Recovering Retirement Plan Overpayments: Process Is Key

A qualified retirement plan paying more in distributions than a participant is entitled to occurs frequently. Common reasons for overpayments include miscalculation of benefits due to systemic error, the plan sponsor being unaware of the death of a participant for some time, or the incorrect application of the provision of a plan (e.g., the definition of "compensation"). While unfortunate for participants who received an overpayment, a plan sponsor has an obligation to recover overpayments on behalf of the retirement plan to protect the plan's tax-qualified status and comply with the sponsor's fiduciary responsibilities under ERISA. A recent court case involving the recovery of an overpayment highlights the value of having a robust administrative process for dealing with the inevitable overpayment issues that arise.