Recent investigations by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) have found that apprenticeship and training funds are being misused for graduation ceremonies and advertising. In order to help clear up confusion, the DOL has issued a field assistance bulletin that gives definitions and examples of allowed and non-allowed expenses, particularly in regards to graduation ceremonies and promotional activities.
Apprenticeship and training programs that are covered by ERISA – typically those that run a multiyear training program registered with the U.S. Department of Labor, Office of Apprenticeship or a recognized State Apprenticeship Agency – are subject to an EBSA audit and should be aware both of EBSA’s stepped-up auditing of such programs and which expenses are not allowed to be funded by the training funds.
According to
Field Assistance Bulletin No. 2012-01, issued by EBSA on April 2, 2012, expenses that
do not qualify as allowable training or administrative expenses include:
- Payments for meals, gifts, entertainment or other expenses associated with graduation ceremonies;
- Payments to market, advertise or promote the apprenticeship or training program.
However, the bulletin added, “We cannot unconditionally classify all such payments as per se impermissible in light of the special characteristics and aims of apprenticeship and training plans,” since “a graduation ceremony that serves to congratulate graduates on their achievements and encourage them on their future endeavors may support the training objectives of the plan by establishing an incentive and goal for participants to successfully complete the program.”
“In every instance, apprenticeship and training plan fiduciaries must be able to justify plan expenses as appropriate means of carrying out the plan’s mission of training workers,” the bulletin cautioned.
In particular, the bulletin said, “expenses associated with a modest graduation ceremony,”
may be a permissible use of plan assets, provided the expenses are:
- Modest compared to the plan’s assets;
- Approved in accordance with internal accounting and administrative controls; and
- Used for the cost of the ceremony.
“A graduation dinner for all attendees, valet parking, or payments for travel or hotel accommodations for graduating apprentices or guests” were cited as examples of impermissible expenses, while “light refreshments” were called permissible. In a
meeting in February 2012, EBSA officials also gave an open bar as an example of an impermissible expense.
Similarly, certain outreach expenses may be covered by the plan. According to the bulletin, the expenses “must be for marketing or promotion of the apprenticeship or training program itself (e.g., not for industry advancement or for sponsoring employers or employee organizations) and the amount of the expense must be consistent with the fiduciaries’ obligation to be prudent and economical in the use of plan assets.” The bulletin cites as an example of an appropriate promotional expense the cost of giving t-shirts bearing the program’s logo to apprentices, provided that the expense is modest and the t-shirts are not purchased from parties in interest in prohibited transactions. It cites as examples of inappropriate expenses (a) tickets to sporting and other entertainment events and (b) donations to favored charities or other causes.
The complete bulletin can be found at:
http://www.dol.gov/ebsa/regs/fab2012-1.html.
For more information, contact Liz Elvin at elvinl@agc.org.
