Johnston, Rhode Island, Employer Ordered To Restore Health Plan Premiums Withheld From Employee Paychecks

Archived News Release — Caution: Information may be out of date.

A Phoenix Corporation of Johnston, Rhode Island (formerly known as MEACO Products Corporation), and company president Lisa Adams have been ordered to repay health insurance premiums which the defendants had withheld from employee paychecks but never forwarded to the health insurance company, the U.S. Department of Labor announced today.

According to James Benages, northeast Regional Director for the department’s Pension and Welfare Benefits Administration (PWBA), the defendants and the Department have agreed to entry of a consent judgment in the U.S. District Court for Rhode Island which resolves a lawsuit filed by the Department against the company and Adams. The judgment, signed by U.S. District Judge Mary M. Lisi, prohibits Lisa Adams from acting as a fiduciary or service provider to any employee benefit plan covered by federal law for ten years. The order also requires the defendants to pay to 11 participants of the company health plan a total of $1,604.52 which had been withheld from their paychecks but never paid to the health insurance company.

Benages noted that the MEACO Products Corporation Health Plan had been established in January 1997 pursuant to an agreement with Blue Cross/Blue Shield of Rhode Island to provide group health insurance to MEACO employees. Later that year, MEACO began operating under the name APhoenix Corporation, which assumed the group health contract to provide health insurance to its employees.

The Department’s lawsuit alleged that, between September 30, 1998 and January 27, 1999, the defendants deducted health insurance premiums from employee paychecks but did not forward them to Blue Cross/Blue Shield of Rhode Island. As a result, on November 9 1998, Blue Cross/Blue Shield of Rhode Island canceled the group insurance contract for the company retroactive to September 30, 1998. Benages stressed that, despite this cancellation, the defendants continued to deduct insurance premiums from the employee paychecks until January 27, 1999.

“The law specifically prohibits this sort of misuse of employee benefit plan funds by employers or plan sponsors,” said Benages, noting that his agency enforces the Employee Retirement Income Security Act (ERISA) which protects employee pension and welfare benefit plans, such as group health insurance. “The defendants had no right to deduct those premiums from their employees’ paychecks and then convert that money to their own use.

The Department’s legal action against the defendants followed an investigation by the Boston Regional Office of the Pension and Welfare Benefits Administration. That office is located in Room 575 of the John F. Kennedy Federal Building in Boston. The telephone number is 617-565-9600.

(Herman v APhoenix Corporation and Lisa Adams
Civil Action File Number: 00515)

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Archived News Release — Caution: Information may be out of date.