Judge Refuses to Rule on Pension Recoupment Dispute

January 12, 2006 (PLANSPONSOR.com) - A federal judge in Ohio has thrown out worker claims that their employer should be barred from collecting past pension benefit overpayments out of future payments.

US District Judge Sandra Beckwith of the US District Court for the Southern District of Ohio issued the ruling in a participant lawsuit filed against Formica Corp., BNA reported.

Granting Formica’s motion to dismiss, Beckwith found that the participants’ claim was not properly set before the court for review given that Formica had not yet tried to recoup past overpayments.

The company found in a 2002 audit that it had been underpaying approximately 170 pensioners and overpaying nearly 300 others.

When Formica adjusted current benefit payments to the amounts its audit showed it should have been paying all along, the participants sued Formica in an Ohio state court asserting claims of negligent misrepresentation and promissory estoppel. The participants also sought injunctive relief to compel Formica to restore their monthly benefits to previous levels.

Formica had the case moved to federal court and in June 2004, the federal court denied the participants’ motion for a temporary restraining order. The district court’s decision denying the restraining order was upheld by the US 6 th Circuit Court of Appeals.

After the 6th Circuit’s decision, Beckwith re-examined the participants’ complaint to determine whether any of their remaining claims were permitted under the Employee Retirement Income Security Act (ERISA). Among their claims, the court noted the participants argued that if they were able to show that Formica breached its fiduciary duties, they would be entitled to injunctive relief to prevent Formica from further reducing their benefit payments to recoup past overpayments.

In an unusual note, Beckwith wrapped up by expressing sympathy for the pension participants’ plight and urged the parties to work out a settlement to the matter as soon as possible – particularly with the Internal Revenue Service.

“The Court recognizes that this decision seems to be a particularly harsh result for a blameless group of individuals,” Beckwith wrote. “While the Court empathizes with the Plaintiffs and the anxiety they must be experiencing, Congress has not provided any remedy for plan participants in this situation. Having said that, the Court encourages Formica to pursue, and the IRS to accept, plan corrections which do not impose any further hardship on these Plaintiffs. The Court also encourages Formica and the IRS to resolve Formica’s (voluntary compliance plan) submission as expeditiously as possible so that Plaintiffs and the class do not have to continue living with the fear and uncertainty created by these errors in plan administration.”

The case is Ramsey v. Formica Corp., S.D. Ohio, No. 1:04-CV-149, 1/5/06.