ERISA INSIDER: VOL II., ED. I: Meet William Kropkof – President of the ERISA Advisory Group

William Kropkof, founder and president of the ERISA Advisory Group, has been a trusted independent fiduciary since 1995. His experience working as a former DOL Investigator and expertise in Health & Welfare and Retirement Plan compliance sets him apart from every fiduciary in the business.

Dear Reader,

When I got a call from William last week I heard a cheerful tone in his voice. After discussing the usual business of the day, I finally got around to asking what had him so excited.

He told me that he had just gotten a call back from one of the biggest Employee Benefits Law Firms in the United States, giving him the great news that he was to be their Expert Witness for numerous ERISA cases involving clients all around the country.

While he sounded a bit surprised to find himself in this new position, I was not.

Many law firms, insurance brokers, and financial advisors hold fiduciary roles for their clients under ERISA, but I have met no one with the sheer experience and expertise in ERISA Plan management and compliance as William.

Very few, if any, have ever been employed by the US Department of Labor, having first hand knowledge about what goes on behind-the-scenes during an Employee Benefits Security Administration (EBSA) audit.

Fewer have walked in the offices of a well-known healthcare agency to serve a court order and shut the place down for violating ERISA.

William Kropkof has done both.

Background: From Willingboro, New Jersey to Sunny Southern California

William came from humble beginnings, growing up in the small town of Willingboro, New Jersey with his mother Lillian and his father Ben.

Ben Kropkof served in the Navy during World War II, narrowly escaping the bombs dropped on the shipyard he was stationed at in Pearl Harbor, Hawaii on December 7, 1941.

Lillian worked several jobs as a translator for an import/export company, and later a lunch-aide serving local school children. All while raising a household of 3 children as well as several cousins and neighbors who made the Kropkof residence their second home.

Both had grown up during the Great Depression, giving them a keen sense of financial responsibility and the drive to do whatever it took to give their children a fighting chance to succeed.

William, the youngest sibling, was determined at a young age to make the most of the opportunities at his disposal. After studying Economics and earning his B.S. from Florida State University in 1988, he quickly accepted a job at an employee benefits consulting firm in New York.

One year later, a spot opened up at the firm’s Los Angeles office. Having always wanted to move to the west coast, William quickly put in a transfer and headed for California. It was there that his career as a fiduciary would take shape.

The world of employee benefits proved fascinating. During this time, William set his sights on becoming a Certified Employee Benefits Specialist (CEBS) – and enrolled in night classes to prepare for the exam.

An Unexpected Opportunity During CEBS Night School Led To A Change Of Plans

Initially, the goal was to get certified and rise through the ranks of the corporate employee benefits world. However, once classes started, something unexpected happened.

The instructor of the program turned out to be a woman named Julie Lowry. To William’s surprise, Ms. Lowry wasn’t a consultant who worked helping companies design and operate employee benefits and pension plans, like most students in the program.

She worked for the US Department of Labor as an investigator. With her specialized knowledge, Ms. Lowry’s job was to make sure employers weren’t breaking the law under ERISA and potentially harming plan participants and beneficiaries.

At the time, the agency charged with monitoring and enforcing ERISA compliance was the Pension and Welfare Benefits Administration (PWBA). These days, you may be familiar with their new name since 2003, the Employee Benefits Security Administration (EBSA).

During class, Ms. Lowry frequently shared stories about fiduciaries who got “nailed” for compliance violations. Some were caught making careless mistakes that wound up costing an arm and a leg in legal fees and civil penalties.

Others had committed acts that were downright criminal. These misguided employers were presently serving hard time in prison.

As the weeks went on, William became more fascinated by the idea of working as an investigator and going after bad guys. Instead of spending his days in a cubicle, fighting to get that next promotion, why not dive head first into the thrill of pursuing justice for employees?

With so few specialists in this area, it seemed like the perfect opportunity for a new adventure. Luckily for William, the PWBA was hiring.

A 7 Year Career As A DOL Investigator Started It All

Government jobs come with a lot of perks: a guaranteed salary, great benefits and access to information most people aren’t privy to.

More importantly, it can open up the opportunity to have a meaningful impact on the lives of ordinary people if you’re in the right position.

This was certainly the case for William when he first joined the Department of Labor in 1989.

Based out of their Los Angeles office, he started investigating companies in Southern California, Arizona and Hawaii for potential ERISA compliance problems that could negatively impact plan participants and beneficiaries trying to access their health insurance.

Several of those investigations turned into full scale audits of Health & Welfare and Qualified Retirement Plans, as well as their fiduciaries.

While there’s a wide variety of plans on the market, the investigation and audit process is generally the same for everyone.

It didn’t take long for William to realize that, similar to getting pulled over at a routine traffic stop, the DOL is more likely to find a violation with your plan it than not.

As he famously tells his clients, “if you happen to pop up on their radar and an investigator is assigned to take a look at your plan, you could be looking at serious financial trouble in the form of fines, penalties and excise taxes. That’s before you pay the attorney’s fees, independent fiduciaries and potential court costs while you try to tunnel your way back to safety.”

As the months passed, the cases kept coming. The more cases he worked on, the faster William was moving up the pay scale.

