ERN Holdings Inc., a Fort Worth, Texas-based benefits outsourcing firm, began experiencing financial difficulties soon after Yale signed a contract with the company in January, two former ERN employees said Tuesday.

ERN, which ceased operations Oct. 15, was responsible for administering Yale’s tax-free Flexible Benefits program. Through the program, Yale employees could request that Yale withold a portion of their paychecks; the employees could later use the money to pay for certain expenses such as day care and transportation. ERN was responsible for processing the purchases.

The two former ERN employees said the company’s recent closure was a result of financial problems that had been ongoing for several months. One employee said that in the past six or seven months, there had been four rounds of layoffs.

The employee said the Texas Workforce Commission, a state government agency responsible for overseeing workforce development services, was present last Friday when the remaining employees were laid off.

“I know things were getting tight,” the second employee said.

ERN President Robin Birdsong declined to comment.

The employees also said ERN lost some of its key clients in the months leading up to its closure.

“After [Sept. 11, 2001] one of our huge accounts ended up folding, and we wound up losing a lot of money,” the first employee said.

The first employee said Yale may have been having some problems with ERN. The company reimbursed Yale employees for their purchases in one of two ways. Most used an ERN-issued SmartCard VISA, which functioned like a debit card; other employees submitted purchase forms.

“It seemed like it was maybe a little tense at times, because it seemed that Yale was maybe a little worried about service,” the employee said.

Before ERN began its relationship with the University, Yale had been administering the benefits program. The University reassumed responsibility for the program following ERN’s announcement.

Yale Director of Benefits Kenneth Korsu declined to comment and University spokesman Tom Conroy said he could not comment on Yale’s relationship with ERN.

“That is between ERN and the University,” Conroy said.

Conroy said ERN approached Yale with an offer, which the University accepted because of the SmartCard option and because outsourcing the benefit repayments was efficient.

“The employees that were doing the functions that were turned over to ERN were free to do other work,” Conroy said.

History Director of Graduate Studies Valerie Hansen, who had been using the Flexible Benefits program before January, said she is pleased the administration of the program has reverted to Yale.

“I’m glad ERN is gone because I don’t think they were doing a good job,” Hansen said.

Hansen said the checks from ERN often arrived in the middle of the month, while Yale had previously included the reimbursements with her paychecks.

Conroy said no employee will lose any money during the transition period.

Only employees who were in the process of making a reimbursement claim when ERN made its announcement will be affected, Conroy said.

“If an employee hadn’t made a claim — there would be no possible inconvenience,” Conroy said.

Conroy said the Benefits Office will mail letters today to all affected employees, specifying the current status of their accounts.

Lesley Devine, an associate research scientist at Yale, said she is currently waiting for approximately $2,000 in reimbursements. She said that although she is not concerned about getting reimbursed, she is worried about when she will receive the money.

Devine said the current situation has made her skeptical about the program.

“I had already signed up to use [the Flexible Benefits program] next year, but now I’m not so sure,” Devine said.