Class Members Can Continue Lawsuit Despite Lack of Benefit Denial.


The U.S. District Court for the Western District of Texas grants in part and denies in part the defendants' motion to dismiss the plaintiffs' claims for prohibited transactions and breach of fiduciary duties and finds that the plaintiffs have both statutory and constitutional standing to sue.

The plaintiffs include a class of individuals on behalf of themselves and other similarly situated participants and beneficiaries under an employee welfare plan governed by the Employee Retirement Income Security Act of 1974 (ERISA). The defendants include companies that market and administer retirement and health and welfare benefit plans to the employees of nonunion employers seeking to compete for government contracts.

Nonunion employers seeking to bid on such government contracts are often required to pay their workers the wages and benefits paid to the majority of similarly situated laborers in the area during the relevant time period. The defendants offer a contractors plan to such nonunion employers through which the employers can affordably provide retirement and health and welfare benefits to their workers and thus submit competitive bids for government work. The plan is funded through various trusts. The plaintiffs' employer, a training and rehabilitation institute, enrolled in the plan to provide retirement and health and welfare benefits to its employees and established separate component plans under the plan to provide those benefits.

For every hour that plaintiff employees worked, their employer contributed a certain amount of money to a fringe benefit account that was used to pay premiums incurred through enrollment in employer-provided health and welfare plans and/or contributions to retirement plans. Administrative fees charged by the defendants were deducted directly from an employee's account. Any excess funds related to the fringe benefit account under the health and welfare plan were supposed to be contributed on an employee's behalf to an individual retirement plan account; however, no such contributions were ever made. In addition, any excess funds in the fringe benefit account under the retirement plan account would accrue for the benefit of employees to use in retirement. The plaintiffs allege there were no excess funds remaining because the defendants charged excessive fees, in violation of ERISA.

The plaintiffs bring claims for prohibited transactions under ERISA Sections 406(a) and 406(b) and a claim for breach of fiduciary...

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