Feds Send First-Ever Cease-and-Desist Letters in Benefits Case

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

The Labor Department has, for the first time, issued cease and desist orders to prevent people associated with a multiple employer welfare arrangement from continuing to market the plan.

The department’s lawsuit targets AEU Holdings LLC and related entities in charge of a multiple employer welfare arrangement (MEWA) that, at its height, provided welfare benefits to about 14,000 participants and beneficiaries spread out across more than 560 employers and 36 states. AEU failed to pay more than $26 million in these participants’ health benefit claims, according to the department. A MEWA is an employee welfare benefit plan or arrangement that provides benefits to employees of two or more employers.

In court documents unsealed Nov. 7, a federal judge entered an order temporarily blocking the AEU defendants from taking any action with respect to the MEWA and appointing an independent third party to oversee the plan going forward. The judge also ordered two banks to freeze 14 accounts that may hold assets of the plan ( Acosta v. AEU Benefits, LLC , N.D. Ill., No. 1:17-cv-07931, temporary restraining order unsealed 11/7/17 ).

According to the department, contributions employers made to the MEWA weren’t used to pay for employees’ health coverage, but instead were funneled to offshore Bermuda accounts. As of October 2017, the MEWA had failed to pay more than $26 million in health benefits claims for services dating as far back as January 2016, the DOL said.

In addition to obtaining this court order, the DOL issued cease and desist letters preventing people working on behalf of the MEWA from marketing it to new employers or enrolling those employers in the plan. Although the federal Employee Retirement Income Security Act authorizes such letters, the DOL hasn’t exercised that power until now, the department said in a press release.

The order was signed by Judge Manish S. Shah of the U.S. District Court for the Northern District of Illinois.

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.

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