Court Orders Employer to Restore Misused Health Plan Premiums

The former president and COO of the now-defunct Faribault Woolen Mills Inc. must pay $55,000 in restitution and more than $12,000 in interest.

A fiduciary of the Faribault Woolen Mills Inc. Fully Insured Hospital Life Welfare Plan has been ordered to restore to participants more than $55,000 in health insurance premiums taken from the participants’ paychecks but never remitted to the health insurer.

In 2012, the Department of Labor (DOL) filed a civil complaint against Michael Paul Harris and the Faribault Woolen Mills Inc. Fully Insured Hospital Life Welfare Plan, alleging that Harris, as the fiduciary to the plan, breached his fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) by failing to remit $55,040.61 in contributions withheld from employee paychecks for health insurance premiums between January 9, 2009, and March 20, 2009. According to the complaint, as a result of his failure to remit premiums to the insurance company, plan participants’ insurance was retroactively cancelled.

Harris was president and chief operating officer of the Faribault, Minnesota, company. Faribault Woolen Mills Inc. went out of business in 2009, and the mill assets were purchased in 2011 by a completely new entity called Faribault Woolen Mill LLC. The new firm has no connection with the former company or Harris.

The U.S. District Court for the District of Minnesota found Harris was a fiduciary to the health plan from at least January 1, 2009, through March 31, 2009, and he breached his fiduciary duties and violated ERISA.

The court said Harris is liable for restitution of the $55,040.61 in unremitted employee health insurance premiums, and he is also liable for $12,798.99 in prejudgment interest on the unremitted employee health insurance premiums for those three months, as calculated through June 1, 2015.

The court’s opinion can be accessed here.