A U.S. District Court has sided with a pension plan sponsor seeking the return of a $725,000 overpayment made to a participant who elected to receive a lump sum payout.
In the lawsuit filed against Kaiser Health Foundation Health Plan and Kaiser Permanente Retirement Plan, the U.S. District Court for Northern New York, based in Syracuse, ruled the plan sponsor was within its rights to not credit 20 years of service time accrued by John Baackes before Community Health Plan merged with Kaiser Permanente.
Baackes was president of the northeast division of Kaiser Permanente for about two years before leaving the company in 1998. In 2011, he retired and after reaching age 65 he requested his lump sum payment.
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The plan's third party sponsor calculated his benefits based on a mistaken termination date of November 2001 and credited Baackes with nearly 22 years of service with the company. In February 2011, his lump sum payment was set at $782,733.
Within five months, Baackes received notice that the payment was too high by $725,000 because his service time before the merger should have only counted toward vesting.
After being rebuffed by the plan's appeals committee, Baackes sued claiming breach of fiduciary duty. Kaiser asked for summary judgment against Baackes.
In granting summary judgment, the court found that Kaiser had not breached its fiduciary duties, saying the appeals committee lacked any "financial incentive" to deny his claim.
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