Repayment plan for overpayment

[BTG]

A participant in a DB plan has been significantly overpaid. The participant is contacted and offers to pay back the amount of the overpayment, but requests to do so over a period of time spanning multiple years. Any thoughts on whether this is a permissible return of overpayment or whether it would instead be a prohibited extension of credit under Code Section 4975©(1)(B)?

(By the way, the reduction of future benefits is not a feasible solution, because the actuarial value of all future payments is less than the overpayment.)

[Guest Sieve]

If this person is an ex-employee, and not an owner, then it's proably not a PT.

Here's one solution: Why doesn't the employer (probably the Adminsitrator, & on the hook for the overpayment) put the $$ back into the plan, and have the former employee pay the employer back over time? That's certainly an appropriate fix. See, e.g., EPCRS, App. B, Section 2.04(1), which gives a suggested fix for DB overpayments, & note specifically Ex. 21 for the proposition that the employer makes up what the employee can't pay back. So, why not get this over with: have the employer pay back all of it now, and deal with the employee over time.

[mbozek]

A participant in a DB plan has been significantly overpaid. The participant is contacted and offers to pay back the amount of the overpayment, but requests to do so over a period of time spanning multiple years. Any thoughts on whether this is a permissible return of overpayment or whether it would instead be a prohibited extension of credit under Code Section 4975©(1)(B)?

(By the way, the reduction of future benefits is not a feasible solution, because the actuarial value of all future payments is less than the overpayment.)

How long have the overpayments been made? There is a question of whether the plan will be prevented from recouping any portion of the overpayments under the doctrine of latches especially where the total amount of the overpayments exceeds the value of future benefits.