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Extra-judicial Contracts Sufficient to Recoup Benefit Overpayments
The appellate court rejected the argument by two General
Motors’ employees that a US Supreme Court precedent
says plan administrators may only use judicial
remedies offered by the Employee Retirement Income Security
Act (ERISA) to regain benefit overpayments, preventing them
from using contractual agreements to do so, according to
the court opinion.
The former GM employees said ERISA Section 502
“prohibits GM from invoking contractual remedies for
reimbursement and instead requires GM to seek equitable
relief before a court.” However, the court upheld
the decision by the US District Court for the
Southern District of Indiana, saying that ERISA does not
bar the administrator from using extra-judicial contractual
remedies, such as reducing or suspending benefits.
According to the opinion, “GM modified performance of
its current payment obligations in accordance with a
contractual provision entitling it to do so; this
modification does not violate any aspect of ERISA that the
plaintiffs have identified, nor does it violate a clearly
articulated policy of ERISA.”
James Northcutt and Lewis Smith asked the court to force
repayment of pension benefits that had been withheld from
them by GM. GM withheld monthly benefits from the
plaintiffs’ after learning of social security benefits
they had received.
An agreement between the union and GM mandated that pension and disability benefit payments due to plan participants would be reduced by the amount equivalent to social security benefits. Further, if an employee received employer-sponsored benefits and later received social security benefits, the plan could demand reimbursement from the participants or withhold or suspend benefits in order to recoup the overpaid benefits.
Before Northcutt retired in 1997, he applied for monthly
retirement benefits and an early retirement supplement
through the employer-sponsored plan. He also signed an
agreement that said he would reimburse his plan if he
became eligible for a social security disability insurance
benefit or an unreduced social security benefit before he
turned age 62.
Northcutt received a retroactive lump-sum social security
payment of $32,175, and GM contacted him in 2003 requesting
reimbursement. However, Northcutt refused to pay GM,
claiming that the award had been spent by the time his
former employer made the reimbursement demand.
Smith took a disability leave of absence beginning in 1990
and began receiving benefits under GM’s disability plan. He
was approved for a lump-sum social security disability
payment, but when GM requested repayment of the plan
benefits overpaid by retroactive reward, he also said the
award had been dissipated.
For the full opinion go
here
.