Last week we learned of a prevailing wage bona fide benefit plan administrator who has run into trouble with the U.S. Department of Labor. It’s important to understand the allegations because when a plan administrator has compliance problems, those problems usually have a negative effect on their clients.
FCE Benefits Administrators, Inc., is headquartered in California but with clients throughout the United States. The Department of Labor has sued FCE, their client (Chimes International) and the Chimes executives. Chimes International provides janitorial services to the federal government which is subject to the Service Contract Act. FCE provides specialized bona fide benefit plan administrative services to companies that are subject to the Service Contract Act and the Davis-Bacon Act. The Department of Labor says that the company, their executives and FCE have violated the Employee Retirement Income Security Act (ERISA) by paying millions in excessive fees. Specifically, the DOL alleges that Chimes agreed to pay excessive fees to FCE in return for FCE making “charitable donations” to a related entity, The Chimes Foundation.
In addition to the excessive administrative fees, FCE also is alleged to have received rebates, commissions, and other payments from the plan’s trustee, as well as the plan’s providers of various benefit plan services and insurances.
The DOL has demanded that all defendants account for and disgorge profits related to the fiduciary breaches and prohibited transactions. Furthermore the DOL is seeking a permanent bar against FCE from acting as a service provider for any plan covered by ERISA.
The DOL has issued a press release regarding the action.
What is the lesson that should be learned with these cases?
- When choosing a prevailing wage benefit plan administrator, take care to find one that does not have conflicts of interest. Conflicts are easier to avoid or at least detect when the administrator is not also selling you insurance or other financial products. You need to understand exactly how the administrator is getting paid and you should consider shopping the market to make sure that the fees are not excessive.
- Prevailing wage benefit plan compliance strategies should be based upon the law. We prefer a strict and conservative interpretation of the law. We would also recommend having legal counsel review the overall strategy and the underlying Plan documents.
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 move prevailing wage dollars out of payroll and reduce associated costs. Increase profits. Submit more competitive bids. Build employee loyalty.
How we can help
DirectAdvisors, established in 2001 and located in Albany, New York provides 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 3000 employees.
In 2015, 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.
Our solutions are free from any conflict of interest as we do not sell any financial or insurance products. We work with existing agents, brokers and insurance companies.
NOTE: The views expressed in this blog are matters of opinion expressed by DR Pension Services, LLC and DR Advisory Services LLC (d/b/a DirectAdvisors) and do not constitute legal or other advice upon which the reader is entitled to rely.