US District Judge Sarah Evans Barker of the US District Court for the Southern District of Indiana rejected the notion that a 2002 US Supreme Court case involving Great-West Life & Annuity Insurance Co. rendered unenforceable all recoupment provisions in Employee Retirement Income and Security Act (ERISA) plans.
“[N]othing in Great-West or any other decision known to us suggests that a plan may not enforce its agreed-upon contractual reimbursement provisions through an alternation of performance requirements,” Barker ruled.
According to Barker’s ruling, plaintiffs James Northcutt and Lewis Smith were hourly employees of GM and participated in both the company’s pension and disability benefit plan. The plans in question called for offsets for Social Security disability benefits and required that if a participant became eligible retroactively for Social Security disability benefits after receiving plan benefits, they had to reimburse the plans. .
Smith became disabled in April 1990 and began collecting a disability pension in April 1991. In June 1996, Smith was awarded retroactive disability benefits by the Social Security Administration. Northcutt retired in January 1997 and began at that time to receive an early retirement supplement under the pension plan.
The GM plans sought repayment from both Smith and Northcutt after each received retroactive lump-sum Social Security disability benefits by cutting the amount of monthly benefits paid to Smith and Northcutt. The participants sued the plans, arguing that the plans’ attempt to recoup the overpayments was prohibited by the Supreme Court’s ruling in Great-West.
Baker noted that the Supreme Court’s discussion in Great-West on the distinction between equitable and legal remedies was prompted by an ERISA plan fiduciary’s efforts to file a civil action under ERISA Section 502(a)(3). In this case involving Northcutt and Smith, the GM plans only sought to enforce contractual reimbursement provisions by suspending or reducing benefits, the court said.
The case is Northcutt v. General Motors Hourly-Rate Employees Pension Plan, S.D. Ind., No. 1:04-cv-0337-SEB-VSS, 10/31/05.