labor lawAdivision of labor law center

The US Dept. of Labor recently recovered almost $2 million in New Jersey employee benefits. The Dept. of Labor was granted a court judgment requiring the trustees of the New Jersey Licensed Beverage Association’s Multiple Employer Welfare Arrangement or MEWA, to fork over $1.65 million as restitution for mismanagement of the plan.

In addition, the MEWA trustees are barred from serving in any fiduciary capacity to any employee benefit plan, ever again. The funds will be used to pay health claims for workers. An additional $600,000 in restitution has already been paid under the plan.

The MEWA offered medical insurance for almost 4,000 employees of New Jersey bars and restaurants. The plan was dissolved in 2003, owing more than $6 million in unpaid benefits.

The US Dept. of Labor brought the suit under the Employee Retirement Income Security Act, ERISA.

Using strong words, US Secretary of Labor Elaine Chao said, “The mismanagement of this benefits plan was an inexcusable betrayal of the thousands of New Jersey workers who were left on the hook for health care bills.” Secretary Chao added, “I commend the court for ordering over $2 million in restitution and permanently barring these untrustworthy trustees from ever again being in a fiduciary capacity involving an employee benefit plan under ERISA.”

The Labor Department lawsuit alleges that the trustees failed to determine and maintain adequate funding levels to pay benefits from 1998 to 2003. In addition, they did not have adequate contribution rates to support benefit payments.

In an interesting twist to the case, Midlantic Healthcare, Inc., the insurance company, was also named in the suit. Apparently, the Midlantic Healthcare plan was essentially a self-insurance scheme. Essentially the suit claims that Midlantic did not keep the trustees informed of the financial condition of the plan. The suit also alleges that Midlantic failed to manage the plan in a financially responsible manner. This resulted in employees being promised benefits while the premiums were too low to cover the costs of those benefits.

The trustees also failed to monitor the actions of the plan administrator. An independent trustee has been appointed by the court to oversee the plan, and to use the plan assets to maximize payment of eligible claims.