U.S. Labor Department Settlement Provides $5 Million in Restitution for PA Based Trade Organizaion Health Plan and Reforms Plan Operations

Source: U.S. Department of Labor (DOL)

PHILADELPHIA — The U.S. Department of Labor has obtained a consent judgment in which a Pennsylvania based professional trade organization, its wholly-owned subsidiary, and its trustees agree to restore $5 million to the fund and pay a civil penalty of $500,000. The judgment also permanently bars the trustees from using plan assets to pay royalties and/or licensing fees to the association, prevents the trustees from contracting with the subsidiary for administrative services in exchange for fees, and prohibits the use of trust assets for lobbying purposes. In addition, current and future trustees must receive eight hours of fiduciary training annually over the next five years.

"This $5 million judgment protects the benefits plan's participants by restoring the funds and taking steps to make sure the plan is managed properly in the future," said Secretary of Labor Elaine L. Chao.

The suit alleges the company received royalty payments and the wholly-owned subsidiary received administrative fees under arrangements with the trust's third party administrators. The royalties paid to the company represented a percentage of the administrative fees paid by contributing employers. The department alleged these royalty payments were prohibited because the sponsor had provided its name and endorsement to the trust when it created and named the trust. The trustees allegedly misused plan assets to pay royalties to the company from 2000 to 2007, administrative fees to the subsidiary from 2000 to 2007 and for political lobbying from 2002 through 2004.

The trust provided health, life insurance, dental, vision, and temporary disability benefits to 12,616 participants as of 2006.

The court action, filed in the U.S. District Court for the Middle District of Pennsylvania, resulted from an investigation conducted by the Washington District Office of the Labor Department's Employee Benefits Security Administration (EBSA). Employers and workers may contact the Washington District Office of the EBSA at 202-693-8700 or toll-free at 866-444-3272 for help with problems relating to private sector pension and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.