Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Transamerica Life Insurance Co. and FCE Benefit Administrators Inc. convinced a federal judge to toss out state-law claims of fraud by a South Dakota nonprofit accusing them of mismanaging its welfare benefit plan ( BH Servs. Inc. v. FCE Benefit Adm’rs Inc. , 2017 BL 342088, D.S.D., No. 5:16-cv-05045-KES, motion to dismiss granted 9/27/17 ).
The claims of fraudulent inducement and unjust enrichment by BH Services Inc. are expressly pre-empted by the Employee Retirement Income Security Act, U.S. District Judge Karen E. Schreier held Sept. 27. Schreier declined to strike from the organization’s lawsuit a paragraph that references another action brought by the Labor Department against benefit administrator FCE for allegedly mismanaging the health plan of a federal contractor. The reference could be relevant because it may provide additional background and context for BH’s lawsuit, Schreier held.
BH is a nonprofit that employs nearly 200 people in Nebraska and South Dakota and provides rehabilitation and job opportunities for people with disabilities. The lawsuit alleges that FCE and Trust Management Services violated ERISA by, among other things, dissipating plan assets, charging excessive fees and misrepresenting the nature of the plan to prevent BH from discovering what happened to its plan assets. BH also accused FCE and Transamerica of mismanaging the life insurance policies allegedly included in its plan.
The decision is the latest legal development involving FCE, a benefit provider for government contractors. The company is defending several other lawsuits by the DOL and private entities accusing it of violating ERISA. Last week the DOL sued FCE for allegedly retaliating against suspected whistle-blowers. FCE is also defending a proposed class action by Washington parking operators who say the company charged them excessive fees through their benefit plan.
BH accused FCE and Transamerica of orchestrating a scheme to make the nonprofit believe that it sponsored group term life insurance benefits for its employees, but allegedly it was all a “ruse” to get BH to pay extra fees. After requesting information from Transamerica, BH allegedly discovered that the insurance policies were actually owned by FCE and a multiple employer welfare benefit plan controlled by FCE. BH believes that it has an undisclosed amount of cash sitting in participant accounts at Transamerica.
Bangs McCullen Butler Foye & Simmons LLP, Fee Smith Sharp & Vitullo LLP, and Malesovas Law Firm represent BH. Goosmann Law Firm and Sedgwick LLP represent FCE. Gunderson Palmer Nelson & Ashmore LLP and Carlton Fields Jorden Burt P.A. represent Transamerica. Boyce Law Firm LLP and Jones Day represent Trust Management.
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