The U.S. Department of Labor recently announced two actions to recover benefits for workers in Mississippi and California, under federal law.
Most employees never think twice about employee benefit plans, but they should. In 2006, the U.S. Department of Labor recovered more than $2.6 billion in employee benefit funds that had been misappropriated by employers. These included funds for employee pension plans, healthcare funds and profit-sharing accounts.
In the most recent case, the DOL recovered $3.5 million in five union employee pension funds that had been misappropriated by the plan trustees. The retirement, health, scholarship, apprenticeship, and vacation and holiday funds cover more than 2,000 participants employed throughout northern California.
The settlement also orders the sale of the Konocti Harbor Resort and Spa on Clear Lake. The Kelseyville, California resort hotel was apparently renovated and operated with funds diverted from the union pension plans. The DOL charges that the union “imprudently spent millions” to build and maintain facilities at Konocti, despite the resort’s continued losses. In addition, the union profited from the interest of a $6 million loan that it made to itself.
“Workers’ retirement dreams, health and other benefits were jeopardized by the gross mismanagement of their benefit plans,” said Secretary of Labor Elaine L. Chao. “This legal action puts the benefit plans under new, independent management and restores at least $3.5 million to the pension plan.”
The plan administrators were removed from five employee benefit plans sponsored by Local 38 of the United Association of Plumbers, Pipefitters and Journeymen of San Francisco. The trustees were permanently barred from serving as fiduciaries or service providers on any employee benefit account, ever again.
The suit filed by the DOL alleges violations of the Employee Retirement Income Security Act (ERISA) by current and former trustees. The trustees include Lawrence J. Mazzola, Sr., the business manager and financial secretary-treasurer of Local 38. Other trustees who were removed include, William Fazande, Larry Lee, James Shugrue, Bohon Kazarian, Tom Irvine, Robert E. Buckley, Art Rud, Ron Fahy, and Robert Nurisso. Frank Sullivan, plan administrator, was also banned for life from controlling any more employee benefit accounts.
In a surprise move, the court retained Lawrence J. Mazzola Jr. and Robert E. Buckley Jr., two trustees who have been on the board for less time.
Under the settlement, a court-appointed independent administrator will oversee the union employee benefit plans and implement financial controls to prevent future misuse of the assets. A second court-appointed trustee has independent and exclusive authority over the resort sale and, until it is sold, management and operation of the property.
In the future, all assets of the pension plan must be managed by professional investment managers under the oversight of an investment monitor.
In a second case, the DOL obtained a settlement requiring the Mississippi State Medical Association, or MSMA of Ridgeland, Mississippi, to reimburse participants and beneficiaries for unpaid health claims. The claims resulted from the termination of the MSMA Benefit Plan and Trust.
Ironically, MSMA was established in the 1980s to provide healthcare for physicians, their employees and families. Prior to its collapse in January 2004, the plan had more than 1,800 participants.
“The mismanagement of this benefits plan left workers and their families on the hook for unpaid medical bills,” said U.S. Secretary of Labor Elaine L. Chao. “The department’s legal action will ensure that the plan sponsor meets its responsibility by paying the medical bills of these workers and their families.”
The judgment appoints Receivership Management Inc. as an independent fiduciary to manage the distribution of plan assets. The judgment also removes MSMA as a fiduciary to the health plan and protects participants from creditors’ claims by medical providers. Finally, MSMA is enjoined from providing health, disability or other welfare benefits through any self-funded arrangement in the future and may be liable for a civil penalty.
The Labor Department’s lawsuit alleged that MSMA knew the plan was under funded, did not take steps to remedy the situation and failed to inform participants of the unsound financial condition. As a result, the plan had more than $5 million in outstanding claims when it was terminated.
The president has recently signed a law extending the Mental Health Parity Act, or MHPA. It is to continue through December 31, 2007.
The MHPA bill was originally signed into a law in 1996. The “sunset clause” that was originally on the law stated that it would be in effect until September 31, 2001 unless amended. Well, it is still active today because of the five times it was amended since that time. The mental health parity act states that employer offered health insurance plans that provide mental health treatment coverage must cover it at the same rate as other treatments are covered.
Any California employee benefit plan that covers various treatments, including medical, have to make sure that mental health coverage is not any less than other treatments. Before the MHPA was passed in 1996, coverage for mental health could be significantly lower than the amount covered for medical treatments. Surgery coverage rates should not be any higher than mental health coverage rates, either. It is currently against the law to provide a high amount of coverage for other treatments and provide a low amount of mental health coverage under the same plan.
