Two Individual Fiduciaries Liable for Payment of $4.7 Million for Bilking Welfare Benefit Plan

December 12, 2014 at 10:59 am | Posted in Employment Law, ERISA, Essential Health Benefits | Leave a comment
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 Two Individual Fiduciaries Liable for Payment of $4.7 Million for Bilking Welfare Benefit Plan;

 Lawsuit was filed 9 years ago.


The DOL issued the following announcement yesterday:

CHERRY HILL, N.J. – A federal judge has found the fiduciaries of a defunct national multi-employer benefit plan based in Cherry Hill, are liable for approximately $4.7 million in assets that were improperly diverted. James Doyle and Cynthia Holloway, fiduciaries to the Professional Industrial Trade Workers Union Health and Welfare Fund, must make restitution to the plan, with interest, for violating the Employee Retirement Income Security Act.

The decision resolves a lawsuit filed by the U.S. Department of Labor in 2005 and subsequent legal proceedings stemming from an investigation conducted by the department’s Employee Benefits Security Administration.

“Doyle used this benefit plan as the guise for an illegal moneymaking scheme that jeopardized the well-being of countless workers and their families.  Holloway was in a position to put an end to the fraud, but failed to act,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “The department’s persistence in pursuing this case through an appeal should send a message to those who think they can get away with conducting such an outlandish scheme.”

The court determined that Doyle and others used the fake Professional Industrial Trade Workers Union as a front for a scheme to operate a purported, union-sponsored employee benefit plan.  To obtain medical benefits from the plan, employers and workers across the United States were required to join the phony union and make payments.  Rather than use the funds to pay out health care benefits and pay reasonable costs of administration, most of the payments were used to cover bogus expenses including “union dues.” While Doyle diverted money that should have been used to pay benefits, Holloway failed to act as a prudent and loyal fiduciary by failing to put a stop to the scheme.

The court also found that the defendants marketed and ran the health plan in violation of federal law when they failed to administer the fund’s assets for the exclusive purpose of providing benefits to the fund’s participants and beneficiaries.

Filed in the U.S. District Court for the District of New Jersey, the decision permanently bars Doyle and Holloway from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan, and appoints an independent fiduciary to administer and ultimately terminate the plan.  At its height, the plan had approximately 2,500 participants.

The investigation was conducted by the EBSA Philadelphia Regional Office. The case was litigated by the New York Regional Office of the Solicitor and the department’s Division of Plan Benefits Security.

Workers participating in employer-sponsored health and retirement benefit plans, who feel that they have been denied a benefit appropriately or have questions about benefits laws, can contact an EBSA benefits advisor by or calling 866-444-EBSA (3272).

DOL Issues Compliance Guidance for Plans Contemplating Reducing Contraception Coverage in Wake of Hobby Lobby

August 5, 2014 at 11:18 am | Posted in Affordable Care Act, Department of Labor, ERISA, Health and Human Services | Leave a comment
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On July 17th the DOL, in reaction to the Supreme Court’s recent decision in Hobby Lobby, released FAQ guidance reminding employers and plan sponsors that ERISA requires them to disclose any type of contraception exclusion in their Summary Plan Description and to utilize a Summary of Material Modification if they are contemplating removing the benefit from their current plan. The guidance follows.

Set out below is an additional Frequently Asked Question (FAQ) regarding implementation of the Affordable Care Act. This FAQ has been prepared by the Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively, the Departments). Like previously issued FAQs (available at, this FAQ answers a question from stakeholders to help people understand the law and benefit from it, as intended.

Disclosure with respect to Preventive Services

Q: My closely held for-profit corporation’s health plan will cease providing coverage for some or all contraceptive services mid-plan year. Does this reduction in coverage trigger any notice requirements to plan participants and beneficiaries?

