Marvin Teater began receiving monthly pension benefits of $1,615 after he retired from DSM Engineering Plastics in 1995. When he died, his wife Eileen Teater began receiving joint survivor pension payments of $886 per month.
In August 2001, The Netherlands-based company told Eileen that it had found an error that caused her husband to be overpaid by $60,000 in pension payments and that she would have to payback $207 over a period of 282 months so that DSM could recover the overpayment.
Eileen filed a suit against the plastics company, contending that because the error was not her or her husband’s fault, she was not obligated to repay the money. She cited the language in the plan that said that DSM had the right to recoup overpayments when a mistake in calculations was made, “whether attributable to the participant, beneficiary, eligible spouse, or any other person.”
In a summary judgment opinion , US District Judge Judge Juan Sanchez rejects Eileen’s claim that DSM could only recover the overpayments only if the plan participant or beneficiary was at fault. The court ruled that DSM as a corporation fell under the umbrella of “any other person,” as defined by the Employee Retirement Income Security Act (ERISA).
Sanchez writes that: “It is true the plan specifically defines DSM as Corporation and the mistake provision does explicitly identify Participant, Beneficiary and Eligible Spouse, which are all defined terms. Nevertheless, an average person would interpret ‘any other person’ to include any person or entity other than those specified and such construction would cover the DSM employee who made the clerical error.”
In March 2003, the US District Court for the Northern District of Illinois found that an employer that overpaid a benefit can recover the overpayment as an equitable remedy if it was able to trace the funds to a particular account (See Court Finds Pension Overpayment Traceable, Recoverable ).
The court said that even though the funds were no longer in the beneficiary’s possession, “It is undisputed that the alleged overpayment was disbursed into an IRA, and that since the funds were used for a down payment on a house, the overpayment is attributable to the house.