DOL questioning certain expenses

[mal]

We have an apprenticeship plan that underwent a DOL investigation.

Some of the findings were legitimate, but others are questionable. I would

appreciate input on the following:

1. Apprentices regularly compete in regional and national competitions. Attendees (instructors, commitee persons, etc.) to apprenticeship competitions are paid a low stipend ($35 per day). The stipend is not

meant to cover every conceivable expense, but to subsidize parking, meals, etc. In addition to the stipend, attendees are treated to a recognition dinner hosted by the Fund.

The EBSA investigator has deemed the dinner expense to be unreasonable. Her theory is that the Fund

cannot pay a stipend AND supply a meal to the attendees. Our argument is that the stipend is so nominal it is not unreasonable to pay for a recognition dinner. Even when the stipend and the dinner are combined, the average cost per person ranges anywhere from $60-$100. (Keep in mind that the competitions are often held in locales such as Boston, Chicago, Philadelphia, etc., where 35 bucks doesn't go too far.)

2. Guests are invited to the dinner. Typically this includes the spouses of the competitors and instructors.

The EBSA has demanded the costs of the guests meals be repaid as it is "unreasonable" to provide a meal

to a spouse, etc. Our belief is that it is entirely appropriate (and very common) for apprenticeship funds

to host recognition dinners or banquets. It is also common for spouses and family to be invited to these dinners.

Input is appreciated.

[Harwood]

Boston, Chicago, and Philadelphia are "high-rate" cities for per-diem purposes. $42 for meals and incidentals from 10/1/01 - 9/30/02. See IRS Publications 1542 and 463

If a meal is provided to a government employee, the employee must reduce their per-diem by $9 for breakfast; $9 for lunch; $22 for diner [$2 is for incidentals such as laundry]. www.policyworks.gov/ftr Chapter 301, 301-11.18

For spouses, I think there has to be a clear business purpose, otherwise their expenses are not considered business-related. Perhaps the hosts of the dinners who invited everyone can help you out with this issue.

[mal]

Thanks for the input. I have seen the IRS pubs, but

I don't think they fit our situation perfectly. One

problem is with mileage. The Plan would pay

a person mileage from the home city to the

host city, but would not reimburse him for any

miles or parking while in the host city. It all came out

of the per diem.

[KJohnson]

I thought that you could advance expenses as long as backup/receipts were provided that the advance was actually spent on legitimate plan business.

I did not think that you could have a per diem in the traditional sense in that you get to keep anything you don't spend.

[Harwood]

1. The per diem is for meals and "incidentals" only. Mileage is a totally separate issue for business related expenses. It seems like the "per diem" being provided in this situation falls far short of being adequate reimbursement. The DOL is being overly harsh to try to reduce it further.

2. Per diems for meals are an approved alternative to submitting actual meal expenses. People who want to feed themselves for less than $42 per day while on business in Chicago [not to mention incidental expenses of dry cleaning and hotel tips] are free to keep the difference. It is my experience that out-of-towners will almost always spend more than the IRS approved per diem amount.

[KJohnson]

"Per diems for meals are an approved alternative ..."

Personally, I agree that per diems should be considered a reasonable alternative in most instances. The fact that the IRS recognizes this does not mean the DOL agrees. I am not aware that per diems have been "approved" by the DOL in any published guidance. If anything the regs seem to imply that at least with regard to plan fiduciaries and employees per diems are not allowed and that the fiduciary and or employee must "account to the plan" that the expenses were reasonably and actually incurred.

[mal]

My understanding is that a finding from the EBSA does not

have the force of law. Like any other administrative body

they must prove their case through an administrative hearing

or the solicitor's office.

Assuming this is correct, is the fund taking a big gamble in settling

the legimate issues but refusing to budge on the per diem/meal

issue? WHat are the options for the EBSA if they want to push

the issue?

BTW, I reviewed the IRS guidelines cited by Harwood. For government

travelers (including the DOL), they can recieve a per diem for

meals AND mileage, tolls, telephone, taxis, etc. Our people did

not receive such benefits.

[Bill Ecklund]

You have a tough investigator. She seems to be confusing participants with trustees. The attendees, or at least most of them, are not fiduciaries. She seems to be treating the apprentices as though they are subject to the provisions of 408©(2). They are not. I would argue that the fund is providing benefits to the participants and that these are reasonable expenses of administering the fund. I represent a National Training Fund, and it has been providing these types of activities for years. It has been audited by the DOL and no questions were ever raised. Having said that, there has been a trend in certain areas for the DOL to take a very strident position on expenses, especially trustee expenses. For example, the DOL has recently quesitoned the "stay over Saturday night airfare rule" of many funds and has disallowed the hotel expenses related to a satruday night stay, unless the trustee could prove (with written confirmation) that He/she needed to arrive on Saturday in order to timely attend the meetings, or prove that it was cheaper to arrive on Saturday than on Sunday (including the extra expenses associated with arriving early). This is hard to prove two years after the fact. Also the trustee cannot stay the night the meeting is over unless he/she can't get home at a reasonable hour. What area is she from?

[KJohnson]

I agree with Bill about the distinction between participants and plan fiduciaries/employees.

I also agree that the DOL takes a very hard line regarding expenses for Trustees. I know of one case where DOL went through every long distance phone call charged to the hotel bill for every trustee and disallowed reimbursement for any call that was not about "fund business."

[mal]

FYI...an update on the original post.

I had a compliance meeting this morning

with the EBSA. The investigator has backed

off of her original position somewhat, but

is still taking a relatively hard line approach

to the issues.

1. Per diem/meal issue- They are asking those

who received the $35 per diem to repay 1/3

of the per diem for any day in which they received

a dinner from the fund. (This is much less than

asking the trustees to repay their entire pro

rata share of the meals.)

They suggested that the board could

pay expenses such as parking and mileage on

top of the per diem, (similar to government

travel) but that they would want to see receipts justifying

these costs. This does not help us with

the current situation as none of the apprentices

were told to keep receipts.

2. They are not moving on the spousal meal issue.

I think the client will likely pay these costs and

be sure future meals provided to spouses

are backed up by minutes, receipts, etc. That

way we have all the evidence that would be

needed if forced to litigation.