FLETCHER, N.C. – The U.S. Department of Labor has sued former Fletcher-based Unicomp Inc. and its chief executive officer, Stephen Hafer, to restore losses suffered by participants in the company’s health plan.
The Labor Department has filed a lawsuit in the U.S. District Court for the Northern District of Georgia, Atlanta Division, alleging that the defendants violated the Employee Retirement Income Security Act when they withheld $9,688 in employee contributions to the plan between May and December 2006, even though the plan had been terminated on April 30, 2006, for nonpayment of premiums. Employee contributions were neither returned to employees nor forwarded to the insurer, but were instead used by the defendants for other purposes.
The department’s Employee Benefits Security Administration has found that Unicomp also received $2,481 in Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, premiums between April and July 2006, but did not reimburse plan participants for COBRA payments after the health plan had been canceled. Nor were the payments used for plan purposes. In addition, following cancellation of the policy, participants incurred $4,127 in unpaid medical claims.
The Labor Department is asking the court to require the defendants to restore all losses to the plan, including interest and lost opportunity costs. The department is also asking that any funds owed by the health plan to the defendants for any claims submitted not be paid to them but used instead to help restore losses incurred by other participants in the plan. It is also asking that the defendants be removed as fiduciaries of the plan and have a successor trustee take over its operation, distribute assets and terminate it if necessary.
“Employees acted in good faith when they contributed to their health plan and were deceived into believing that they had health coverage when none existed. The Labor Department will not tolerate misuse of employees’ funds by fiduciaries who fail to act in the best interests of plan participants,” said Isabel Colon, acting director of EBSA’s Atlanta Regional Office, which conducted the investigation for this case.
Unicomp was a holding company incorporated in North Carolina that filed for bankruptcy in 2006. This case is being brought before a federal court in Atlanta because that is the district in which Hafer currently resides.
The Labor Department is represented in court by the department’s Office of the Solicitor. Employers and workers can reach the Atlanta office at 404-302-3900 or toll-free at 866-444-3272 for help with problems relating to private sector retirement and health plans. For more information, visit www.dol.gov/ebsa.
Solis v. Stephen Hafer
Civil Action File Number 1-11-CV-1429
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