Sixth Circuit Provides Guidance on Recovering Overpayments
In Zirbel v. Ford Motor Company, the Sixth Circuit Court of Appeals gives further insight into a benefit fund’s options when attempting to recover an overpayment of benefits via lawsuit. The case interprets the Supreme Court’s decision in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan from 2016.
In Montanile, the Supreme Court provided guidance on an ERISA provision that allows benefit plans to obtain “appropriate equitable relief” to enforce the terms of the plan. In the case of an accidental overpayment of benefits by, for example, overpaying pension benefits or paying a medical claim not covered by the plan, appropriate equitable relief includes attaching a lien in the amount of the overpayment on the defendant’s property. The Supreme Court, however, held that an equitable lien can only attach to funds or property that is “specifically identifiable” and “traceable” to the overpayment. For example, if a defendant purchases a house or a boat with the funds, the lien can be attached to that property because the overpayment can be traced to that property. If, however, the defendant spends the money on items like groceries or services, the funds cannot be traced and the plan cannot attach the lien to any funds.
In Zirbel, the defendant was overpaid nearly $250,000 in retirement benefits. The defendant deposited the money in her main bank account and subsequently transferred the money to other accounts. The Sixth Circuit held that the overpayment was traceable to these accounts, even though the overpaid funds were commingled with the defendant’s general assets. The court allowed the retirement fund to attach a lien to the bank accounts, up to the amount of the overpayment.
This case is noteworthy because it clarifies a benefit fund’s right to recover when an overpayment is mixed in with a participant’s general assets.