"Overpayment"

[Fielding Mellish]

Defined benefit multiemployer plan. When contributions come in to the Plan, 70% of the contribution is credited to the participant, 30% is non-credited. The participant's total benefit amount is a percentage of only the credited portion.

Due to an honest mathematical error, some (not all) of the participants had more than 70% of the contributions go toward credited and therefore less than 30% put toward non-credited. This went on for about 3 years before it was discovered. Again, it was an honest mathematical error (don't worry about how it happened, I'm satisfied with the explanations I've received).

91 total participants were affected. The Plan has about 180 participants, but not all of the 91 participants were affected each year. That's 91 total over 3 years, not 91 each year. So, one year it may have been 15 affected, the next may have been 40, the next may have been 26 (hypothetical, just using as illustration).

Of those 91, only 6 have since retired. The other 84 are still active and are not drawing any benefit yet.

Per EPCRS, the Plan can self-correct insignificant operational failures. I would argue that this would fit into that (the Fund is about $90,000,000 and the total amount at issue here is about 0.1% of that). Specifically, EPCRS talks about correcting Overpayments.

Overpayment is defined as a "Qualification Failure due to a payment being made to a participant or beneficiary that exceeds the amount payable to the participant or beneficiary under the terms of the plan or that exceeds a limitation provided in the Code or regulations."

Here's my question for all my learned colleagues on the board: for the 84 people whose accounts have been overstated but have not yet retired, has there actually been an Overpayment? Or, does Overpayment only apply to ACTUAL payment (like to the 6 who have retired)?

Thanks for your responses.

[John Feldt ERPA CPC QPA]

The overstated accounts should be adjusted to show the proper values (and probably some communication explaining it to the participants if the employer(s) think that's needed).

Otherwise, only those who have truly been paid benefits from the plan would fit into the category of possibly receiving an overpayment.