Retiree-Only HRA Mistaken Contributions

[luissaha]

Employer made a significant amount of mistaken contributions to retiree-only HRA trust.  The trust contains ERISA Section 403(c)'s prohibition on return of erroneously made contributions (mistaken contributions can only be returned if discovered within 1-year of error).  Here, the mistakes were discovered after the 1-year period.  Employer is not requesting a refund, but instead asking to "offset" future required contributions to the trust by the amount of the mistaken contributions.  Anyone know of legal support for the offset in a case like this?  Would the offset violate ERISA Section 403(c)?  

[Peter Gulia]

What do the documents governing the plan provide as the measure of the employer's obligation to pay contributions into the trust?

[luissaha]

The governing documents require the employer to contribute an actuarially determined amount to the trust when the employee first becomes eligible to retire based on age and Service credit.  The error occurred because the City had incorrect payroll information for some employees.  For example, incorrect birthdates, employee ID numbers, etc. The employer audited the contributions but didn't uncover the errors until more than a year had passed since it made certain contributions.

[Peter Gulia]

Your mention of “the City” suggests a governmental plan. If so, ERISA’s titles I (including ERISA § 403), III, and IV do not apply.

If the “HSA Trust” is a governmental plan, likely there is an interplay of the State’s laws beyond the plan’s and trust’s governing documents.

The City might want the advice of its lawyer. And a trustee, if serving other than as an ex-officio appointment because of one’s City office, might want his or her lawyer’s advice. Further, the City might consider whether it must seek, prefers to seek, or deliberately would not seek the State’s attorney general’s advice.

The City or the trustees, or each distinctly, might want an actuary’s advice about how the mistaken contribution might affect the next actuarially determined amount.

The City might want a certified public accountant’s advice about effects on the City’s financial statements. The trustees might want a certified public accountant’s advice about effects on the trust’s financial statements.

This is not advice to anyone.

[luissaha]

Thank you for the response.  Yes, the contributing employer is a government al agency, but the Trust was created by various labor organizations for participation by represented employees.  I think the fact that the labor organizations created the trust would make the trust subject to ERISA.

[Peter Gulia]

Whether the plan is governmental or ERISA-governed;

which State laws might not be superseded, even if the plan is ERISA-governed, because the particular State law does not “relate” to the plan;

which subjects are within or beyond collective discussion with one or more labor organizations;

who, if anyone, has discretionary authority to interpret the employer’s obligation;

which persons are required to obey a government lawyer’s advice;

which persons are permitted to rely on a government lawyer’s advice;

which persons might enjoy or lack sovereign, governmental, or public-officer immunity;

which persons might be entitled to a defense at the government’s expense;

which persons might be entitled to a defense at the plan trust’s expense;

which actuarial standards might apply;

which assumptions might apply;

all these and more might affect how one or more of the persons involved might consider the error.

And consider that each person involved might have interests that differ from others' interests.