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U.S. Department of Labor Obtains Temporary Restraining Order To Protect Participants and Beneficiaries of Failing MEWA
LOS ANGELES, CA – The U.S. Department of Labor has obtained a temporary restraining order in the U.S. District Court for the Central District of California against Riverstone Capital LLC; NexGen Insurance Services Inc.; and NGI Brokerage Services Inc. (collectively, “Riverstone”) and the individuals that operate it. The order protects more than 16,000 participants and beneficiaries of a failing self-funded insurance arrangement, the Riverstone Capital LLC Multiple Employer Welfare Arrangement (MEWA), by temporarily placing all the MEWA’s assets in the hands of an Independent Fiduciary charged with administering to the plan.
After an investigation by the Department’s Employee Benefit Security Administration (EBSA) revealed that the MEWA was in danger of collapsing, leaving little to no money to pay outstanding claims, the Department filed a complaint on February 1, 2019, and moved for emergency relief. As alleged in the complaint, the Department found that as of the end of December 2018, Riverstone had approximately $24 million in processed but unpaid claims, despite collecting only between $4-6 million in contributions each month and having reserves far short of the amount needed to pay the claims. Investigators further found that the operators of the MEWA violated the Employee Retirement Income Security Act (ERISA) – a federal law that protects participants in employee benefit plans – by failing to prudently set adequate premium rates to properly fund the 100 participating ERISA-covered plans, failing to hold the assets of the MEWA in trust, and charging excessive fees. As unpaid claims mounted, Riverstone delayed the payment of approved claims and “cherry-picked” which claims to pay. On the same day the lawsuit was filed, the court issued emergency relief that included freezing bank accounts containing plan assets.
On February 7, 2019, a court ordered further relief, to which the Defendants voluntarily agreed. Pending a preliminary injunction hearing set for March 11, 2019, the order temporarily appoints an Independent Fiduciary – Receivership Management – to take control over operation of the MEWA. The order charges Receivership Management with taking all reasonable steps necessary to marshal the existing plan assets and place them in trust, perform an accounting, pay urgent claims, communicate with impacted entities and persons, and design and implement a fair process for paying out covered-claims to the extent feasible.
In addition, the order temporarily protects participants and beneficiaries who are unable to pay covered-medical expenses from collections actions until further order by the court. This relief was granted under the All Writs Act, 28 U.S.C. § 1651.
The order further restrains the Defendants from serving as fiduciaries to the plan and prohibits them from marketing the MEWA. In addition, the Department has issued a cease and desist order that prevents brokers and other MEWA operators and agents from working on behalf of the MEWA to market it to prospective employers or enroll new employers.
For persons directly impacted by this case, the independent fiduciary has set up the following website, www.receivermgmt.com/riverstone-nexgenhealthplan. The Department urges members of the public to immediately contact EBSA at https://www.askebsa.dol.gov or 866-444-3272 if they are the targets of any sales pitches or marketing activities related to the Riverstone/NexGen MEWA.