During his 7 year career at the DOL, he worked his way up from a GS-9 to a GS-13.

That’s a rapid rate of promotion for a government employee, and while the Department valued his work, William soon entered the ranks where office politics played a role.

Like any corporate job, government offices come with a cut-throat competitive environment fueled by a battle to the top. Needless to say, things could get dicey.

By 1995, William had had enough. It was finally time for another career move that would open new doors.

Having gained an entirely new set of skills as a DOL investigator, he decided to go independent, and work on ERISA plans in the private sector.

The Call To Action: Serving As An Independent Fiduciary For A Health Care Fraud Case In San Francisco

Every company that runs a Health & Welfare or Qualified Retirement Plan needs third party services to help them get set up, and carry out operations.

That’s why it was a natural first step to start a business as a Third Party Administrator (TPA) service provider. William knew the business, and understood how to help plan sponsors design plans that delivered the coverage employees needed while keeping costs reasonable.

It was a success, and appeared to be the model that would serve him and his clients for many years to come. That is, until just 6 months later when a call came in from his former employer: the US Department of Labor.

When William picked up the phone, he was interested to learn the DOL had a new job for him. A job as an Independent Fiduciary.

His 7 years of experience and success as a former investigator made him the perfect candidate to assist them with a new case, this time as an outsider working in the private sector.

The target: a company called “Interstate Services Incorporated”, or ISI for short, based out of the San Francisco bay area.

“Interstate Services Incorporated” Offices Shut Down – $16 Million Dollars In Unpaid Claims, A 64-count Indictment, and 4 Years In Federal Prison

An extensive investigation of Interstate Services Incorporates gave DOL investigators enough cause to seek a Temporary Restraining Order (TRO) against the business and its president, John B. Hyde.

William Kropkof was tasked with delivering the TRO, demanding Mr. Hyde vacate the premises, and securing the offices of ISI.

Employees were to be removed from the office while maintaining files, records and computers. As the office was closed down, employees were required to leave without touching computers which were now evidence in the case.

The ordeal took place over several hours and faced much resistance. William recalls John Hyde on the phone with his attorneys, fighting the charges and the court order, until finally he and his daughter surrendered the office and documents.

Once the office was clear, William had to call a locksmith. The next step was to change the office locks, so nothing could get in or out, and he alone was to gather paper records and computers needed to complete the case.

After the evidence was secure, William got to work building records on unpaid claims, and conducted a financial reconciliation of how premiums were being collected and used.

Later on, he would have to take the stand as a witness in federal court and testify for 3 hours to explain his findings, and face cross-examination.

When all was said and done, ISI was found to have $16 Million Dollars in unpaid claims. In addition, John B. Hyde was indicted by a federal grand jury after he pled guilty to 64-counts of health care fraud, mail fraud and money laundering under a scheme in which he sold fraudulent health plans and used the premiums to pay for personal expenses and salaries to his family members.

As the US Department of Justice reported in their 2004 press release on the case: “The victims purchased health insurance plans from Mr. Hyde’s company, only to discover after illnesses or accidents that their health insurance was essentially worthless and that the premiums they paid had been diverted to benefit Mr. Hyde and his family.”

When the proceedings concluded, John B. Hyde was sentenced to 4 years in federal prison.

Now, The ERISA Advisory Group Helps Private Employers Stay Out Of Trouble By Keeping Their Plans In Compliance

After the case involving Interstate Services Incorporated wrapped up, William realized he could have a much bigger impact as an ERISA Independent Fiduciary than a TPA service provider.

While TPA services were a steady business, the duties involved are limited to ministerial tasks for plan administration. Whereas, an Independent Fiduciary can take on a much larger role by assuming fiduciary liability for the plan, and being there full time to prevent problems with ERISA compliance.

In other words, he could make sure honest business owners wouldn’t one day find themselves in the position of someone like John Hyde…

Having experienced 7 years of plan audits at the DOL, and now seeing first-hand what it was like to go into a business and shut the place down for breaking the law, William was in a unique position to help protect companies rather than bust them.

That’s why, as an Independent Fiduciary, William started the ERISA Advisory Group to help companies design smart plans for participants and beneficiaries, while keeping plan sponsors and fiduciaries out of trouble with the DOL.

This is certainly no easy task for any business. Which is why the ERISA Advisory Group carries out the fiduciary duties for plan compliance by looking at plans the same way an investigator would during an EBSA audit, and correcting problems before they become public knowledge.

Few, if any, ERISA attorneys, insurance brokers or independent fiduciaries know this process the way William Kropkof and the ERISA Advisory Group do. Even less are willing to take on the liability as a 3(16) Plan Administrator, or 402(a) Named Fiduciary, to personally answer for the plan should it ever be subject to an audit.

Contact William Kropkof, CEBS, To See If He Can Help You Keep Your ERISA Plan Compliant

William Kropkof and the ERISA Advisory Group have been helping private employers design smart and compliant Health & Welfare and Qualified Retirement Plans since 1995.

EAG works with PEOs, Trade Associations, Unions and Single Employers across the United States on a variety of ERISA compliance issues, including:

If you would like to learn more, email William at bill@erisaadvisorygroup.com. Or, call him directly at (925) 250-4030.