Request a Proposal

Fiduciary Attempt to Claim Overpayments

Although case law recognizes the right of a fiduciary to recover overpayments, the practical application of such an action may prove less straightforward, as in the case of Pharmacia Corporation Supplemental Pension Plan and a retiree, who retired in 1999 and elected to receive pension payments (twice per month, one payment from each of two pension plans) over a three-year period ending in 2005.

After 2005 however, the checks were still sent. The retiree and her adviser did contact the provider responsible for the check issuance, and were informed that the annuity payments would continue for life. In 2009, the plan sponsor discovered the mistake and suspended future monthly payments. However, it wasn’t until 2014 that the Plan and Pfizer, Inc. (Pfizer, Inc. acquired Pharmacia Corporation in 2003) filed suit to recover the overpayments, which at that point had accumulated to over $1.3 million.

The district court refused to completely dismiss or grant summary judgment. Equitable claims for repayment could proceed to trial; however, the plaintiffs would have to show that there were still “identifiable” funds (for example the funds as placed in a bank account) or the proceeds of such funds in order to recover them. Additionally, the plaintiffs are not in the position to sue to enforce the terms of the plan, as no specific plan provision outlining the requirements for recovery exist.

As evidenced in this case, plan fiduciaries should ensure that their plans have specific provisions for recouping overpayments and conduct self-audits periodically. If lawsuits appear necessary, prompt filing would certainly be recommended.

www.asppa.org; September 2, 2015.