US Department of Labor obtains judgment ordering service provider, its owner to restore more than $4.4M in fringe benefits

GREENBELT, MD – The U.S. Department of Labor has obtained a consent judgment requiring a health and welfare benefits administration firm, its owner and others to restore more than $4.4 million in fringe benefits owed to people employed by government service contractors across the U.S.

The U.S. District Court for the Southern Division of the District of Maryland entered the judgment following litigation by the department’s Office of the Solicitor. Investigators with the department’s Employee Benefits Security Administration found that Axim Fringe Solutions Group LLC, majority owner James Campbell and the firm’s Director of Compliance Accounting Melissa McManes misused funds from fringe benefit plans. Campbell and McManes used fringe benefits due to the employees of Axim’s government contractor clients to pay the clients’ expenses from December 2015 to June 2022, violating the Employee Retirement Income Security Act.

EBSA also determined that Axim, Campbell and McManes violated the McNamara O’Hara Service Contract Act by charging clients’ employees for their fringe benefits instead of charging its clients for employer administrative costs of fringe benefits. By law, Axim’s clients — government service contractors — must pay employees who work on certain federal service contracts a minimum amount of wages and fringe benefits. 

“The law is clear. Employee contributions cannot be used to pay for employers’ costs related to employee benefit plans,” explained Employee Benefits Security Administration Deputy Regional Director Norman Jackson in Philadelphia. “Axim Fringe Solutions Group illegally put the interests of their clients ahead of their clients’ employees by using workers’ hard-earned wages to pay for their employers’ costs.”

EBSA found that the firm, Campbell and McManes misappropriated over $5 million in payments from their clients’ employees by transferring fringe benefit contributions from the employee trust accounts to Axim’s operating account. These transfers delayed payments of health insurance premiums, leading some insurers to send the contractors late payment notices. Axim restored more than $1.5 million to the trust accounts before the court entered the consent judgment. 

“Plan fiduciaries must act solely in the best interests of plan participants and their beneficiaries,” said Regional Solicitor of Labor Samantha N. Thomas in Philadelphia. “In this case, Axim Fringe Solutions Group endangered the health coverage of numerous workers and their families across America. The Department of Labor will pursue all legal remedies available to ensure plan participants and beneficiaries receive the benefits they have earned.” 

The judgment also orders the removal of Campbell and McManes as fiduciaries and permanently forbids them from serving in a fiduciary capacity for any ERISA-covered plan. Additionally, Axim, Campell and McManes must pay $100,000 for the cost of an independent fiduciary to restore the fringe benefits to the plans’ participants and beneficiaries. The judgment also forbids all three parties from using employee fringe benefits to pay employer’s expenses in the future.