Avoiding Liability For Another’s Health Plan Fraud

February 25, 2011

TPA’s Embezzlement Guilty Plea Reminds Plan Sponsors, Fiduciaries & Service Providers To Ensure Fiduciaries, Administrators & Staff Prudently Selected, Monitored & Bonded

The guilty plea of an Ohio-based third-party administrator to embezzlement of $1 million in plan assets reminds employers and other employee benefit plan sponsors and members of their management participating in plan related activities, plan administrators and other plan fiduciaries and plan service providers (“plan decision-makers”) of the importance of ensuring appropriate, well-documented credentialing and selection, oversight, auditing and bonding the individuals and companies acting as fiduciaries and others participating in administration of plans or their assets (“plan workforce members”) to minimize their potential exposure to potential personal liability as a result of the fraud under the Employee Retirement Income Security Act (ERISA).

Cox Prosecution Reflective DOL Readiness To Prosecute Parties For Misuse of Plan Monies & Other Plan Fraud

According to a February 23, 2011 U.S. Department of Labor (DOL) announcement, Rhonda Sue Irvin Cox, owner of Irvin Administrative Solutions LLC (IAS), pleaded guilty to the embezzlement of $1 million of retirement plan assets from client plans administered  by IAS.   The DOL reports that between January 2003 and April 2007, Cox plead guilty to using used her position with ISC to embezzle the funds from 12 of 59 plans for which IAS served as a third party administrator. Cox also pleaded guilty to one count of making false statements in documents required under ERISA to be kept and certified by the plans’ administrator.  Scheduled to be sentenced on June 1, 2011, Cox faces a maximum of five years in prison on each criminal count, a $250,000 fine and a special assessment. Cox is scheduled to be sentenced on June 1, 2011.

The DOL and Justice Department have a long-standing record of aggressive investigation and prosecution of embezzlement or other fraud impacting health and other employee benefit plans.  Their criminal and civil enforcement and prosecution record makes clear this commitment remains strong. 

Plan Sponsors, Fiduciaries & Service Providers May Face Civil Liability From When Others Defraud Their Plans

While plan decision-makers generally are aware that individuals defrauding health or other employee benefit plans risk criminal and civil prosecution, many fail to recognize their own potential civil liability exposures that may arise out of the fraudulent acts or other misconduct of another plan workforce member. 

Embezzlement of plan assets is one of many acts of misconduct that can create potential fiduciary liability exposure for plan decision-makers under ERISA.  Until confronted with potential fraud, misconduct or other misfeasance by a plan fiduciary, service provider or other plan workforce member, many plan decision-makers lack an adequate appreciation of the personal liability they may incur if they cannot demonstrate appropriate steps were taken to protect their health plan from this misconduct.

Under ERISA’s fiduciary responsibility rules, embezzlement or other misuse of employee contributions or other plan assets as well as certain other misconduct or misfeasance by a plan fiduciary, service provider or other plan workforce member can create personal liability exposures for plan decision-makers with responsibility or discretionary authority over the selection, retention, or management of plan workforce members if the plan decision-maker cannot demonstrate appropriate steps were taken to select, monitor and bond the plan workforce and other prudent action was taken to prevent and redress the fraud.  Accordingly, health plans, their sponsors, fiduciaries, service providers, their management, and others serving as, or selecting, managing or retaining companies or individuals that participate in the handling of health plan assets or administration should act to strengthen their health plans and themselves against these exposures.

Risk Management Strategies & Tips

When embezzlement or other concern affecting their health plan arises, plan decision-makers concerned about protecting their health plans and themselves must act promptly in a carefully documented, prudent manner to investigate and respond to the concern. They should be prepared to present well-documented evidence of the scope and limits of their responsibility, authority, awareness, and potential for the selection, monitoring and oversight of the plan workforce member or others responsible for the performance of those actions, the adequacy of the bonding arrangements for the plan, and other efforts to prudently protect the plan before, during and after the discovery of the concern.  While these and other steps can help strengthen the ability of a plan decision-maker to liability exposures that can result from the other plan workforce member’s embezzlement of plan assets or other misconduct, plan sponsors and plan decision-makers also should acquire suitable fiduciary and other liability insurance coverage and make other arrangements to help provide for the potential financial costs and other demands that are likely to arise in the event that it becomes necessary to investigate or redress fraud or other misconduct.   Learn more here.

