Participant Overpaid

[Dougsbpc]

To make a long story short, we administered a DB plan and 401(k) plan for a client for about 7 years.

They left us for 2 years but the new administrator completely dropped the ball and did nothing during those two years.

They came back to us.

We noticed that incorrect distributions were made to a terminee back two years ago. It looks like the plan sponsor just took the PVAB from our 2007 report that was not based on 417(e). In any event, we recalculated her benefit and will have the plan distribute the additional $10,000 to her.

In addition to the DB benefit underpayment, they overpaid the same participant $5,000 from the 401(k) plan.

Can the DB plan reduce her benefit by the $5,000?

Thanks.

[mbozek]

To make a long story short, we administered a DB plan and 401(k) plan for a client for about 7 years.

They left us for 2 years but the new administrator completely dropped the ball and did nothing during those two years.

They came back to us.

We noticed that incorrect distributions were made to a terminee back two years ago. It looks like the plan sponsor just took the PVAB from our 2007 report that was not based on 417(e). In any event, we recalculated her benefit and will have the plan distribute the additional $10,000 to her.

In addition to the DB benefit underpayment, they overpaid the same participant $5,000 from the 401(k) plan.

Can the DB plan reduce her benefit by the $5,000?

Thanks.

No. Only recourse is to recover excess from participant or from TPA who made mistake.

[MoJo]

No. Only recourse is to recover excess from participant or from TPA who made mistake.

Agreed. Plans stand on their own. One cannot "subsidize" the other - which would be the case if DB plan distributions were reduced to repay DC plan overpayments.