Fringe Benefit Group/Contractors Plan named in Excessive Fee Litigation
The Austin, Texas based Fringe Benefit Group (also known as The Contractors Plan), a pension and welfare benefit plan administrator has been named in a class action suit for charging “sky-high” and “grossly excessive” direct and indirect fees for their administrative services.
With respect to health and welfare benefits, the lawsuit alleges that the Fringe Benefit Group has the power to direct the purchase of these benefits to its wholly-owned insurance brokerage subsidiary, Fringe Insurance Benefits, Inc., which results in Fringe Benefit Group as a whole receiving fees and commissions equal to 10%-17% of the premium amount.
Regarding their pension trust, the lawsuit alleges that Fringe Benefit Group and its affiliates receives direct and indirect fees that average about 2% of the trust’s total assets (not including investment-related fees charged by the providers of the particular investment products).
The entire complaint can be viewed here.
What lessons can be learned regardless of the result of the suit?
- When choosing a prevailing wage benefit plan administrator (health & welfare or pension), take care to find one that does not have conflicts of interest. Conflicts are easier to avoid or at least detect when the administrator is not also selling you insurance or other financial products.
- You need to understand exactly how the administrator is getting paid and you should consider using a benchmarking service and/or shopping the market to make sure that the fees are not excessive.
How We Can Help:
DirectAdvisors, established in 2001 and located in Albany, New York provides bona fide benefit plan consulting and third party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act, Service Contract Act and state prevailing wage regulations. Our clients are located throughout the United States and range in size from 10 to 3000 employees.
In 2015, our construction company clients contributed tens of millions of dollars of prevailing wage fringe benefit contributions to The DirectAdvisors Trust (health & welfare benefits) and retirement plans managed by our team.
Our solutions are free from any conflict of interest as we do not sell any financial or insurance products. We work with existing agents, brokers and insurance companies.