Yes. For plans subject to the Employee Retirement Income Security Act (ERISA), ERISA requires disclosure of information relevant to coverage of preventive services, including contraceptive coverage. Specifically, the Department of Labor’s longstanding regulations at 29 CFR 2520.102-3(j) (3) provide that, the summary plan description (SPD) shall include a description of the extent to which preventive services (which includes contraceptive services) are covered under the plan. Accordingly, if an ERISA plan excludes all or a subset of contraceptive services from coverage under its group health plan, the plan’s SPD must describe the extent of the limitation or exclusion of coverage. For plans that reduce or eliminate coverage of contraceptive services after having provided such coverage, expedited disclosure requirements for material reductions in covered services or benefits apply. See ERISA section 104(b)(1) and 29 CFR 2520.104b-3(d)(1), which generally require disclosure not later than 60 days after the date of adoption of a modification or change to the plan that is a material reduction in covered services or benefits. Other disclosure requirements may apply, for example, under State insurance law applicable to health insurance issuers.

HPID Requirements Apply to Self Insured “Stand Alone” Dental Plans

April 14, 2014 at 3:12 pm | Posted in ERISA, Federal Laws, Medical | Leave a comment
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Self Insured Dental Plans
Protector Group recently issued an email ALERT advising clients on whether or not they had a responsibility to obtain a Health Plan Identification (HPID) number from the federal government. The HPID requirement is not specific to medical plans alone. A self insured “stand alone” dental plan would also have to obtain a HPID since it satisfies the applicable definitions of health plan and medical care under ERISA and the Internal Revenue Code. On the other hand, if a self insured dental plan is part and parcel of a self insured health plan, only one HPID is necessary.  

Timing of Compliance
A self insured dental plan will need to obtain a HPID no later than November 5, 2014 if it has $5 million or more in “annual receipts.” If the self insured stand alone dental plan has less than $5 million in receipts, you are allowed another year (November 5, 2015) to obtain the HPID. The phrase “annual receipts” is understood to mean receipts of paid claims before the payment of stop-loss premiums exclusive of administrative costs.  

FSAs and HRAs
We are waiting for further government guidance re: the possible application of the HPID requirements to FSAs and HRAs.

Happy 40th Birthday, ERISA!

March 7, 2014 at 1:00 pm | Posted in Compliance, Department of Labor, ERISA, Federal Laws, Regulations | Leave a comment
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Protections for employee benefits moved forward 40 years ago this week with the March 4, 1974, Senate passage of the Employee Retirement Income Security Act. While it would be nearly six months until President Gerald Ford signed ERISA into law in September of that year, the bill marks congressional recognition of the sanctity of retirement, health care, and other employee benefits. ERISA also calls for the DOL to play the role of chief regulator and enforcer of the new protections. The DOL’s divisions…the Employee Benefits Security Administration…performs that important task.

Failure to Timely Produce ERISA Plan Documents Can Be Costly: United Healthcare Fined $99,000

November 6, 2013 at 9:18 am | Posted in ERISA, Health Care | Leave a comment
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In Butler v. United Healthcare of Tennessee, a Federal District Court recently imposed a $99,000 late production (900 days at $110 a day)) penalty on the plaintiff’s health insurer for its failure to timely produce its internal medical necessary claims guidelines that were relied upon in denying the plaintiff’s claim. The Court also award pre judgment interest and attorneys fees. The Court stated:

“ERISA authorizes the court to impose statutory penalties in certain circumstances. Here, an administrator who fails to furnish, upon a participant’s request, any internal rule, guideline, or similar criterion that was relied upon to make the adverse determination may be liable for up to $110 per violation (i.e. per day). 29 U.S.C. § 1132(c)(1)(B); 29 C.F.R. § 2575.502c-1 (2013). The calculation of the penalty begins thirty days after the participant’s request for such information.”

Although the $99,000 penalty came in the context of a health insurance claim denial, the same remedy is available to any plan participant, in the Court’s discretion, who simply asks for a copy of an ERISA plan document.

A copy of the opinion can be found here:  Butler v. United Healthcare of Tennessee

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