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These days, it’s not often that we agree with the decisions companies make when it comes to pensions (take a look at our lists of companies that have frozen their pensions or that have cut their 401(k) matches), but an activist alerted us to one company that is actually doing the right thing. As reported in the Times of Northwest Indiana last week, steel giant ArcelorMittal is forgiving $960,000 in pension overpayments made to 79 widows of retired workers. Many of these women are in their 80s and 90s and have relied on their survivor’s pension for decades. Having to pay back years of overpayments would have been a severe hardship for them.
When a pension plan realizes that it has been overpaying a retiree or widow (usually because the company has miscalculated the benefit), it can demand that the retiree or widow pay back the amount that was overpaid. This situation is called a “recoupment.”
Recoupments can happen years after retirees have started receiving their benefits, creating a serious burden for people who are living on a fixed income. To get the money back, a plan might reduce a monthly benefit to zero until the overpayment is fully paid back, or it might demand repayment all at one time, as a lump sum.
Recoupments are a double-whammy for retirees, who, through no fault of their own, can be slapped with a claim for thousands of dollars and must live on a smaller monthly benefit in the future. Legally, there is usually little that retirees can do to stop recoupment. However, the plan has options, such as reducing the retiree’s benefit by only a small amount until the full amount is paid back — or forgiving the overpayment entirely, as the ArcelorMittal plan has done.
As part of our Consumer Agenda for Retirement Security, the Pension Rights Center has asked the Department of Labor to protect retirees from unfair recoupment actions by allowing them to contest a recoupment and by requiring that companies give retirees at least 10 years to pay back an overpayment. Unfortunately, not every company will show the compassion that ArcelorMittal has.
