel is completed or canceled in order toavoid treatment as a reportable loan on the branch’sannual financial report to the U.S. Department of Labor.See note 5 above.

7 Although a “reasonable time” under I.R.S. rules general-ly means within 120 days after payment of the expense,see notes 5 and 6 above.

8 See I.R.S. Publication 463, Travel, Entertainment, Gift,and Car Expenses, for guidance concerning deductiblebusiness trip, local transportation and entertainmentexpenses, and for a good explanation of AccountablePlans. This and other publications setting forth rules ondeductible business expenses are available atwww.irs.gov.

9 Non-employee recipients of branch expense paymentsunder a Nonaccountable Plan should avoid the trap offailing to report such income—even though the amountmay be less than $600 and so not reported on a Form1099-MISC from the branch. It is each citizen’s responsi-bility to comply with the tax laws; moreover, the I.R.S.has ways to catch and punish violators. The conse-quences may be severe—for both an individual who hasevaded taxes and for the reputation of the local union.

10 Although 60 days after the ticket’s purchase is the usualI.R.S. rule, see note 5 above.

11 Although the I.R.S. rules provide that the excess mustbe returned within 120 days of the purchase, see note 5above.

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Contents

A. Bonding—A Special Type of Insurance, Required by Law 5-1

B. How to Obtain Bonding 5-1

C. Who Must be Bonded? 5-1

D. What Amount of Bonding is Required? 5-2

E. Reporting of Bonding Information 5-3

F. Record-keeping Requirement 5-3

G. Enforcement and Penalties 5-3

APPENDIX: Bonding Computation Worksheet 5-4

Chapter 5BondingRequirements

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A. BONDING—A SPECIALTYPE OF INSURANCE,REQUIRED BY LAW

Bonding is a type of insurance policy thatinsures an organization against financial losscaused by the persons who are “bonded.” Theinsurance policy is called a “bond”—often a“surety bond” or “fidelity bond.” When a losscovered by the bond occurs, the bonding com-pany reimburses the union.

Federal labor law requires bonding, to protectunions from financial losses caused by “fraudu-lent or dishonest acts” of union officers oremployees—for example, embezzlement, for-gery or theft.

The Labor-Management Reporting andDisclosure Act (LMRDA) establishes specificbonding requirements which apply to officers,other officials and employees of NALC branch-es. This chapter briefly explains those require-ments. For more information see the OLMSwebsite at http://www.dol.gov, underCompliance Assistance, unions and unionMembers, Financial Reporting and FiscalControls, Compliance Assistance Materials,Bonding Requirements under the LMRDA.The requirement of bonding is based onexperience: When many people are entrustedwith money or property belonging to others,occasionally an individual will cause a lossthrough either fraud or dishonesty. While thismay happen very rarely within NALC, it is agood practice to insure against such risks.Organizations of all types—businesses and gov-ernments as well as unions—commonly protecttheir money and other property by bondingtheir officers and employees.

B. HOW TO OBTAINBONDING

Under the LMRDA, bonding must be obtainedfrom a company approved by the Secretary ofthe Treasury. A list of approved companies isavailable from OLMS or online at theDepartment of the Treasury’s website athttp://www.fms.treas.gov/C570.

A fidelity bond from an approved company maybe obtained through many insurance agentsand brokers. However, some insurance com-panies may be reluctant to write a fidelity bondfor a small amount or covering only a few per-sons. The branch may have better luck obtain-ing reasonably-priced coverage through anapproved insurance company with which it reg-ularly does other insurance business.

Headquarters assistance: If your branchhas trouble obtaining a bonding policy, you maycontact the office of NALC’s national Secretary-Treasurer. NALC’s own officers and employeesare bonded, and upon request headquarterswill have NALC’s bonding company send thebranch an application. When the completedapplication is accepted, the insurance companywill bill the branch directly.

C. WHO MUST BE BONDED?

Every officer, agent, shop steward, and otherrepresentative and employee of a branch whohandles funds or other property of a branch (or ofa covered trust1) must be bonded, if the branchhas property and annual receipts exceeding$5,000. An official of such a branch who is not

NALC Branch Officer’s Guide to Finance and Administration Bonding Requirements I page 5-1

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bonded may not handle branch funds or prop-erty. The definitions below explain theserequirements.

