U.S. Labor Department settlement provides $5 million in restitution for Pennsylvania builders health plan and reforms plan operations

Archived News Release — Caution: Information may be out of date.

Philadelphia – The U.S. Department of Labor has obtained a consent judgment in which the Pennsylvania Builders Association (PBA), its wholly-owned subsidiary and its trustees agree to restore $5 million to the fund and pay a civil penalty of $500,000. The judgment also permanently bars the trustees from using plan assets to pay royalties and/or licensing fees to the association, prevents the trustees from contracting with the subsidiary for administrative services in exchange for fees, and prohibits the use of trust assets for lobbying purposes. In addition, current and future trustees must receive eight hours of fiduciary training annually over the next five years.

“This $5 million judgment protects the benefits plan’s participants by restoring the funds and taking steps to make sure the plan is managed properly in the future,” said Secretary of Labor Elaine L. Chao.

The lawsuit being resolved alleged that PBA of Lemoyne, Pennsylvania; its wholly-owned subsidiary Builders Services Inc. (BSI); and trustees Robert Basile, Patrick Brewer, Dennis Brislin, Scott Cannon, James Conner, Brad Elliott, Charles Farrell, Chuck Hamilton, David Knipe, Gene Kreitzer, Gary Naeser, Michael Rodino, Toni Rogan, Mack Smith, Chauncey Wirsing, Clarence Yeagley, Jack Zimmer and Roger Zimmer violated their fiduciary duties to the Pennsylvania Builders Association Benefits Trust. PBA sponsored the trust, and BSI was administrator of the trust.

The suit alleges that PBA received royalty payments and BSI received administrative fees under arrangements with BSI and the trust’s third party administrators. The royalties paid to PBA represented a percentage of the administrative fees paid by contributing employers. The department alleged that these royalty payments were prohibited because the sponsor had provided its name and endorsement to the trust when it created and named the trust. The trustees allegedly misused plan assets to pay royalties to PBA from 2000 to 2007, administrative fees to BSI from 2000 to 2007 and for political lobbying from 2002 through 2004.

The trust provided health, life insurance, dental, vision and temporary disability benefits to 12,616 participants as of 2006.

The court action, filed in the U.S. District Court for the Middle District of Pennsylvania, resulted from an investigation conducted by the Washington District Office of the Labor Department’s Employee Benefits Security Administration (EBSA). Employers and workers may contact the Washington District Office of the EBSA at 202.693.8700 or toll-free at 866.444.3272 for help with problems relating to private sector pension and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

Chao v. Pennsylvania Builders Association
Civil Action Number 1:08-cv-01564-SHR

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