Article on ERISA and Regulations to Restrict Companies’ Ability to Recoup Overpayment of Pension Funds
Ralph Yore retired from his job as an aircraft maintenance worker in 2001. Yore received a pension of $ 2,937 per month until 2009 when his previous employer notified him that the company had made an accounting mistake in calculating his pension benefits eight years prior. Yore was told that, unbeknownst to him, he had been receiving too much in pension benefits for eight years, $ 113,490 to be exact, and that he would now have to pay it all back.
Ralph Yore is not unique among retirees facing unreasonable pension overpayment recoupment. Sylvia Glaab was overpaid $ 32,000 over fifteen years and saw her monthly payments cut from $ 359 to just $ 70. Charlie Craven was overpaid and forced to pay back $ 18,363, which he had received over eighteen years of retirement. Chuck Ackerman was notified that he owed $ 31,904 in overpayment. The company initially stopped Ackerman’s pension payments altogether saying that the benefits would be reinstated when the debt was paid. The company later agreed to let Ackerman pay the company $ 500 per month; however, when Ackerman died before the debt was repaid, his widow was expected to finish making the payments.
These individual stories are exacerbated by the fact that 35 percent of Americans currently have a pension. This means a substantial percentage of our population is at risk of facing a recoupment action at some point during their retirement. This risk of recoupment has the potential to yield devastating financial consequences because pensions are currently the third largest source of income for families with a family member aged 65 or above, and 50 percent of retirees take in less than $ 16,500 annually, an amount barely greater than minimum wage.
Recoupment actions are legal, and commonly pursued by companies in all sectors of the economy. The current legal and regulatory environment places the burden of administrative mismanagement of employee retirement plans on one of the most economically vulnerable populations: elderly retirees. Reform is needed to reign in recoupment practices like those described above and restore consumer confidence in retirement security.
This article discusses the history of the legislative act that allows companies to recoup overpayments, the mechanics of how overpayments are made, the justifications put forth by companies for recoupment actions, the shortcomings of the legislative act in protecting retirees from harsh company recoupment actions, and proposals for amending the legislative act so that recoupment procedures will be less unfair for retirees.