By Pension and Benefits Editorial Staff
The DOL is suing Advance Benefits Management Systems USA Inc. (ABMS) and its founder/CEO and president in federal court in Georgia, seeking appointment of an independent fiduciary to employee health care plans previously administered by the company. The DOL wants the independent fiduciary to marshal the plans’ assets and to obtain insurance reimbursement and more than $7 million in unpaid claims. The suit also asks the court to require the two ABMS officials to restore all losses caused by their fiduciary breaches to the plans and disgorge to the plans all profits, fees, and other monies earned in connection with their violations.
The Employee Benefits Security Administration (EBSA) previously investigated an allegation that the South Carolina corporation and third-party employer-sponsored health care plan administrator, and its two officials, committed these breaches while acting as fiduciaries to about 118 self-funded health benefits plans in violation of ERISA.
Unpaid claims. EBSA investigators found that ABMS, which ceased operations in April 2019, and the two company officials were responsible for more than $7,000,000 in unpaid claims for thousands of plan participants and beneficiaries left without the health coverage and benefits they were promised. The defendants allegedly controlled both employer and employee contributions and were responsible for paying eligible medical claims with the participating plans’ assets.
Comingling and misappropriation. EBSA also alleges that the defendants unlawfully comingled, misappropriated, and diverted for the own use funds entrusted to them to pay uninsured portions of medical claims. The defendants purportedly misused funds intended for claims payments by diverting them to other companies that the defendants or their family members controlled and misappropriated the participating plans’ assets for non-plan purposes. Further, they regularly used funds provided by one employer to pay the liabilities of another, and failed to track payments by, and on behalf of, their employer clients.
Stop-loss claims. In addition, EBSA found that ABMS and the two officials, contrary to their contractual obligations and fiduciary duties, failed to file timely stop-loss insurance claims and obtain stop-loss reimbursement on employers’ behalf. They also failed to keep adequate records of employer and employee contributions and employer premium payments. As a result, insurers of almost half of the ABMS-administered plans refused to pay stop-loss claims. The fiduciaries’ misuse of funds and failure to obtain insurance reimbursement led to the insolvency of both ABMS and the plans it administered, leaving the company incapable of paying its claims obligations.
Permanent injunction. The DOL is also asking the court to permanently enjoin the defendants from serving as plan fiduciaries and as a service provider to employee benefit plans in the future.
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