ERISA Overpayment Showdown
Claimant suing to stop MetLife’s non-judicial collection of an “overpayment.”
Konektus Photo/Shutterstock.com
Policy Stuff: “Other Income” and “Overpayments” : Plans often provide for dollar-for-dollar “offsetting” of public benefits like SSDI as “other income” a participant may receive against disability benefits owed. The public disability benefits process lags private benefits decisions, so retroactive benefits regularly result in “overpayments” as plans do the sums on new awards.
No Money Back Guarantee: If a plan is paying benefits it can recover by offsetting against future payments. But ERISA only lets a plan seek “appropriate equitable relief” to enforce its terms. Plans cannot assert claims against participants’ “general assets” and are left with factually-difficult “equitable lien” claims, while Social Security’s shield on attaching benefits adds an additional barrier to recoupment.
No Suit, No Problem?: Here's the Complaint in Hazel v. Metropolitan Life Ins. Co. (E.D. Cal.). Hazel was a plan participant who received STD benefits and California state disability payments (which she denies are “other income”). After terminating benefits MetLife asserted a roughly $9,000 overpayment that it demanded by two letters before hiring a collections agent. Hazel wants a declaration that the Plan’s repayment provisions are unenforceable and an injunction stopping further efforts to collect.
In its Answer MetLife says it hasn’t sued Hazel, so decisions constraining ERISA remedies don’t apply. Dispositive motions are due in January 2024.
The Big Picture: Hazel may answer some questions on the risks posed to claimants by plan reimbursement demands when the money at issue is long-gone. But any uniform approach will require Congressional action that is nowhere in sight. N.B. - It settled.