DOL Sues Union Health Fund Over $3M in Allegedly Excessive Fees

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

A union health fund covering about 300 small employers paid more than $3 million in excessive fees to a benefits administrator connected to the fund’s trustees, the Labor Department alleged in a new lawsuit ( Hugler v. DeWalt , E.D. Wash., No. 2:17-cv-00082, complaint filed 2/24/17 ).

The complaint attacks the relationship between the Associated Employers Health and Welfare Trust and its benefits administrator, Associated Industries Management Services Inc. (AIMS). According to the DOL, two of the health plan’s trustees were officers and employees of AIMS, and the plan secretly authorized steep increases in AIMS’s fees during a time in which the plan saw a “sharp decease” in the number of employers and workers serviced by AIMS.

The lawsuit is only the second ERISA enforcement action filed by Acting Labor Secretary Edward C. Hugler since he took the helm of the DOL under President Donald Trump, according to a search on Bloomberg Law Dockets.

In addition to targeting AIMS and the health plan, the DOL’s lawsuit also names four individual plan trustees as defendants. Two defendant trustees, James DeWalt and Robert G. Bakie, are chief executives of AIMS and stood to benefit from the fee increases, the DOL alleged.

By increasing the fees paid to AIMS from 2 percent to 7 percent of premiums over a four-year period, the defendants caused the plan to pay more than $3 million in excessive fees, the lawsuit claims.

The complaint was filed Feb. 24 in the U.S. District Court for the Eastern District of Washington.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Pension & Benefits Daily