“Handling:” Branch officials and employeeswho “handle” funds or other property of thebranch include not only those who physicallyhandle money or checks, etc., but also thosewho have access to, supervision, authority orcontrol over, or custody of funds or otherproperty. In general, an individual is consideredto be handling branch funds or other propertyif the branch could suffer a loss in the event theindividual performed his or her duties frau-dulently or dishonestly. The loss could becaused by the individual acting alone or withothers.

Typically, those branch officers “handlingfunds” include at least the following: President,Vice-President, Recording Secretary, FinancialSecretary, Treasurer and Trustees. In manybranches stewards handle raffle tickets or othermeans of “funds” and thus should be bonded aswell.

“Funds or other property:” Generally thismeans cash, bank accounts, checks, bills andnotes, government obligations, marketablesecurities—plus any other branch property thatis held for possible conversion into cash or forsimilar purposes making it substantially equiva-lent to “funds.”

Branch property of a relatively permanentnature, such as land, buildings, and office furni-ture and equipment, is not considered “funds orother property” for the purposes of bonding.

“Property and annual receipts exceed-ing $5,000:” The bonding requirementdoes not apply to branches whose property andannual receipts have less than $5,000 in value.To determine the amount of “property andannual receipts” for your branch, use the“Bonding Computation Worksheet” at the endof this chapter. The LMRDA’s bonding require-ments apply only if Line 7 is more than $5,000.

D. WHAT AMOUNT OFBONDING IS REQUIRED?

A bond, like any insurance policy, has a maxi-mum recovery amount. That amount must be,for each individual covered by the LMRDA’sbonding requirements, equal to at least 10 per-cent of the funds handled by the individual andhis or her predecessor, if any, during thebranch’s preceding fiscal year. If there was nopreceding fiscal year, the bond must be at least$1,000 for each covered branch official oremployee.

A quick formula for computing the approximateamount of required bonding coverage is:

Liquid Assets + Total Receiptsx 10% equals

Amount of Coverage Required

For more detailed information see the BondingComputation Worksheet at the end of this chap-ter.

The branch should compute its necessarybonding coverage at the start of each fiscal yearand promptly obtain any increase that is neces-sary. Any lapse of adequate coverage is a viola-tion of the LMRDA.


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E. REPORTING OF BONDINGINFORMATION

A union filing an annual financial report (LM-2,-3 or -4) must indicate on the report whether itwas insured by a bond during the annualreporting period and, if so, state the maximumamount recoverable for loss caused by any per-son.

The union also must indicate whether it discov-ered any loss or shortage or funds or otherproperty during the reporting period. If so, itmust describe the loss or shortage in detail byexplaining what was lost, how it was lost and towhat extent, if any, there was any recoverythrough bonding or other means.

F. RECORD-KEEPINGREQUIREMENT

The LMRDA requires branches to keeprecords on any matters reported to the LaborDepartment for at least five years after reportsare filed. Because bonding is reported on theForm LM-2, LM-3 or LM-4, records of bondsare covered by this requirement. For moreinformation on branch record-keeping seeChapter 6.

G. ENFORCEMENT ANDPENALTIES

Willful violations of the LMRDA’s bondingrequirements are punishable by fines of up to$10,000, imprisonment for up to one year, orboth.


1 According to the Department of Labor, a trust in which alabor organization is interested is defined as any trust orother fund or organization which meets the followingtwo conditions:

(1) One of its primary purposes is to provide benefitsfor union members or their beneficiaries; and

(2) A union created it or selected one or more of its trustees or members of its governing body.

This definition, for example, covers funds for accidentinsurance, vacations, death benefits, apprenticeship andtraining, scholarships, childcare, and legal services.

The definition of a trust also covers pension funds andhealth and welfare funds. However, if these funds aresubject to the bonding provisions of the EmployeeRetirement Income Security Act of 1974 (ERISA), noadditional bonding is required under the LMRDA.

