Overpayment of benefit

[Miner88]

When an overpayment is made from a plan, the EPCRS rev. proc. says that the employer must make reasonable efforts to collect the overpayment and, to the extent it cannot be recovered, then the employer or another person must contribute the difference to the plan. In the defined benefit multiemployer context, who makes the payment to make the plan whole when the recipient does not repay the entire amount? Any thoughts would be appreciated!

[Effen]

I think it would depend upon who made the mistake, how much it was worth, and when it occurred. If the custodian made the error, I would ask them to pay for it. If the plan administrator made the error, then maybe they should pay. It is also possible that if the Trustees made a good faith effort to recover the money, but could not, then the fund just absorbs the loss. I think there are lots of facts and circumstances that would be relevant. If you are unsure of your solution, you can always go in with a VCP filing and ask for approval.

[Miner88]

Thanks for your reply Effen. In this case, the plan was not notified that a beneficiary had died, so continued to send payments to the account held jointly by the beneficiary and her son. When the plan found out that the beneficiary had died (after about $5,000 was overpaid), it requested repayment from the son. He paid half back, but cannot/will not pay the rest. In this case, I'd love to just have the plan absorb it and not have to pay VCP fees to have the IRS approve that solution!

[Effen]

That sounds more like theft than a mistake. Did the plan notify the authorities? Obviously you can't get blood out of a turnip but it I would think the courts would require him to restore the money. If he is bankrupt, there isn't much the plan can do except absorb the loss? Obviously fund's attorney should make the final call.

[mbozek]

That sounds more like theft than a mistake. Did the plan notify the authorities? Obviously you can't get blood out of a turnip but it I would think the courts would require him to restore the money. If he is bankrupt, there isn't much the plan can do except absorb the loss? Obviously fund's attorney should make the final call.

ERISA is a a law of equity and under the rules for equity the plan could only recover the excess funds paid to the son which are still in his possesson. If son spent the plan distributions plan has no right to payment from other assets in son's possession or garnish wages.

Also there is no basis for criminal action since the son's defense is he did not have any obligation to notify plan of mother's death or that he assumed that he was entitled to receive payments after mother's death.

[MoJo]

Also there is no basis for criminal action since the son's defense is he did not have any obligation to notify plan of mother's death or that he assumed that he was entitled to receive payments after mother's death.

I respectfully disagree, and have successfully obtained prosecution against several for having obtained a benefit under "false pretenses" and "forgery" (either by cashing a check, or by obtaining an unauthorized withdrawal from an account).

[mbozek]

Also there is no basis for criminal action since the son's defense is he did not have any obligation to notify plan of mother's death or that he assumed that he was entitled to receive payments after mother's death.

I respectfully disagree, and have successfully obtained prosecution against several for having obtained a benefit under "false pretenses" and "forgery" (either by cashing a check, or by obtaining an unauthorized withdrawal from an account).

Prosecution is not a conviction- as law professors remind students, a prosecutor can indict a ham sandwich.

Crime of forgery requires an intent to defraud. In the OPs case the funds continued to be sent to the son/participants joint bank account after death so I dont see how there could be any intent to defraud by the son simply because the funds continued to be paid by the plan where they were comingled with other funds.

[MoJo]

Crime of forgery requires an intent to defraud. In the OPs case the funds continued to be sent to the son/participants joint bank account after death so I dont see how there could be any intent to defraud by the son simply because the funds continued to be paid by the plan where they were comingled with other funds.

The question is one of knowledge. If the son had knowledge that pension benefits were still coming, an argument could be made that the requisite mental state existed to prove the crime. Clearly the OP didn't provide sufficient information.

At the very least, a constructive trust could be imposed to obtain recovery of the overpayment. Granted, recovery could only be had to the extent that the assets are still in the possession of the son, *but* since money is fungible and to some extent traceable when converted into other assets (like a new pickup truck or a boat), then the trust could be enforced.

And yes, prosecution is not the same as conviction. But I could give you the inmate numbers of more than one person who served time as a result of crimes associated with post death benefit continuations....

[mbozek]

Crime of forgery requires an intent to defraud. In the OPs case the funds continued to be sent to the son/participants joint bank account after death so I dont see how there could be any intent to defraud by the son simply because the funds continued to be paid by the plan where they were comingled with other funds.

The question is one of knowledge. If the son had knowledge that pension benefits were still coming, an argument could be made that the requisite mental state existed to prove the crime. Clearly the OP didn't provide sufficient information.

At the very least, a constructive trust could be imposed to obtain recovery of the overpayment. Granted, recovery could only be had to the extent that the assets are still in the possession of the son, *but* since money is fungible and to some extent traceable when converted into other assets (like a new pickup truck or a boat), then the trust could be enforced.

And yes, prosecution is not the same as conviction. But I could give you the inmate numbers of more than one person who served time as a result of crimes associated with post death benefit continuations....

A good argument isnt enough to convince a jury of guilt beyond a reasonable doubt. E.g., Casey Anthony, John Edwards, Roger Clements. Son's defense is that he thought benefits were supposed to continue to be paid to him after mom died since it was paid to a joint account.

I am limiting my response to the OP facts so I am not opining on other cases based on unknown facts.

As for tracing assets to establish a constructive trust, cost of tracing funds plus the attorney's fees to file a suit would exceed the $2500 that could be recovered. If the funds were used to pay the rent, buy beer, gas and food there will no recovery. Better to let this one go. Its a loser.

[MoJo]

A good argument isnt enough to convince a jury of guilt beyond a reasonable doubt. E.g., Casey Anthony, John Edwards, Roger Clements. Son's defense is that he thought benefits were supposed to continue to be paid to him after mom died since it was paid to a joint account.

I am limiting my response to the OP facts so I am not opining on other cases based on unknown facts.

As for tracing assets to establish a constructive trust, cost of tracing funds plus the attorney's fees to file a suit would exceed the $2500 that could be recovered. If the funds were used to pay the rent, buy beer, gas and food there will no recovery. Better to let this one go. Its a loser.

I limit my opinions to principle. I would never advise a client to sue for a small amount. I would, however, always advise a client to spend the time to talk to the prosecutor (no out of pocket costs except for the time spent) and pursue the issue. Whether or not a jury can be convinced factors into the price equation. Not the "right" equation.