For Help With Investigations, Policy Review & Updates Or Other Needs

If you need help investigating or responding to fraud or other misconduct affection a health or other employee benefit plan, dealing with an employee benefit plan investigation or enforcement action by the Labor Department, private plaintiffs or another public or private party, reviewing current or proposed health plan processes or procedures, or responding to other employee benefit, labor and employment or other related controls and practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on HIPAA and other privacy and data security, health plan, health care and other human resources and workforce, employee benefits, compensation, internal controls and related matters.

For more than 23 years, Ms. Stamer has counseled, represented and trained employers and other employee benefit plan sponsors, plan administrators and fiduciaries, insurers and financial services providers, third party administrators, human resources and employee benefit information technology vendors and others privacy and data security, fiduciary responsibility, plan design and administration and other compliance, risk management and operations matters.  In connection with this work, Ms. Stamer regularly counsels and helps clients to defend a broad range of clients about employee benefit plan fraud and other fiduciary responsibility concerns.  Throughout her career, she has represented and served as special counsel to health and other employee benefit plans, plan sponsors, plan service providers, officers, directors and other management officials, bankruptcy trustees, debtors and creditors, and others in connection with health and other employee benefit plan fraud and other fiduciary responsibility and related investigations, prosecutions and other actions involving the Labor Department, IRS, HHS, Justice Department, state insurance and attorneys general, bankruptcy actions, and participant, beneficiary and vendor disputes.  She also is recognized for her publications, industry leadership, workshops and presentations on these and other employee benefits, insurance and human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on health care, human resources, employee benefits, data security and privacy, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here. To unsubscribe, e-mail here.

 

©2011 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.


4/19 Deadline For Comments On Proposed Rules For Selecting State Employment Service Delivery Systems Providers For Veterans

February 23, 2011

April 19, 2011 is the deadline for sharing comments with the U.S. Department of Labor Veterans’ Employment and Training Service (VETS) on proposed regulations that would establish a uniform national threshold performance level to be applied to state grantees that provide employment services to veterans under both the Wagner-Peyser State Grants administered by the Labor Department’s Employment and Training Administration and the Jobs for Veterans State Grants administered by VETS.

Under the proposed rule published February 18, 2011 here, the national threshold will apply to “state employment service delivery systems” funded by these two-state grant programs but not the employment services provided through state and local agency grants under the Workforce Investment Act.  To determine whether any of the state employment service delivery systems are deficient in their services to veterans, the proposed rule will apply the national threshold as part of a two-step process:

  • Step 1, identify those state agencies whose performance on behalf of veterans is to undergo further review.
  • Step 2, conduct a comprehensive review of the operations and outcomes of those state agencies whose performance falls below the national threshold, taking into account economic conditions and other key factors that vary by state. If the review determines that the performance of a state grantee is deficient, the draft rule requires that the state grantee prepare a corrective action plan, with technical assistance provided by VETS. The corrective action plan then will be submitted to the department for approval.

For Help With Investigations, Policy Review & Updates Or Other Needs

If you need assistance in reviewing or commenting on the proposed rule or with other labor and employment, employee benefit, compensation, or other internal controls and practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer has counseled, represented and trained employers and other employee benefit plan sponsors, plan administrators and fiduciaries, insurers and financial services providers, third party administrators, human resources and employee benefit information technology vendors and others privacy and data security, fiduciary responsibility, plan design and administration and other compliance, risk management and operations matters for more than 23 years.  She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on health care, human resources, employee benefits, data security and privacy, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here.

©2011 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.


Health Plans & Employers Beware! $4.3 Million Civil Penalty Shows OCR Serious About HIPAA Enforcement

February 23, 2011

 

A $4.3 million civil monetary penalty (CMP) imposed by the U.S. Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) against Cignet Health of Prince George’s County, Md., (Cignet) signals the growing need for health plans and their sponsors, health care providers, health care clearinghouses and their business associates covered by the Health Insurance Portability & Accountability Act (HIPAA) Privacy Rule to get serious about HIPAA compliance. 

