The U.S. Department of Labor has secured a consent judgment requiring a health and welfare benefits administration firm, its owner, and others to restore more than $4.4 million in fringe benefits owed to employees of government service contractors across the United States.
The U.S. District Court for the Southern Division of the District of Maryland entered the judgment following litigation by the department’s Office of the Solicitor. Investigators from the Employee Benefits Security Administration (EBSA) found that Axim Fringe Solutions Group LLC, majority owner James Campbell, and Director of Compliance Accounting Melissa McManes misused funds from fringe benefit plans. According to EBSA, Campbell and McManes used fringe benefits due to Axim’s government contractor clients' employees to cover clients’ expenses from December 2015 to June 2022, violating the Employee Retirement Income Security Act (ERISA).
EBSA also determined that Axim, Campbell, and McManes violated the McNamara-O’Hara Service Contract Act by charging clients’ employees for their fringe benefits instead of billing their clients for employer administrative costs associated with these benefits. Under this law, government service contractors must pay employees working on certain federal service contracts a minimum amount in wages and fringe benefits.
“The law is clear. Employee contributions cannot be used to pay for employers’ costs related to employee benefit plans,” explained Employee Benefits Security Administration Deputy Regional Director Norman Jackson in Philadelphia. “Axim Fringe Solutions Group illegally put the interests of their clients ahead of their clients’ employees by using workers’ hard-earned wages to pay for their employers’ costs.”
Investigations revealed that Axim, Campbell, and McManes misappropriated over $5 million from employee trust accounts by transferring fringe benefit contributions into Axim’s operating account. These transfers delayed health insurance premium payments, resulting in some insurers issuing late payment notices to contractors. Before the court's consent judgment was entered, Axim restored over $1.5 million to the trust accounts.
“Plan fiduciaries must act solely in the best interests of plan participants and their beneficiaries,” said Regional Solicitor of Labor Samantha N. Thomas in Philadelphia. “In this case, Axim Fringe Solutions Group endangered the health coverage of numerous workers and their families across America. The Department of Labor will pursue all legal remedies available to ensure plan participants and beneficiaries receive the benefits they have earned.”
The judgment mandates the removal of Campbell and McManes as fiduciaries and permanently bars them from serving as fiduciaries for any ERISA-covered plan. Additionally, Axim, Campbell, and McManes are required to pay $100,000 for an independent fiduciary's services to restore fringe benefits to plan participants and beneficiaries. The judgment also prohibits all three parties from using employee fringe benefits for employer expenses in future.