This law also applies to annual limits. The annual limit of coverage for mental health treatments should never be lower than the annual limits on surgery or other medical treatments.
If a plan is in violation of the MHPA, the Employee Benefits security Administration (EBSA) will investigate. The EBSA is in charge of enforcing the laws that govern any group health insurance plans. They govern retirement security, pension, and welfare as well as employer provided health insurance plans. They have been established since 1974, and have been enforcing these laws ever since that time.
Millions of employees across the United States are affected by the issues of benefits, especially health care. The EBSA holds a great responsibility to ensure that these workers are taken care of within the guidelines of the law.
The policies regarding California employee benefits have no legal provision for mental health coverage per se. There are a considerable number of employers who include mental health coverage as a part of their group insurance, but there is also an equally large number who choose not to.
Even inpatient or outpatient mental health treatment in a hospital may or may not be a part of an employee’s health plan. But in case an employer does offer mental health coverage as a part of a group insurance plan, there are several laws governing it. The one that has proven to be the most important is the Mental Health Parity Act or MHPA. The Mental Health Parity Act requires that any group health insurance plan that funds mental health treatment, cover it at the same level as other medical treatments, including surgery.
The MHPA has undergone a total of five amendments since its enactment. It was passed in 1996 with a provision to expire on September 30, 2001. A number of extensions followed, and in February 2007 it was extended up to December 31, 2007. Considering the history of amendments and extensions every time the Mental Health Parity Act nears expiry, it would be a safe assumption that this law will remain in effect for quite some time to come. If it ever does expire, hopefully it will be replaced by a permanent regulation that makes up for its lack.
Employee benefit plans provide a lifeline to a large number of American citizens. The federal government has an agency to enforce the laws regarding employee benefits and pension plans. It is known as the Employee Benefits Security Administration, or EBSA. The number of workers covered under EBSA plans exceeds 150 million. The name itself suggests that agency handles as many violations of law concerning health care as pensions.
The MHPA, the Mental Health Parity Act, requires that any health insurance plan that includes mental health coverage must pay the same amount for mental health treatments as it pays for other types of medical treatment. This bill, approved in 1996, originally included an expiration date of September 30, 2001.
However, the law is still in force. In February 2007, the MHPA was extended for it fifth time, and the new expiration date is December 31, 2007. Everything points to this law being extended again in 2008.
The MHPA bill does not force insurers to include mental health treatments in their plans. But if they do, they must pay the same for mental health treatments as for other medical treatments, including surgical procedures.
Many people ask about California employee benefits, specifically, about mental health coverage such as therapy and psychiatrist appointments. There is no state or federal law that requires that their group health insurance cover mental health treatments. However, if the group plan does cover mental health, it cannot set a lower limit on payments than it sets on other types of treatment.
The federal government has a specialized agency to oversee insurance and pension plans. The agency is the Employee Benefits Security Administration, or ESBA. Most American workers are covered by benefit plans, and the ESBA enforces laws regarding these employee benefits and pension plans. The name of the agency itself shows that one of its main tasks is to handle violations in benefits plans. Today, more than 150 million workers are covered by ESBA plans.
Prior to 1996, a health insurance plan could pay less for mental health treatments than for other types of healthcare. For example, a play might pay up to $80,000 per year for surgery and only $1,200 per year for mental health treatment.
Today, any plan should pay the same amount for both types of treatment, under the law.
The health care plans are coming out of the woodwork it seems. Just yesterday we talked about the health care reform plan from the folks at the hospital association. Now we have another one to talk about, this one emanating from the legislature from the state of California. It is an important counterweight to the health care reform plan that came out of Cali last month, from the Governator.
This plan is coming from Democrat Senator Sheila Kuehl, from Santa Monica, who says that the Arnold plan actually kow tows to the health insurance companies too much. Her plan is to set up a single payer health care system. This is the third time as a senator that Sen. Kuehl has tried to pass some sort of similar legislation. We can only wait and see if this bill gets more traction this time around in Sacramento. Last year, Sen. Kuehl’s bill actually passed both housed of the California Assembly, but then the Governator vetoed it.
The bill calls for basically the end of private health care insurance in the state. Instead, the bill would set up a state agency, funded by payroll taxes and income taxes, which would then be the fund that all residents would dip into to pay for medical services and case.
The Governator’s plan, on the other hand, which he released details on last month, would make it that all individuals and employers in the state would have to carry some sort of health care plan. It would also provide for low income families and residents by giving them subsidized health care insurance rates.
Sen. Kuehl, however, says that her plan is the only way to make sure that every resident in the state gets health care, while maintaining low health care costs and the integrity of the state budget.