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Appendix: Bonding Computation Worksheet

To determine the amount of funds handled during the last completed fiscal year and the amount ofbonding required, complete the following bonding computation worksheet.

Note that the LMRDA’s bonding requirements apply only if the amount on Line 7 exceeds $5,000.


1. Liquid Assets as of start of fiscal year (date) _______________________:A. Cash on hand and in banks $__________B. Accounts Receivable $__________C. Loans Receivable $__________D. U.S. Treasury securities(market value) $__________E. Other investments (market value) $__________F. Other liquid assets $__________

2. Total Liquid Assets (Total of Lines A through F) $__________3. Receipts during the fiscal year ended (date) $__________4. Total Liquid Assets plus Receipts (Line 2 plus Line 3) $__________5. Deduct:

Receipts included in Line 3 which resulted from converting Liquid Assets held at thebeginning of the year into cash and from additional rollovers of securities:A. Payments on accounts receivable $__________B. Payments on loans receivable $__________C. Sales of U.S. Treasury securities $__________D. Payments on mortgage investments $__________E. Sales of other investments $__________F. Sales of other assets $__________G. Additional rollovers of securities $__________

6. Total Deductions (Total of Lines A through G) $__________7. Total Funds Handled During Last Completed Fiscal Year

(Line 4 minus Line 6) $__________8. Amount of Bonding Required:

A. For each person having access to receipts only:10 percent of Line 3 $__________

B. For each person having access to receipts and liquid assets:10 percent of Line 7 $__________

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Contents

Introduction 6-1

A. Officers’ Responsibilities for Branch Records 6-1

B. Retention of Records 6-2

C. The Branch Filing System 6-21. Overall Filing Plan 6-22. Filing Methods 6-23. Filing Hints (Paper) 6-34. Filing Hints (Electronic) 6-3

D. Storing Records 6-4

E. Disposing of Records 6-5

Retention Schedule for Branch Records 6-6

Chapter 6RecordKeeping

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INTRODUCTION

Every branch needs a good system for filing,maintaining and eventually disposing ofrecords. A branch accumulates, in the course ofits activities, a variety of records that documentits operations. Branch officers need to maintaina useful, reliable system for managing thosepaper and electronic records, so they can carryout the union’s necessary work.

This chapter suggests basic strategies to helpbranch officers perform their record-keepingresponsibilities, which include:

■ Maintaining branch records and turningthem over to successors;

■ Establishing concrete retention periods fordifferent kinds of branch records;

■ Setting up a logical, workable branch filingsystem;

■ Managing electronic records.

■ Storing and preserving long-term or perma-nent records;

■ Disposing of out-dated materials.

A. OFFICERS’RESPONSIBILITIES FORBRANCH RECORDS

Branch officers’ record-keeping responsibilitiesare defined by federal laws, by the NALCConstitution, and by the needs of the particularbranch.

Federal laws require branches to keep cer-tain records. The most significant is the Labor-Management Reporting and Disclosure Act(LMRDA) [http://www.dol.gov/esa/olms/regs/statutes/lmrda-act.htm] which requiresbranches to keep records supporting informa-tion reported to the U.S. Department of Laboron Forms LM-1, LM-2, LM-3 and LM-4.1

Federal tax laws also contain certain recordsretention requirements.

The NALC Constitution requires the branchto keep various membership, meeting, andfinancial accountability records. Article 6 of theNALC Constitution for the Government ofSubordinate and Federal Branches outlinesthese record-keeping duties of branch officers.It also requires branch administrative officersto deliver to their successors in office all books,papers and property in their possession belong-ing to the branch.

Branch operational needs are the finalimportant reason for each branch to maintainorderly paper and electronic records beyondthose specifically required by federal law or theNALC Constitution. Officers should maintainthese additional records in accordance with thebranch’s particular needs. The branch may alsowant to retain and preserve photographs,records, and documents which are, or willbecome, historically significant (such as theoriginal branch charter or photographs ofbranch officers and activities).

NALC Branch Officer’s Guide to Finance and Administration Record Keeping I page 6-1

1 For more information on the LMRDA’s record-keepingrequirements, see Chapter 3, Reporting to the U.S.Department of Labor.

