labor lawAdivision of labor law center

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.

If you are a worker covered by a group health insurance plan, and suffer from some kind of mental illness, then you no longer have to suffer in silence due to lack of funds.

There are over 150 million workers in the United States who are covered by group health insurance plans who will be pleased to learn of the Mental Parity Health Act and what it means to them.

This affects many workers, including those covered by Mississippi employee benefit plans.

The Mental Health Parity Act, or MHPA was signed into law by the president, and has been extended through December 31, 2007. It has taken 5 amendments to extend the expiration date of the original Mental Health Parity Act from September 31, 2001.

But what does the Mental Health Parity Act mean to workers?

Well, if you are covered by any group health insurance plan, it means that the plan must cover mental illness in the same way that it covers other medical conditions and treatments.

This means that whereas in the past there was often a huge discrepancy between the monetary limit on mental health conditions and other medical conditions, including surgery, this is no longer legal.

The discrepancy has been, in the past, $90,000 or more, with some plans setting limits for medical treatments at $100,000 or more and limits for mental health related treatments at $5,000 to $10,000 or even lower.

It is now illegal for group health insurance plans to do this.

Workers who need treatment for mental health related conditions can use cover for a diverse range of treatments. These may include a visit to any licensed therapist, drug and alcohol rehab for dependency and stays in the mental health wing of a hospital.

You may have to stay in hospital for a length of time for depression, schizophrenia or other mental health conditions. This can also include post-traumatic stress disorder.