Overpayment by DB Plan.

[mal]

Due to administrative error in 1992, retirees received overpayments equal to 5 % of their monthly benefit from that date forward. Error was just recently discovered. The Plan is considering a suit against the former actuary who never caught the mistake.

Questions...

1) Can the plan stop the overpayment now, or is there an argument that the benefit has somehow vested?

2) Can plan recoup the overpayments through future reductions in monthly checks (for those who are still alive)?

3) Is the former actuary "off the hook" due to a statute of limitations problem? 14 years is a long time.

[JAY21]

In my opinion; (1) the plan should stop the overpayments and indeed has a fiduciary responsibility to do so, (2) the plan document should address how overpayments are to be addressed and adjusted for, a reduction in the future amounts is a common remedy if allowed under the plan, (3) not sure any statute of limitations would apply since this is a private party (plan) to private party (actuary) issue, but I'd think the damages might not justify a suit if under the plan you're able to adjust the benefit stream going forward. In that case maybe the damages to negotiate over are the expense to do the calcs (including make-up reductions) plus any overpayments on deceased individuals where the overpayments can't be re-couped.

[SoCalActuary]

I would start with confirming that the former actuary did err. Have their workpapers been reviewed?

Does the former actuary have facts that were not shown in the newest review?

Did the employer review the workproduct at the time of the change?

Are there mitigating issues?

Did the employer already fund for the additional benefits?

Does the statute of limitations toll from the date the work product was completed?

Has the former actuary been informed of the potential conflict?

[Guest mjb]

Before recouping the excess payments from the retirees you need to consult with counsel as to whether payments can be reduced after such a long delay to discover the error. There was a recent case where a fed ct refused to allow a plan to recover excess payments by reducing benefits because the error was not discovered for 9 years which the ct considered to be an unreasonable period of time.

Jay s/l apply to any law suit against party since the claim would either be a breach of contract or malpractice depending on st law. Usual s/l is 6 years from the date of the mistake or discovery. Need to talk to counsel.

[Ron Snyder]

You might also look into the doctrines of waiver, laches and estoppel while you're at it. The plan is not in a good place legally and definitely needs counsel familiar with ERISA litigation (not ERISA or litigation but both).

As an attorney, I would rather represent the participants whose pension payments were just unilaterally reduced through no fault of my own than the plan at this point.

[mal]

Does anyone have a case cite on this issue?