Upper Midwest Pension Rights Project helps widow avoid recoupment for overpayment
Pension plans can often make mistakes when calculating pension benefits. These errors can result in retirees, through no fault of their own, receiving pensions in the wrong amount. To correct their own mistakes, pension plans often ask retirees to repay the amount that has been overpaid. Below is a description of what happened when Annie*, a client of the Upper Midwest Pension Rights Project, found herself in this situation and how counseling project staff used their knowledge of pension plans to help Annie.
After her husband died in 2000, Annie began receiving a monthly survivor’s pension in the amount of $270. More than five years later, Annie was notified by her husband’s pension plan that they had overpaid her by more than double. The plan told Annie that her monthly benefit should have been $124, which meant that Annie had been overpaid by more than $9,300. To correct their error, the pension plan told Annie that her survivor’s benefit would not only be adjusted to the proper amount, but it would be reduced by an additional $50, leaving Annie with a monthly pension of just $74.
Knowing that, in extreme circumstances like Annie’s, pension plans sometimes waive the recoupment of an overpayment, staff of the Upper Midwest Pension Rights Project contacted the pension plan, asking them to do so for Annie. In 2006, less than a year after it had first informed Annie that her benefit would be reduced, the pension plan told Annie that it would forego the repayment. As a result, Annie was saved from having to repay the $9,300 the pension plan had overpaid her.
*For privacy reasons, the name of the person featured in this story has been changed.
Learn about the Upper Midwest Pension Rights Project.
Learn about the Pension Counseling and Information Program.
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A lump-sum distribution is a method of paying benefits from a pension plan in which a participant's entire beenfit is paid out in a one-time payment. Lump sum distributions are sometimes called cash outs.