NEW YORK (Legal Newsline) — The U.S. Department of Labor (DOL) announced July 25 that MagnaCare LLC will return at least $14.5 million to health benefit plans covered by the Employee Retirement Income Security Act (ERISA) after allegations of ERISA violations.
According to allegations, the company failed to properly disclose its network management fees and provided incomplete year-end summaries of its fees to certain clients. Because of this, the clients could not accurately fill out federal Form 5500 financial reports with the government. In addition to the $14.5 million, MagnaCare could possibly pay an additional $4.5 million based upon business volume through 2019.
“This case serves as a reminder that a fiduciary must fully disclose fees to plan clients under federal law, as MagnaCare has agreed to do,” said Jonathan Kay, New York regional director for the department’s Employee Benefits Security Administration. “Benefit plans must receive accurate fee disclosures so that they can make informed decisions when selecting service providers.”
The Employee Benefits Security Administration's New York Regional Office handled the case with the assistance of the Office of the Solicitor’s Plan Benefits Security Division in Washington, D.C., and the New York Regional solicitor’s office.
The company offered a statement:
“We made a strategic decision to work collaboratively with the department of labor in order to come to an agreement to provide additional transparency to our customers, despite our position that the department’s claims were unfounded.
"This constructive approach enables us to move forward as the industry leader in fee transparency, and focus on continuing MagnaCare’s long tradition of providing our clients outstanding service, along with benefit plan administration and provider networks that offer access to high-quality health care services at competitive prices. Further, our client contracts make it clear that MagnaCare is not a fiduciary; in fact our clients retain all final benefit decisions.”