Overpaid Former Plan Participant Found to Be a Fiduciary

The U.S. District Court for the District of New Jersey has ruled that a former participant in the Lucent Technologies Inc. Pension Plan’s (LTPP) sponsored by Alcatel-Lucent USA Inc. (ALU), became a plan fiduciary under the Employee Retirement Income Security Act (ERISA) because she retained control over plan assets she was not entitled to and breached her fiduciary duties by not returning the assets to the plan.

Prior to 2012, Pamela Neely received payment from the LTPP in satisfaction of the benefits to which she was entitled. In November 2012, the LTPP mistakenly paid Neely an additional amount of $233,691.92 to which she was not entitled. The LTPP notified her of the error and demanded return of the overpayment by written letters sent on January 16, 2013, and February 15, 2013. However, Neely has not returned the overpayment.

The court said there was evidence that Neely possessed $207,645.17 of the overpayment as of October 1, 2013, and found the plaintiffs in the case were entitled to default judgement in that amount.

In her court opinion, U.S. District Judge Madeline Cox Arleo noted a plan fiduciary is anyone who “exercises any authority or control respecting management or disposition of [plan] assets.” She cited other case law that found “ERISA ‘defines fiduciary not in terms of formal trusteeship, but in functional terms of control and authority over the plan,’” and “The plain language of this statute encompasses those who knowingly and unlawfully retain plan assets to which they are not entitled.”

Neely’s counterclaims were dismissed in part because she “acted culpably as she has been served with the Complaint, exhibited a history of dilatory behavior, and has failed to participate in this litigation since July 2015 in violation of multiple Court orders.”

The opinion in Alcatel-Lucent USA Inc., et. al. v. Samueal Borlabi, et. al. is here.