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B. RETENTION OF RECORDS

Deciding how long to keep branch records isan important part of records management. Tohelp branch officers determine how long to pre-serve different types of records, NALC’s nation-al office has developed a retention schedule,which appears on page 6-6. Specific legalrequirements are identified in the “Notes” col-umn; the other retention periods are recom-mendations.

The retention schedule reflects the fact that theproper retention period depends on the type ofrecord. Federal laws dictate that financial andelection records be kept for certain periods oftime. Other records, such as branch meetingminutes or branch newspapers, have historicalor research value and should be kept perma-nently. Routine correspondence, on the otherhand, typically has a much shorter useful life.

For some records, no hard-and-fast rules dic-tate how long the branch should keep them.Rather, the responsible financial and adminis-trative officers should use their best judgment.If unsure, they can always consult the Directorof the Information Center, who handles theunion’s records management program.

C. THE BRANCH FILINGSYSTEM

To operate efficiently, every branch needs tocreate and spend time maintaining a good filingsystem for both their paper and electronicrecords. The branch filing system should dothree things:

■ Classify and arrange records so that branchofficials can retrieve information quickly andeasily;

■ Be logical enough to enable new officers orstaff to retrieve information easily when there isturnover in the branch; and

■ Enable branch officials to easily identify anddispose of inactive records.

1. Overall filing plan. Overall filing plan.A branch filing system should have an overallorganizational plan. The plan suggested in theretention schedule groups files into these maincategories:

■ General Branch Files■ Correspondence■ Membership Records■ Grievance and Related Records■ Financial Records

2. Filing methods. Branch officials willhave an easier time finding papers if the branchoffice uses a combination of the following com-mon filing methods:

a. Subject Filing: Classify files by subjectand arrange the subject files in alphabeticalorder. If a letter, report or other documentrefers to more than one subject, put cross-refer-ence sheets or separate copies under the othertopics covered. File the branch president’s andother officers’ general correspondence by sub-ject.

b. Name Filing: File membership records,for instance, alphabetically by the member’slast name and where last names are the same,alphabetically by first name. Use cross-referenc-


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ing to locate members whose names havechanged due to marriage, divorce, etc.

c. Numerical Filing: Use this system to filerecords which are numbered, such as canceledchecks, receipts, grievance or OWCP case files,and warrants.

d. Chronological Filing: Keep a masterChron File of all outgoing branch correspon-dence and/or memos, in date order with themost recent documents in the front of the file.A Chron file can help branch officials locate aspecific document quickly, and also serves as auseful backup in case important papers cannotbe found in a particular subject file.

3. Filing hints (paper): The following fil-ing hints will help keep branch files lean andwell organized:

■ Frequency of filing: File records on a regu-lar schedule to avoid backlogs and make it easyto retrieve recent documents.

■ Folder labels: Put main headings in capitalletters on each folder tab. Include dates—e.g.,2008, 2009—to facilitate location of particularitems and later disposal of files. Color coding isalways helpful.

■ File folders: Place most recent letters, etc.in the front of the folder. Do not over stuff filefolders; when one is full, sub-divide materials bydate or topic.

■ File drawers: Each file drawer should havea label describing its contents. Leave sufficientspace in each drawer (about one-fifth of thedrawer) for expansion, so you don’t need tokeep shifting folders as files get full.

Do not file:

■ Magazines, journals, or books;

■ Multiple copies of documents in one file;

■ Routine materials with no lasting usefulnesssuch as form letters, simple requests for publi-cations, etc.; or

■ Envelopes of incoming correspondenceunless they have necessary information notcontained in the letter.

Inactive Files: Retire non-current files to aseparate storage location. Move the entiregroup of each type of record together andreplace it with a new set of file folders. Be sureto keep a record of what’s been stored andwhere.

4. Filing hints (electronic): Branchesneed to pay as much attention to organizing thefiles on their computer as they do to the files intheir filing cabinets.

■ Organization: To help locate the computercopy of that document in your filing drawer,make your digital files parallel your paper filingsystem. Use electronic folders to keep track offiles on a particular topic or from a specific year— don’t just stick everything in “MyDocuments.”

