Jump to content

Indemnification


Recommended Posts

An individual claiming to be a deceased participant's beneficiary is making a claim for a death benefit under a plan. For reasons I'd rather not get into, there is some question whether this individual is the rightful beneficiary. With that said, there is some evidence that they have a valid claim...enough where I think the plan administrator's decision to pay the benefit would be considered to be reasonable if this ever made its way to court.

Could the plan administrator require the beneficiary to execute an indemnification agreement where the individual agrees to reimburse the plan for the amount paid if another individual makes a claim for the same benefit and it is conclusively determined that the second claimant was the rightful beneficiary? We're talking about a relatively small payout, so interpleader is not a cost effective solution.

Link to comment
Share on other sites

An individual claiming to be a deceased participant's beneficiary is making a claim for a death benefit under a plan. For reasons I'd rather not get into, there is some question whether this individual is the rightful beneficiary. With that said, there is some evidence that they have a valid claim...enough where I think the plan administrator's decision to pay the benefit would be considered to be reasonable if this ever made its way to court.

Could the plan administrator require the beneficiary to execute an indemnification agreement where the individual agrees to reimburse the plan for the amount paid if another individual makes a claim for the same benefit and it is conclusively determined that the second claimant was the rightful beneficiary? We're talking about a relatively small payout, so interpleader is not a cost effective solution.

The plan can condition payment of the benefits upon indemnification if some one else is deemed to be the rightful heir since it is not prudent for the plan to be put at risk of paying the same benefits twice. If amount of the benefit is too small for interpleader to be cost effective plan can pay on condition of being indemnified by the beneficiary. The problem is that the beneficiary may not be able to be located or may not be able to pay back the benefits.

mjb

Link to comment
Share on other sites

Would there be any 411(d)(6) issues with adding a new condition for receiving the distribution?

Are you saying that a plan cannot condition payment of benefits to a beneficiary on being required to repay the funds if the beneficiay is determined later not to be the rightful payee under law? There is plenty of case law that has allowed plans to recover benefits paid to the wrong party under the doctrine of unjust enrichment since ERISA is a law of equity. Is this any different from requiring competing beneficiaries who agree to share the distribution to waive their claims to additional benefits under any future action?

If the person receiving the benefits is not legally entitled to payment what new condition is added by making payment subject to indemnification since the party receiving the benefits is not the beneficiary designated under the plan?

mjb

Link to comment
Share on other sites

Would there be any 411(d)(6) issues with adding a new condition for receiving the distribution?

Are you saying that a plan cannot condition payment of benefits to a beneficiary on being required to repay the funds if the beneficiay is determined later not to be the rightful payee under law? There is plenty of case law that has allowed plans to recover benefits paid to the wrong party under the doctrine of unjust enrichment since ERISA is a law of equity. Is this any different from requiring competing beneficiaries who agree to share the distribution to waive their claims to additional benefits under any future action?

If the person receiving the benefits is not legally entitled to payment what new condition is added by making payment subject to indemnification since the party receiving the benefits is not the beneficiary designated under the plan?

Just out of curiosity, if it turns out this person is not the rightful beneficiary, would recovery of the benefit become a matter of state law since the person really didn't have rights under ERISA?

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...