Custody of Funds
All banking and investment accounts of the affiliate are subject to the provisions of Article II, Custody of Funds, of the Code. These accounts include, but are not limited to the following:
Dues Trust Account
General Operating Account, including Payroll, Savings and Escrow Accounts
Health and Welfare (Insurance) Funds
PEOPLE Account
Special Political Action Account
Special Grant Account
Strike Assistance Account
Other Accounts
All money received by affiliates must be placed into accounts insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration.
Maximum insurance coverage is limited to $100,000 per banking institution (not per account). Affiliates depositing in excess of this limit should consider opening accounts at more than one institution.
Dues Trust Account
All checks received directly from the employer must first be deposited into the Dues Trust Account. Payments of per capita tax to the International Union and the Council and rebates to the Local Union are to be made from this account. At no time is a payment to be made to the International Union, Council or Local Union for an amount in excess of that entity’s share of funds in the Dues Trust Account
If any other funds are included in the check from the employer, payment to that entity must also be made from the Dues Trust Account in an amount not in excess of that entity’s share of the funds. Examples of these other funds include PEOPLE checkoff and premiums for insurance, legal and other benefit programs.
General Operating Account
including payroll, savings and escrow accounts
The General Operating Account is the account from which the affiliate makes its normal operating expenditures. The account is funded by either : 1) a check from the affiliate’s Dues Trust Account for its share of dues, or 2) the local’s rebate of its share of dues from a council receiving employer dues checkoff on behalf of its affiliated locals. All disbursements to fund payroll accounts, savings accounts and/or escrow accounts are to come directly from the General Operating Account.
Health and Welfare (Insurance) Funds
Affiliates use Health and Welfare Funds to collect premiums for insurance or legal assistance benefits on behalf of members. Premiums normally come in one of two ways:
- Premiums are deducted from members’ pay and are transmitted to the affiliate, either by separate check or "piggy-backed" onto the dues deduction, or
- Premiums are paid by the employer on behalf of members and a separate check is transmitted to the affiliate from the employer.
In either instance, the Funds received are not the property of the affiliate and are only held by the affiliate in Trust until the funds are transmitted to the provider of the benefit. The funds are to be deposited into the Dues Trust Account (or an insurance Trust Account). A check is then written directly from the Trust Account to the provider of the benefit. At no time are the insurance premiums to be commingled with the affiliate’s general account or are the funds to be used for the affiliate’s operations.
The affiliate must obtain professional advice before establishing any sort of member insurance program. Because the funds are held in Trust by the affiliate for the member, there are reporting requirements of both the U. S. Department of Labor and the Internal Revenue Service which must be met. Included with these is the requirement that the Health and Welfare Fund be audited and have an opinion issued by a Certified Public Accountant each year.
PEOPLE Account
A PEOPLE Account is created for the voluntary contributions from members, with the understanding that the funds are to be used for political contributions. These voluntary member contributions are generally referred to as "hard" money. The PEOPLE Account should be maintained as a Separate Segregated Fund (see "Form 1120-POL" in the Glossary of Terms). The account is funded in two ways:
From the affiliate’s Dues Trust Account. This represents funds received from the employer for members’ PEOPLE checkoff.
From the affiliate’s fund raising activities. These activities include raffles, pass-the-hat, sales of items and members’ direct, non-checkoff contributions.
The affiliate must be aware of the Federal and state regulations concerning the use of PEOPLE money. These regulations govern the candidates for whom contributions can be made and also limit the amount of the contribution. There are also Federal and state reporting requirements for these accounts.
The PEOPLE Account must be disclosed on the financial statements of the affiliate, either as a separate entity with its own set of books or as part of the affiliate’s books. The affiliate’s Certified Public Accountant can advise as to the best way to accommodate this obligation.
Special Political Action Accounts
A Special Political Account, as distinguished from the "hard" money PEOPLE Account, is made up of members’ dues dollars. These funds are commonly referred to as "soft" money.
Funds should be transferred directly into this account from the Dues Trust Account, but counted against the affiliate’s share of funds from the Trust. The total of the "soft" money transfer, plus the general account transfer, will equal the total of the affiliate’s share from the Dues Trust Account.
Grant checks from the International Union or other affiliates which are specifically designated for Political Action and which are paid to the order of the Political Action Account may be deposited directly into the Political Action Account.
Restrictions and limitations on the use of "soft" money vary from state to state. It is recommended that the establishment and use of this account be coordinated with the International Union’s Political Action Department. There may be state or other reporting requirements for the activity in these accounts.
The funds in a Special Political Action Account are treated as funds of the affiliate and must be reflected in the financial statements of the affiliate.
Special Grants Account (Non-Political Action)
A Special Grants Account may be established as a separate bank account to track organizing grant income vs. organizing grant expenses. The funding for this account must come from the General Operating Account in the same manner as the payroll, savings and escrow accounts. Checks from the International Union or
other affiliates which are specifically designated for Organizing or other non-Political Action Grants which are paid to the order of the Grant Account, may be deposited directly into the Grant Account. If checks are received for the Grant but are not so designated, the check should be deposited into the General Account with a subsequent transfer to the Grant Account.
The funds in a Special Grant Account are treated as funds of the affiliate and must be reflected in the financial statements of the affiliate. The account must also be included in the affiliate’s IRS Form 990.
Strike Assistance Account
A Strike Assistance Account may be established as a separate bank account. The manner in which this account is funded and the affiliate’s reporting requirements are the same as those for the Special Grant Account.
Other accounts
Other special accounts may be needed from time to time. As a general policy, any account which spends the affiliate’s share of its per capita tax or rebate must be funded from the General Account.
