Olms interpretative Manual

WHOMUSTBEBONDED:“EXCLUSIONS”

531.705BONDINGPROVISIONSNOTAPPLICABLETOFINANCIALINSTITUTIONS

The bonding requirements of the Act were not intended to be, and are not, applicable tobanks or other qualified financial institutions which serve as a depository for trust funds andperform administrative or management responsibilities with respect to trusts, or to otherindependentcontractorswhohavecontractedwithtrustsfortheperformanceoffunctionswhichare normally not carried out by officials or employees of such trusts.Likewise, the bondingrequirements are not applicable to the employees of such banks, such other qualified financialinstitutions,or such independent contractors.

Seealso 29CFR 453.22(b).

331.710EXCEPTIONFORINDEPENDENTCONTRACTORSSee 29 CFR 453.6(b).

531.720 ERISA BONDING EXEMPTIONSPECIALNOTE:
Trustsbonded under ERISAneed not be bondedunder the LMRDA.See Manual Entry 530.005.

AMOUNTOFBOND- TERMOF BOND

532.001LMRDA, SECTION502(a)

The bond of each such person shall be fixed at the beginning of the organization’s fiscalyear and shall be in an amount not less than 10 per centum of the funds handled by him and hispredecessoror predecessors, ifany, during the precedingfiscalyear, butinno case morethan

$500,000.If the labor organization or the trust in which a labor organization is interested does nothave a preceding fiscal year, the amount of the bond shall be, in the case of a local labororganization, not less than $1,000, and in the case of any other labor organization or of a trust inwhicha labor organization is interested, not lessthan $10,000. . . .

532.002SEE 29 CFR453.13,453.15, 453.16, 453.17

532.005SCOPE

29CFR Sections453.13through453.17 discussthe requisiteamount ofthe bondswhichthestatutedeclaresshall befixed“atthe beginningofthe organization’sfiscalyear in an

amount not less than 10 per centum of the funds handled by him and his predecessor orpredecessors,ifany, duringthepreceding fiscalyear butinno casemore than$500,000.”Section
453.15 discusses specifically the meaning of funds handled “during the preceding fiscal year”which is the basis from which the amount of the bond is derived.Such a sum would ordinarilyinclude the totalof whatever funds were on hand at the beginning of the fiscal year plus any itemsreceived or added in the form of funds during the year.Thus, the amount handled at any one timeisnot arelevant consideration in determining theamount of the bond.

(TechnicalRevisions:Dec. 2016)

532.100DUALCAPACITYOFUNION OFFICERANDBULDINGMANAGER

According to section 453.7 and 453.8, a person is required to be bonded only for the fundshe handles.This would include both monies handled in a capacity of manager of-- a union’sbuilding (rent collections in addition to any other monies he may handle in this capacity), andmonies which he may handle, for example, as financial secretary of his local union.It would notincludethe value of thebuilding, butwould includethe value ofsecurities andbank accounts.

(TechnicalRevisions:Dec. 2016)

532.200FUNDSHANDLEDTWICEBYSAME PERSONS

Once an item properly within the category of “funds” had been counted as handled bypersonnel during a year, there would be no need to count it again should it subsequently behandledby the samepersonnel during thesame year insome other connection.

532.300$500,000LIMITATION APPLIESTO AMOUNTOFBONDITSELF

Thelanguage ofthe lawandthe legislativehistory thereof leaveno doubtthatthe

$500,000limitationappliestotheamountof thebonditself, and nottothe amountof fundshandled,fromwhich the amount of the bond is derived.
532.305EXCESSCOVERAGE

Thereisnoprohibitionagainstadditionalor excesscoverage.The additionalbond maybeinany amount and formotherwiselawful andacceptable to the partiesto each bond.

29CFR 453.2(b)

532.310COLLECTIONFEE-BONDINGCLAIMS

Where an international collects a bonding claim from a surety on behalf of a local anddeducts a 20% “collectionfee”, it was held that such fee does not result in a deficiency in thebondingcoveragerequired under section 502 ofthe LMRDA.

Undersection502, the sole measureof theadequacy ofthe amountof bondis theamountof funds handled by the insured during the preceding fiscal year.After a bond at least equal to10% of the funds handled by the insured has been obtained, the Department could not assert thatthe bond is inadequate in amount simply because a subsequently recovered claim is partiallydepletedbypayments ordeductionsfor expensesofcollection by theinsured or his privy.

532.400SAFEKEEPINGAGREEMENTWITH ABANK

Funds covered by a safekeeping agreement with a bank are nevertheless to be consideredindeterminingthe amountof thebondrequired.The factthata savingsaccount isestablishedinthe name of a bank or the bank’s nominee does not constitute such a restriction on access,withdrawalor control ofthe funds by thedepositors, as would makebonding unnecessary.

(Revised:Dec. 2016)

532.500FUNDSIN SAVINGSACCOUNT

All officers individually or severally authorized to make withdrawals from a union’ssavings account are required to be bonded.If this is the only function performed by an officerwhichinvolvesthehandlingoffundsorotherpropertyoftheunion,theamountofhisbond maybe computed solely on the basis of the funds in the savings account, under application of theprinciplesset forth in 29CFR 453.15.

532.600FUNDSHANDLEDDURING THEPRECEDINGFISCALYEAR

Funds handled “during the preceding fiscal year” include funds on hand at the beginningofthe yearplus fundsreceived oradded duringthe yearfor any reason.An itemdoes nothave to

becountedtwiceshoulditbe handledby thesame personduring theyear insome otherconnection.

29CFR 453.15

532.605PRIOR FUNDASBASE

Where the present strike fund is the same trust as a prior strike fund, even though it isadministered by a different organization, it is proper to base the bond for members of theadministeringcommitteeonthe amountofthe fundshandledby themortheir predecessorsinthepriorfund inthe preceding fiscal year.

(TechnicalRevisions:Dec. 2016)