■ Labeling: Give your documents (files) aneasily understood name–one that will enableother branch officers to access needed filesquickly. Include the date in the file name.

■ Paper copies: In many cases it still makessense to print electronic documents or e-mail,


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especially when they are needed for long-termpreservation. Always have a paper copy of vitalrecords.

Back Up Data: Every hard drive crashes,sooner or later. The only way to prevent a disas-ter is to establish a reliable backup routine foryour essential computer records.

It is crucial to back up large data sets thatwould be difficult to recreate (such as member-ship records), expensive program software, anddata which cannot be translated easily intopaper form. Even daily work should be backedup frequently to prevent loss from a disk crash,computer virus, static electricity, power surge,etc.

Defend Your Computer From Attack:Every branch computer should be running anantivirus and antispyware program full-time. Bemeticulous about keeping it current with thelatest updates. Windows® users in particularshould be aware that hackers often exploitrecently-discovered software vulnerabilities, soit is important to stay current with all Microsoftupdates.

Inactive Files: Keep your hard disk clean. Donot clutter computer directories with fileswhich are no longer needed. Erase outdatedfiles or transfer them to CD or other media forstorage.

D. STORING RECORDS

As file drawers become full, remove older mate-rials and store them in a separate, yet accessi-ble location. If you refer to a file less than oncein six months, transfer it to a storage container

to free up prime space in your office filing cabi-nets.

Place the removed files in labeled records stor-age boxes. Store the boxes where they are notin the way, but are easy to retrieve if necessary.Documents will stay in better shape if the stor-age location is cool and dark (like a closet),with moderate humidity. Avoid basements,which can be damp, and attics, which are oftenhot and dry. Never place boxes directly ondamp floors, near leaky walls or in direct sun-light.

The branch should pay special attention tothose records it intends to retain permanentlydue to their vital or historic nature. Removepaper clips, staples and rubber bands fromthese documents before storing them, to pre-vent damage from rust or disintegrated rubber.Acid-free folders will extend the life of fragiledocuments.

Storing electronic records can pose specialchallenges. The same warnings regarding heatand humidity apply to storing disks as to stor-ing paper documents. To prevent warping,disks should always be stored upright, not lay-ing flat in the bottom of a box. Invest in high-quality CDs. While all electronic storage mediahave limited shelf lives, the cheaper the disk,the faster the data saved on it will deteriorate.If opting to store your data on a USB flashdrive, always start with a new one.

Keep an inventory of what material is stored oneach disk. And remember it doesn’t do anygood to have your data stored if you can’taccess it. New releases of software aren’talways backwards compatible, so you’ll need tocheck your stored computer files whenever


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your office is getting ready to upgrade its com-puters. Otherwise, you may be unable to accessdata saved in older versions of your software.

Vital records are a special category of docu-ments which every branch must take particularcare to safeguard. This category includes doc-uments being saved primarily for legal or evi-dentiary value, as well as those items that thebranch would need to resume operations in theevent of a disaster. Records which fall into thiscategory include:

■ Deeds■ Insurance policies■ Bank account information■ Membership rosters or data files■ Financial records■ Names/addresses/telephone numbers/e-mail addresses of officers and staff members.

Protect these documents by placing them in anoff-site storage location such as a bank vault orother fireproof, high-security storage facility.

E. DISPOSING OF RECORDS

Branch officers have a responsibility to not onlymaintain the records of the union, but also todispose of outdated materials properly. Whenbranch records, whether paper or electronic,have reached the end of their set retentionperiod (see chart on page 6-6) and are nolonger needed by the branch, they should bedestroyed.

Many routine items such as meeting notices,simple conveyance letters or publicity forbranch events can simply be thrown away. Allfinancial documents (including financial work-

sheets, expense sheets or bills and receipts con-taining credit card numbers) or papers contain-ing personal information on branch members(such as social security numbers, addresses,telephone numbers, and medical conditions)should be shredded or burned completely. Lowcost, cross-cut shredders are widely available.Branches which have a large number of docu-ments to destroy may want to contact a localcompany specializing in document destruction.This can be done on a one-time basis or once ayear.