The first CMP ever assessed by OCR under the HIPAA Privacy Rule, the Cignet CMP assessment announced February 22, 2011, the $4.3 million CMP against Cignet announced February 22, 2011 applies the expanded HIPAA violation categories and increased HIPAA civil monetary penalty amounts authorized as part of the expansion of HIPAA obligations and penalties enacted as part of the Health Information Technology for Economic and Clinical Health (HITECH) Act in 2009.

The Cignet penalty announcement is the latest in a series of developments documenting the rising risks that health care providers, health plans, health care clearinghouses and their business associates (“covered entities”) face for violations of HIPAA. 

Even before the announcement of the Cignet CMP, the HIPAA Privacy exposures of covered entities for failing to comply with HIPAA already had risen significantly. While OCR had not assessed any civil monetary penalties against any covered entity for violation of HIPAA before Cignet, OCR’s collection of $1 Million from Rite Aid in a 2010 Resolution Agreement, $2.25 million from CVS Pharmacy, Inc. under a 2009 Resolution Agreement and $100,000 from Providence Health & Services under a 2008 Resolution Agreement demonstrated that covered entities could face significant civil liability for willful violations of the Privacy Rules.  In addition, the Department of Justice has secured several criminal convictions or pleas under HIPAA’s criminal provisions. OCR data confirms that the covered entities involved in these actions included health care providers, health plans, and others.  

Health plans and other covered entities as well as their business associates should tighten privacy policies, breach and other monitoring, training and other practices to mitigate against exposures in light of recently tightened requirements and new enforcement risks.  To minimize the potential that the health plan’s sharing of information with the employer will create or spread HIPAA or other privacy risks to the employer or members of its workforce, employers and other plan sponsors and members of their workforce also should take steps to ensure not only that their health plan documents, policies and procedures, as well as those policies and practices applicable to employer, its human resources, and benefits advisors when accessing or handling health plan or other medical information on behalf of the employer, rather than the plan, are appropriately designed and administered.

Read more details and get tips here.

For Help With Investigations, Policy Review & Updates Or Other Needs

If you need assistance in auditing or assessing, updating or defending your HIPAA or other health plan, or other labor and employment, employee benefit, compensation, privacy and data security, or other internal controls and practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

Ms. Stamer, a noted Texas-based employee benefits and employment lawyer Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, will discuss HIPAA and other privacy risks and risk management strategies for employers, health and employee benefit plan sponsors and their administrators at the Southwest Benefits Association/IRS Plan Administrator Skills Workshops to be held February 25 in Dallas and March 4 in Houston. 

The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on HIPAA and other privacy and data security, health plan, health care and other human resources and workforce, employee benefits, compensation, internal controls and related matters.

For more than 23 years, Ms. Stamer has counseled, represented and trained employers and other employee benefit plan sponsors, plan administrators and fiduciaries, insurers and financial services providers, third party administrators, human resources and employee benefit information technology vendors and others privacy and data security, fiduciary responsibility, plan design and administration and other compliance, risk management and operations matters.  She also is recognized for her publications, industry leadership, workshops and presentations on privacy and data security and other human resources, employee benefits and health care concerns.  Her many highly regarded publications on privacy and data security concerns include “Privacy Invasions of Medical Care-An Emerging Perspective.” ERISA Litigation Manual. BNA, 2003-2009; “Privacy & Securities Standards-A Brief Nutshell.” BNA Tax Management and Compliance Journal. February 4, 2005; “Cybercrime and Identity Theft: Health Information Security beyond HIPAA.” ABA Health eSource. May, 2005 and many others.  She also regularly conducts training on HIPAA and other privacy and data security compliance and other risk management matters for a broad range of organizations including the Association of State and Territorial Healthcare Organizations (ASTHO), the Los Angeles County Health Department, a multitude of health plans and their sponsors, health care providers, the American Bar Association, SHRM, the Society for Professional Benefits Administrators and many others.t Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here.

