Trustees agree to reform New York Teamsters welfare fund to come into compliance with federal laws
NEW YORK –Trustees to the Teamsters Local 272 Welfare Fund in New York City have agreed to amend the fund to resolve a lawsuit filed by the U.S. Department of Labor, regarding a fund requirement that participants bear 90 percent of the cost of medical and pharmacy claims above certain annual thresholds.
The consent judgment, filed in the U.S. District Court for the Southern District of New York, followed an investigation by the department’s Employee Benefits Security Administration.
The department’s suit alleged violations of the Employee Retirement Income Security Act and the Affordable Care Act when the Local 272 fund and its trustees replaced annual benefits limits – $125,000 for medical claims and $5,000 for pharmacy claims – with a cost-sharing arrangement requiring participants to bear all but 10 percent of the cost of claims in excess of the same limits.
The department alleged that the fund and trustees denied participants the ACA’s consumer protections in two ways. First, with the new 90 percent cost-sharing requirement, the fund lost its grandfathered status, then failed to cap participants’ annual out-of-pocket expenses, as the ACA requires. The department alleged in the alternative that the 90 percent cost-sharing requirement constituted an annual limit, in violation of ERISA and the ACA.
The trustees have agreed to amend the fund to eliminate the 90 percent cost-sharing requirement, and to provide relief to participants affected by that cost-sharing requirement in past years.
ERISA and the ACA generally prohibit annual limits on benefits for participants in group health plans. These federal statutes also limit the amount of expenses that non-grandfathered ERISA-covered group health plans can require participants to pay for essential health benefits each year.
“The actions by the Teamsters Local 272 Welfare Fund and its trustees denied the fund’s participants and beneficiaries the healthcare benefits guaranteed to them by law. The cost-sharing limits and prohibition on annual limits are part of the essential guarantees of the Affordable Care Act,” said Employee Benefits Security Administration Regional Director Thomas Licetti in New York. “Plans and their trustees must ensure they comply with these important health care protections for workers. This resolution protects the rights and benefits of the fund’s participants. The U.S. Department of Labor will continue to investigate and seek remedies for potential violations.”
“Workers must receive the healthcare benefits guaranteed to them by law. This case demonstrates the U.S. Department of Labor’s ongoing commitment to ensuring that plans and their trustees respect the Affordable Care Act’s protections,” said Regional Solicitor of Labor Jeffrey S. Rogoff in New York.
EBSA’s New York regional office conducted the investigation. Senior Trial Attorney Jason Glick of the department’s regional Office of the Solicitor in New York litigated the case for the department.
Civil Action No. 22-cv-5292-AT