Plan Administrator Cleared of Wrongdoing in Restitution Demand

U.S. District Judge Terrence F. McVerry of the U.S. District Court for the Western District of Pennsylvania ruled that the administrator’s action for reimbursement qualified as “appropriate equitable relief” under Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA). The relief was appropriate because the overpaid benefits could be traced to two individual retirement accounts set up by the participant, the court said.

McVerry asserted that while the plan was not entitled to bring a claim for reimbursement under ERISA Section 502(a)(3), it nonetheless could obtain such relief through a federal common law claim for equitable restitution.

According to the ruling, Fred Kienast worked for Limbach Facility Services Inc. for 52 years before his 2002 retirement. He estimated that when he retired he would receive $700,000 in benefits from Limbach’s plan.

The plan paid $312,596 to Kienast in July 2003, which he rolled over into an IRA, the opinion said. The following year, the plan mistakenly made a second disbursement of $218,817, which was rolled over into a second IRA.

After the error was discovered, the plan demanded Kienast give back a total of $231,065. He refused and the plan administrator took the matter to court.

McVerry asserted that allowing ERISA plans to use federal common law to recover mistaken payments furthers the goals of ERISA and safeguards the funds set aside under the plan for other participants and beneficiaries.

The case is Plan Administrator v. Kienast,   W.D. Pa., No. 2:06-cv-1529, 1/23/08.