©2011 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.


ERISA Leader Nell Hennessy Dies From Cancer

February 4, 2011

Nell Hennessy died February 4, 2011 after a brave battle with cancer.  Her passing was announced earlier today by Phyllis C. Borzi, Assistant Secretary of Labor Employee Benefits Security Administration.

Ms. Hennessy, Chief Executive Officer of Fiduciary Counselors Inc., was widely respected in the employee benefit community for both her professional leadership in the development of employee benefit law and her generous mentorship and friendship to employee benefits practitioners throughout her career.

Ms. Hennessy began her legal career as an attorney in two of the three federal agencies that regulate employee benefits, first in the Office of the Chief Counsel at the Internal Revenue Service (1978-80) and then at the PBGC (1980-81). She later served as Deputy Executive Director and Chief Negotiator of the Pension Benefit Guaranty Corporation (PBGC), the federal agency that guarantees private defined benefit pensions. She represented PBGC in negotiations with major corporate pension plan sponsors and unions in a wide range of industries, including auto, steel, chemical, textile and airlines. Working closely with the Department of Labor, she negotiated an agreement with General Motors that permitted GM to contribute employer stock to its hourly plan – the largest such transaction in U.S. history — forming the basis for a ground-breaking prohibited transaction exemption that allowed GM to subsequently spin off its EDS subsidiary. She negotiated the restructuring of TWA’s debt to PBGC and Carl Ichan, which allowed TWA to successfully reorganize. The Early Warning Program she headed at PBGC was awarded one of the first federal Innovations in American Government Awards by the Ford Foundation and the Kennedy School of Government at Harvard University. 

In addition to her professional service, Ms. Hennessy also generously mentored others in the profession.  Ms. Hennessy chaired the ABA Joint Committee on Employee Benefits and the Employee Benefits and Executive Compensation Committee in the ABA Section of Business Law. She was a member of the ABA Standing Committee on Technology and Information Systems and was a member of the ABA Presidential Task Force on Corporate Responsibility, which produced the “Cheek Report” cited favorably by the SEC in regulations regulating the conduct of lawyers under the Sarbanes-Oxley Act. 

Since 1985 Ms. Hennessy has been an adjunct professor at Georgetown University Law Center, where she helped develop the graduate certificate program in employee benefits. She was a founding Board member of the American College of Employee Benefits Counsel and she a founding member and past President of the Worldwide Employee Benefits Network (WEB). Ms. Hennessy is also a member of the National Bankruptcy Conference, a non-partisan, organization of approximately 60 lawyers, law professors and bankruptcy judges who advise Congress on bankruptcy law.  

Ms. Hennessy received her B.A. from James Madison College at Michigan State University in 1971, her J.D. from the Catholic University of America in 1978 and her L.L.M. in Taxation from Georgetown University Law Center in 1984. Her publications include ERISA—Fiduciary Responsibility and Prohibited Transactions (BNA Tax Management Portfolio No. 365) and the HR and Benefits Guide to Mergers and Acquisitions (Thompson Publishing 2001). 

A memorial service for Ms. Hennessy is planned for Saturday, February 26th at 11 a,m.at St. Joseph’s Church on Capitol Hill, 313 2nd St NE, Washington DC 20002, followed by a reception at the Irish Channel at 500 H St. NW, Washington DC 20001.

According to Ms. Borzi, persons wishing to memorialize Ms. Hennessy are encouraged to contribute to the Nell Hennessy Employee Benefits Scholar Award at the Catholic University of America, Office of Development and Alumni Relations, 3600 John McCormack Rd., NE, suite 339, Washington, DC 20064.

If you or someone else you know would like to receive future updates about human resources or employee benefits developments, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here. For important information concerning this communication click here. 

About Solutions Law Press, Inc.

Solutions Law Press, Inc.™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested in exploring other Solutions Law Press, Inc. ™ tools, products, training and other resources here and reading some of our other Solutions Law Press, Inc.™ human resources news here.

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here. For important information concerning this communication click here. 

THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2011 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press, Inc.™  All other rights reserved.


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