These strictures don’t apply only to paper docu-ments. The same principle applies to branchcomputers and any other discarded media con-taining private branch financial or membershipdata. Old floppy disks and other removabledisks can be erased completely by special soft-ware or destroyed. Likewise, CDs and DVDscan be shattered or run through a CDshredder. Thumb-drives should be smashed.

Before selling, giving away or donating an oldbranch computer, all branch information shouldbe removed. Otherwise all of the branch fileswill still be present on the machine for the nextcomputer user. Deleting files does not removetheir underlying data from the hard drive. Low-cost software or various Internet sites can pro-vide the latest information on safely and perma-nently clearing branch files off the hard drive.

Proper disposal of old records helps protect thebranch, its officers and members from prob-lems—legal or political—that could arise if dis-carded papers were to be picked up and mis-used.


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RETENTION SCHEDULE FOR BRANCH RECORDSRetention

Type of Record Period Notes

General Branch FilesBy-Laws and Amendments Permanent

Local Memoranda of Understanding Permanent

Minutes of Meetings Permanent(branch and executive board) LMRDA [29 USC 436] requires that minutes be

retained for 5 years, since they record authoriza-tion for branch expenditures. NALC recom-mends that they be kept permanently, for histor-ical and research purposes.

Branch history documentation Permanent Includes such things as photographs, videos,(if the branch has a buttons, uniform items, posters, and newshistorical collection) clippings of significant branch events.

Branch publications Permanent Retain an annual back-up of website (more fre-quently if major changes are made).

Subject Files 3 years Includes community activities, political informa-tion and other items monitored by branch.

Election Records 1 year LMRDA [29 USC 481(e)] requires that electionrecords and all related materials be kept for 1year

CorrespondenceGeneral 3 years Recommendation for routine correspondence;

important items should be kept as long asneeded.

Membership 3 years Recommendation for routine correspondence;important items should be kept as long asneeded.

Financial 5 years LMRDA [29 USC 436] requires that recordssupporting DOL filings (LM-1, LM-2, LM-3 andLM-4) be kept for 5 years after year of filing.

MembershipDues Deduction forms 3 years

Data re: dues deduction Permanent NALC policy: Keep a list of all members whosign a Form 1187; include the “date of deliveryto employer” from each form. Keep a list of allmembers who sign a Form 1189; include thedate each form was signed. If applicable, notedate dues deductions stop.


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RETENTION SCHEDULE FOR BRANCH RECORDS (continued)Retention

Type of Record Period Notes

Grievances and Related RecordsEEO Case Files [full files] 5 years* CAU policy.

Moving Papers only 7 years* CAU policy.

Grievance Case Files [full files] 5 years* CAU policy.


Merit System Protection Board CaseFiles [full files] 5 years* CAU policy.


Workers’ Compensation Case Files 5 years* If branch handles workers compensation casesfor its members.

*after case is completed

Financial RecordsBranch books Permanent Includes cash journals, equipment records, etc.

Financial Statements and Reports Permanent Annual reports after satisfying LMRDA require-ment that records supporting DOL filings(LM-1, LM-2, LM-3 and LM-4) be kept for 5years after year of filing.

Officers’ bonds Permanent

Direct-Pay Per Capita Tax Rosters 5 years LMRDA [29 USC 436] requires that recordssupporting DOL filings (LM-1, LM-2, LM-3 andLM-4) be kept for 5 years after year of filing.

Dues Reimbursement Listings 5 years LMRDA [29 USC 436] requires that recordssupporting DOL filings (LM-1, LM-2, LM-3 andLM-4) be kept for 5 years after year of filing.

IRS returns and forms 5 years Federal tax law mandates that tax records bekept at least 3 years [29 CFR 1600-1]. Sincesome IRS records support DOL filings, allshould be kept for the 5 years required underLMRDA.

Labor Department Reports 5 years LMRDA [29 USC 436] requires that filings andtheir supporting documentation be kept for 5years after year of filing.

Members’ dues payment records 5 years LMRDA [29 USC 436] requires that supportingdocumentation for DOL filings be kept for 5years after year of filing.

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