Recovering Large Overpayment

[Guest bassman]

A pension plan administrator recently discovered that, as a result of the administrator's miscalculation, an alternate payee received a lump sum payment which was greatly in excess of the correct amount to which the AP was entitled. This payment was made almost five years ago. Here are my questions:

1. Is this a case in which the administrator can bring an action for equitable relief under a constructive trust or other equitable theory? Is it necessary to trace the funds to a rollover institution to succeed under a constructive trust theory (i.e., what if the funds have all been spent)?

2. What are the available forums--the beneficiary received the payment in Hawaii, the administrator made the miscalculation in California (but has subsequently moved its offices to Texas), and the trust fund is located in Illinois.

3. What statute of limitations applies?

Thank you for any helpful thoughts and advice.

[mbozek]

While in theory the plan admin. can sue to recover the overpayment there are some practical problems which may prevent recovery:

1. Choice of law- I dont know what would be the correct choice of Fed Ct. in which to bring an action- The Plan admin could sue in the Fed District court in the state where the Plan is administered and then serve the AP where ever he/she lives (assuming you can find the AP). Or the Plan Admin could sue the AP in the state where he/she lives. However you will have to retain counsel in the state the suit is filed to do this and Fed ct lawsuits are expensive.

2. Statute of limitatons- The S/l for benefit payment issues under ERISA is the S/l under the applicable state law for a similar claim. The S/l for claims in contract/equity are usually no more than 6 years. The client has to determine what state law applies and then find the state S/l for that type of action.

3. latches- this a lawyer term and it is used where a party who has a valid claim unreasonably delays commencing an action for recovery which results in injury to the defendant. 5 years to discover a mistake is a long time and the AP may be able to assert that the money was spent, given away or is now needed for valid purposes.

The Plan admin needs to determine the amount of the overpayment and then retain counsel to review the above issues.

[mal]

Unless you have an identifiable sum of money in

the AP's account, I think Knudson is going to

cause you some serious headaches. Any action

you file will be legal, not equitable. Good luck.