Tech Benefits Welfare Plan Prohibited Transactions ERISA Class Action

The complaint for this class action brings suit against Sequoia Benefits and Insurance Services, LLC and Gregory S. Golub, for breach of fiduciary duty to the RingCentral, Inc. Welfare Benefits Plan and other similar plans. The complaint not makes not only the usual allegations of high costs, but alleges, “Defendants have collected more than $100 million from the Plans in transactions prohibited by” the Employee Retirement Income Security Act (ERISA).

The class for this action is all participants and beneficiaries in employee welfare benefit plans that have participated in the Tech Benefits MEWA since January 11, 2015.

The complaint claims that Sequoia and its sole member Golub are fiduciaries of the plans at issue “under a Multiple Employer Welfare Arrangement (MEWA) established by the Defendants called the Tech Benefits Program…” A MEWA provides welfare benefits for employees of two or more employers that are not related.

The RingCentral Plan is one of around 180 employer-sponsored plans in the Tech Benefits MEWA. It provides benefits, such as medical, vision, dental, and life insurance, for employees of tech industry companies in California.

Sequoia administers the Tech Benefits MEWA. Its managing member (and only member) is Golub, who is also the trustee of the plans in the MEWA. Under the rules for such plans, both Sequoia and Golub are parties-in-interest to the plans.

Sequoia and Golub have a great deal of discretionary power over the plans, since they determine the contributions necessary, choose the insurance providers, and set other program costs. The agreements for the plans do not specify the compensation for these services. “Instead,” the complaint alleges, Sequoia and Golub “have exercised discretion in setting their own compensation by arranging for commissions to be paid to themselves from the insurers…”

Since they are fiduciaries, their negotiations are supposed to be done in the interest of the plans’ participants. However, their commissions are a percentage of plan funds paid to the insurers. The complaint claims that “this arrangement creates a perverse incentive for [Sequoia and Golub] to allow (or cause) the cost of the program’s benefits to increase in order to increase the amount of compensation” they earn.

The complaint quotes ERISA rules on prohibited transactions and alleges, “Under these rules, a welfare plan fiduciary … is prohibited from receiving commissions from insurance companies with whom the fiduciary places coverage.” Also, the complaint alleges, “Prohibited transactions likewise may occur if a welfare plan fiduciary, including a MEWA fiduciary, exercises discretion over his own compensation or contracts with entities he owns on behalf of participating plans.”

Fiduciaries are supposed to carry out their duties solely in the interests of the participants and beneficiaries of the plan. The complaint alleges that Sequoia and Golub violated ERISA by receiving improper commissions and authorizing excessive administrative fees.

Article Type: Lawsuit
Topic: Employment
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Prohibited Transactions