Protect Retirees from Pension Plan Recoupment
When retirees receive their first pension check, they trust the amount shown on the check will be what they should receive monthly. Far too often, pension plan sponsors later find an error in the pension payment calculation and force retirees to pay back thousands of dollars and suffer a large cut in benefits as well.
Over the years, retirees from companies such as AT&T, FCA/Chrysler, General Motors, and Lucent Technologies, have been victimized by pension plan overpayment recoupment and have had to pay back millions of dollars.
Current ERISA and Department of Treasury guidance mandates that plan sponsors recover overpayments, but rules are vague in deciding a dollar amount and reasonable time required to recoup overpayments. There have been incidents where plan sponsors have hired collection agencies to recover overpayments to retirees. On the other hand, rules have been relaxed for some plan sponsors to pursue recoupment, but no statues exist for this.
The AREF/NRLN proposal to limit pension recoupment is in Senate bill S.1770, Retirement Security and Saving Act and House bill H.R. 2954, Securing a Strong Retirement Act of 2021. Our proposals clarify that a pension plan fiduciary does not have to recoup overpayments, but if it does, it must be done within three years of the initial overpayment. (Now there is no limit to back years.) The company may not recoup more than 10% of the amount of the overpayment per year, and it may not recoup against a beneficiary of a participant.