The Department of Labor has filed a lawsuit in federal court against an administrative service provider, alleging that the firm mismanaged fringe benefits owed to employees working for at least 54 government service contractors across the United States.
In its lawsuit filed Feb. 20 in U.S. District Court for the Southern Division of the District of Maryland in Greenbelt, the department alleges that Axim Fringe Solutions Group, its majority owner James Campbell and Melissa McManes, its director of compliance accounting, violated the Employee Retirement Income Security Act by misusing millions of dollars taken from ERISA fringe benefit plans. The misused assets were owed to its clients' employees, but instead went to pay expenses of Axim's government contractor clients, according to the Labor Department.
Federal law requires government service contractors to pay their employees who work on certain federal service contracts a minimum amount of wages and fringe benefits. Employee Benefits Security Administration investigators found Axim, Campbell and McManes violated the law by charging clients' employees for the administrative costs of their own fringe benefits instead of the employers, who are required by law to pay those costs.
Fringe benefit usually entail "health and welfare," vacation and holiday benefits, according to the department's website.
The EBSA's investigation also found that Axim, Campbell and McManes misappropriated more than $5 million in payments from their clients' employees by transferring fringe benefit contributions from the employee trust accounts to the Axim operating account. The department alleges that these unexplained transfers from the trust accounts have delayed payments of health insurance premiums, leading some insurers to issue late payment notices, according to an accompanying news release.
"Plan fiduciaries are required to act in the best interests of plan participants and their beneficiaries — not in their own or employers' best interest," said Norman Jackson, EBSA deputy regional director in Philadelphia, in the news release.
A representative from Axim could not immediately be reached for comment.
