Covington Explains Recent Remedies Case

In "Judges Disagree on Remedies for Pension Mistake", Seth Safra of Covington & Burling explains that:

"A recent Ninth Circuit decision, Gabriel v. Alaska Elec. Pension Fund, offers useful insight for deciding how to fix a pension overpayment. Virtually every employer that administers a pension plan has experienced (or will experience) discovering a calculation error after incorrect payments have been made for several years–resulting in thousands of dollars of overpayments. Fixing these overpayments is often difficult. On the one hand, plan fiduciaries have an obligation to stop overpayments and restore losses from excess payments. IRS guidance instructs plan administrators to recover overpayments from the affected participants. On the other hand, participants who have received overpayments inevitably claim that they have relied on the incorrect benefit and that correcting the error would result in undue harm to them. The affected participants often recognize that an incorrect benefit cannot be paid by the plan, but they argue that the cost of the correction should be borne by the administrator who made the error, rather than by the affected participant."

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