labor lawAdivision of labor law center

The U.S. Department of Labor has recovered more than $1.1 million lost by workers when a Miami-based firm raided the employee profit-sharing fund and used the money for operating expenses.

A court judgment provided restitution to the tune of $1,154,848.25 plus interest to the profit-sharing retirement account of X-Ray Equipment Co. The ruling also removed the company as a fiduciary to the plan and appointed an independent overseer.

“These workers’ retirement dreams were threatened by the mismanagement of their retirement plan,” said Secretary of Labor Elaine L. Chao. In unusually heated comments, Secretary Chao added, “This legal action restores nearly $1.2 million to pay these workers retirement benefits and ensures the plan’s future integrity by the appointment of an independent fiduciary.”

According to the suit filed by the U.S. Department of Labor, the company and its president violated the Employee Retirement Income Security Act, or ERISA, by failing to collect loans and interest between September 20, 2000 and the present. Essentially, the company president made unsecured loans from the employee retirement fund, and then failed to repay them. The lawsuit also claims that when the company president did receive loan and interest payments, he deposited the money in company operating accounts, instead of repaying the pension fund. The funds were allegedly used to cover company operating expenses. This resulted in losses to the plan that made it impossible to pay employee benefits as they came due.

Unfortunately, this situation is far from unique. In 2006, the Employee Benefits Security Administration or EBSA collected more than $1.4 billion in misappropriated benefit funds, including 401K accounts, healthcare accounts, retirement accounts and other benefits for American workers and their families.

In a similar incident, Macristy Industries Inc. of New Britain Connecticut was required to repay more than $2 million to the company’s retirement plan earlier this month, under a court order resolving the lawsuit filed by the U.S. Department of Labor.

At that time, Secretary Chao said, “Workers’ retirement plans are not piggy banks for company executives.” She added, “This legal action restores $2.1 million to these workers’ retirement plan and prohibits the company’s president from ever again serving as a fiduciary of an ERISA-covered employee benefits plan.”

In the current case, the president of X-Ray Equipment Co., who oversaw the retirement plan, is deceased. In his September 2006 obituary, he is listed as a resident of Miami since 1938 who succumbed to cancer. He was married for 53 years and was survived by 3 sons, 3 daughters, 13 grandchildren and 3 great-grandchildren.  A Korean War-era U.S. Air Force veteran, he chaired many political fundraisers. He was a member of the Miami Shores Community Church where he served as President of the Church Council and on numerous committees.  According to sources at the U.S. Department of Labor, the company president failed to prudently invest plan assets by concentrating a majority of the investments in notes and mortgages without investigating the soundness of such investments. Eventually, these improper investments resulted in losses to the plan of more than $1.5 million, according to court documents.

Under this judgment in the U.S. District Court for the Southern District of Florida in Miami, an independent trustee was appointed to head the fund. Jeanne Barnes Bryant has the authority to collect assets owed to the plan, to evaluate outstanding claims, and to make payments both to plan participants and to creditors. Those creditors include workers who are owed unpaid profit-sharing or retirement benefits.

Normally in such a situation, the plan’s trustee would be permanently enjoined from acting as fiduciary for any benefit plans. In this case, because the company president was already deceased, that condition did not apply.

This judgment resulted from an investigation conducted by the Miami District Office of the Labor Department’s Employee Benefits Security Administration (EBSA). The suit was originally filed in federal court on February 7, 2007, according to Gloria Della, a Labor Department spokesperson.

Florida employee benefit has no legal provision for mental health coverage. Although there is a substantial number of employers who do provide mental health coverage as a part of group insurance, but there are many who do not. Even inpatient or outpatient treatment in a hospital may or may not be a part of your 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. One that merits special mention is 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 several amendments since its enactment. It was passed in 1996 with a provision to expire on September 30, 2001. Numerous extensions followed, and in February 2007, it was extended up to December 31, 2007. Considering the history of amendments and extensions in MHPA, it would be safe to assume that this law will remain in effect for quite some time to come.

Before 1996, many healthcare plans had very small provisions for mental health coverage. For instance, a plan that provided $100,000 for surgery could have only a provision of only a thousand dollars for mental health. Such small amounts could barely cover counseling, let alone more thorough treatment. But thanks to MHPA, it would be illegal now to have such small provisions for mental health. The law requires that mental health treatments must receive parity with other types of treatment.

A large number of American citizens with insurance are covered by employee benefit plans. The federal government has a dedicated agency to enforce the laws regarding employee benefits and pension plans. It is known as the Employee Benefits Security Administration, or EBSA. More than 150 million workers are covered under EBSA plans. The current name reflects the reality that the agency now handles as many violations of law concerning health care as pensions. 

