Court Rejects Motion to Dismiss in Fringe Benefit Group (Contractors Plan) Excessive Fee Class Action Litigation
The Austin, Texas based Fringe Benefit Group (also known as The Contractors Plan), a pension and welfare benefit plan administrator was named in a class action suit for allegedly charging “sky-high” and “grossly excessive” direct and indirect fees for their administrative services.
Fringe Benefit Group filed a motion to dismiss the complaint on 1/15/18, denying the allegations and stating that the lawsuit was without merit. On 6/15/18 Federal District Court Judge Sam Sparks disagreed and partially dismissed the motion, confirming that the Plaintiffs may proceed with their claims that the defendants breached their fiduciary duties by charging excessive fees and engaging in self-dealing in connection with benefit plans provided through Fringe Benefit Group.
There is insufficient information contained within the various court documents to form an objective opinion as to if the fees charged by Fringe Benefit Group are excessive. However, it is my opinion that the business model followed by Fringe Benefit Group as well as other prevailing wage bona fide benefit providers is inherently conflicted.
Business models that wrap together administrative services, insurance products, and investments can be opaque and therefore difficult to ascertain the various fees and commissions being charged. This information is critically important to Plan fiduciaries.
The business owners (Plan Sponsors) are fiduciaries to the Plan, which means they must make decisions that are in the absolute best interest of their employees (Participants). Fees must be reasonable in comparison to the type and quality of the services being provided. A benefit provider that has paid endorsements with trade groups or that is administratively convenient (one-stop-shop) is not necessarily the best choice.
We at DirectAdvisors believe that a business model that is free from conflicts of interest and where the benefit provider acts as an ERISA fiduciary is often a better choice.
How we can help
DirectAdvisors was established in 2001 and is located in Albany, New York. We provide bona fide benefit plan consulting and third party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act, Service Contract Act and State Prevailing Wage Regulations. Our clients are located throughout the United States and range in size from 10 to 3,000 employees.
This year, our construction company clients will contribute tens of millions of dollars of prevailing wage fringe benefit contributions to The DirectAdvisors Trust (health & welfare benefits) and retirement plans managed by our team.
To be clear, we do not sell any financial or insurance products. Therefore, our solutions are free from any conflict of interest. We work with existing agents, brokers and insurance companies.
If you have additional questions please do not hesitate to contact us or download our whitepapers – “Harnessing the Power of Supplemental Unemployment Benefit Plans” and “Working the Fringe.”
Please also view our short animated video, to see how constructing a bona fide fringe benefit plan can do the following:
- Move prevailing wage dollars out of payroll.
- Reduce associated costs.
- Increase profits.
- Submit more competitive bids.
- Build employee loyalty.