By Pension and Benefits Editorial Staff
A federal district court in California has granted the Department of Labor a temporary restraining order against Riverstone Capital LLC; NexGen Insurance Services Inc.; and NGI Brokerage Services Inc. (collectively, Riverstone) and the individuals who operate those entities. The TRO protects more than 16,000 participants and beneficiaries of a failing self-funded insurance arrangement, the Riverstone Capital LLC Multiple Employer Welfare Arrangement (MEWA), by temporarily placing all the MEWA’s assets in the hands of an independent fiduciary charged with administering to the plan, according to the DOL.
In danger of collapsing. The DOL’s Employee Benefit Security Administration (EBSA) investigated and found that the MEWA was in danger of collapsing, leaving little to no money to pay outstanding claims. The DOL then filed a complaint on February 1, 2019, and moved for emergency relief. As of the end of December 2018, Riverstone had about $24 million in processed but unpaid claims, despite collecting only between $4-6 million in contributions each month and having reserves far short of the amount needed to pay the claims, according to the complaint.
Investigators further found that the operators of the MEWA violated ERISA by failing to prudently set adequate premium rates to properly fund the 100 participating ERISA-covered plans, failing to hold the assets of the MEWA in trust, and charging excessive fees. As unpaid claims mounted, Riverstone allegedly delayed the payment of approved claims and "cherry-picked" which claims to pay.
Emergency relief granted. On the same day the lawsuit was filed, the court issued emergency relief that included freezing bank accounts containing plan assets. On February 7, 2019, the court ordered further relief, to which the defendants voluntarily agreed. Pending a preliminary injunction hearing set for March 11, 2019, the order temporarily appoints an independent fiduciary, Receivership Management, to take control over operation of the MEWA.
The order charges Receivership Management with taking all reasonable steps necessary to marshal the existing plan assets and place them in trust, perform an accounting, pay urgent claims, communicate with impacted entities and persons, and design and implement a fair process for paying out covered claims to the extent feasible.
The order also temporarily protects participants and beneficiaries who are unable to pay covered medical expenses from collections actions until further order by the court.
No marketing. The order further restrains the defendants from serving as fiduciaries to the plan and prohibits them from marketing the MEWA. The DOL has also issued a cease and desist order that prevents brokers and other MEWA operators and agents from working on behalf of the MEWA to market it to prospective employers or enroll new employers.
Contact information. For those who are directly impacted by this case, the independent fiduciary has set up a website. The Department urges members of the public to immediately contact EBSA at https://www.askebsa.dol.gov or 866-444-3272 if they are the targets of any sales pitches or marketing activities related to the Riverstone/NexGen MEWA.
The DOL filed its lawsuit in the Central District of California; the case is No. 2:19-cv-00778-MWF-MAA.
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