Florida has decided to adopt the FMLA federal program. Other states take other directions, approving their own laws about job protection. These laws have similarities with the federal FMLA, but are not identical.

In Florida FMLA protects the worker from the risk of losing his or her job in the case of an emergency. In certain situations, the law permits an employee to take up to 12 weeks per year of unpaid leave. The emergencies can be the birth of a baby, the adoption of a child, illness or medical urgency of the employee or an immediate parent.

Now is a good time to review the Florida FMLA law because Father’s Day and Mother’s Day are this time of year. It is great to know that a law exists that protects us from losing our jobs when life becomes complicated.

In every job site, a poster should explain who is protected by the Florida FMLA, and how the worker can make good use of these benefits. All public employees are protected by the act, and also schoolteachers. In the case of private companies, those with 50 or more employees must comply with FMLA regulations.

Under Florida FMLA law, the employers must give written notice to the employee of his or her responsibilities during leave. The employer must specify the status of the worker and give instructions to follow during the leave. The employee must act in accordance this agreement in order to maintain their job. A good relationship between the employee and the company is recommended. 

Under the USERRA, time served on active military duty counts as hours towards FMLA eligibility.

One important issue that the worker must agree with the employer on, is medical coverage. Medial insurance may be dropped due to non-payment during FMLA leave. Most employees have medical insurance paid with a portion of the salary. When they leave, the employer may opt to continue paying the medical insurance premiums. When the employee returns, they repay the amount owed.

It is because of the MHPA, Mental Health Parity Act of 1996, that mental health treatments must receive equality with other types of treatment. The initial bill that was passed in 1996 was due to expire on September 30, 2001. It has been amended five times, including just this passed February, which extended the act until December 31^st this year. MHPA requires that group health insurance plans that fund mental health treatments cover it at the same level as other medical treatments.

Some people may be wondering why their Florida employee benefits don’t insure mental health treatments. Of course, it is not the case for most people, since many insurance plans do cover mental health. For those that may not be covered for psychological treatment, it’s not against the law. There is no state or federal law that requires group health insurance to cover mental health treatments. The MHPA simply regulates those plans that do offer coverage for psychotherapy, counseling, or other mental health treatments.

The federal EBSA, meaning Employee Benefits Security Administration, handles violations regarding health care and pensions. A majority of workers in the United States are covered by employee benefit plans. There are over 150 million people who are protected by the EBSA. If there was a violation concerning mental health coverage, they would be the ones to deal with it, as well as pension law.

Under the MHPA, annual limits on mental health coverage have to match those limits of other medical coverage. A low limit for mental treatment, for example, would have to be the same as the limit for surgery. If the limit for surgery is higher than the limit for mental health, the plan is in violation of the law. Basically, if a plan is going to cover mental health, it has to be covered equally. Otherwise, the only other legal move is not to offer coverage for it all together.

If you’ve ever wondered what it takes to get US Secretary of Labor Elaine Chao riled up, now you know. The petite, well-dressed Chao is normally described as “ladylike,” but her recent remarks showed that even the normally unflappable Secretary has her limits.

The US Dept. of Labor recently sued a company and its owner to recover over $1.5 million in Florida employee benefits.

In a stinging comment, sedate US Secretary of Labor Elaine Chao said, “Workers’ retirement plans are not to be treated as cash machines for management’s convenience.” She added, “This legal action on behalf of the retirement plan’s participants seeks to recover more than $1.5 million, ensure the plan’s future integrity and prevent the defendants from ever again being in a position to plunder employee benefits.”

The suit was lodged against X-Ray Equipment Co., a firm that sells and services medical equipment including CT scanners, MRIs and PET scanners. The suit alleges that the owner of X-ray misused more than $1.5 million in retirement plan assets to benefit the company.

Misusing retirement funds is a violation of the US Employee Retirement Income Security Act (ERISA). According to the suit, between Sept. 30, 2000 and now the owner of X-ray failed to collect $1,156,800 in loans plus interest owed to the plan. He also kept $427,021 in loan payments made by plan participants and third-party borrowers. In a flagrant violation of trust, the loan repayments were co-mingled with the general assets of the company and used to pay company expenses.

The company owner acted as the plan trustee. In that capacity, he made risky investments with the plan funds resulting in hefty losses. As a result, the plan was unable to pay benefits to retirees who had made contributions.

Under the suit, X-ray and its owner would have to pay back all the lost money, with interest. They would also be barred permanently from service to any plan covered by ERISA. A new plan trustee would be appointed to handle the funds.