Labor Dept. Sues Private Unemployment Program

A private unemployment insurance program for workers in the northwestern U.S. was drained of assets by the family managing the program, the Labor Department alleged in a new lawsuit.

The department on Feb. 28 filed suit against the National Association of Prevailing Wage Employers, a nonprofit that operated a multiple employer welfare arrangement (MEWA) aimed at providing unemployment benefits to workers at private companies that contributed to the program. The Montana family running the MEWA, along with certain affiliated companies, siphoned unauthorized fees from the program in violation of their fiduciary duties under the Employee Retirement Income Security Act, the DOL alleged.

The family caused the MEWA to pay unauthorized fees to companies it controlled, according to the complaint, which was filed in the U.S. District Court for the District of Montana. Some of the fees went to entities that provided no services for the program, the department said. Other fees went to affiliated companies without regard to whether an unaffiliated entity could provide the same services for less money, according to the department.

The DOL has singled out MEWAs for their potential for abuse in earlier actions. In a 2013 fact sheet, the department said that although MEWAs can be provided through legitimate organizations, they’re sometimes marketed using “attractive but actuarially unsound premium structures that generate large administrative fees for the promoters.”

The defendants couldn’t be immediately reached for comment.

The case is Acosta v. Cogswell, D. Mont., No. 4:18-cv-00048-BMM, complaint 2/28/18.