Retiree’s Pension Overpayments Won’t Continue

In agreeing with a lower court’s decision (see “Overestimate of Pension Benefit Not a Fiduciary Breach”), the 6^th U.S. Circuit Court of Appeals found Virginia Stark could not establish four elements of a successful equitable-estoppel claim: that the Mars Pension Plan Committee was aware of the true value of Stark’s benefits, that the committee intended for its representations about Stark’s benefits to be relied upon, that Stark justifiably and detrimentally relied on the committee’s representations, and that the case presented extraordinary circumstances. The appellate court concluded that the committee was not aware of the true value of Stark’s pension benefits and that Stark did not detrimentally rely on representations made to her by the committee about the value of her benefits.   

According to the court opinion, the record demonstrates that call center representatives referred concerns about the calculation of benefits to plan provider Hewitt Management. Hewitt then explained that a seemingly high estimate for the pension plan participants would nevertheless be accurate. Thus, the committee properly investigated the exact concern that Stark raised, and it had no reason to question further Hewitt’s calculations. “[T]he committee’s reliance on those assurances was at most an honest mistake, and did not rise to the level of malfeasance. Accordingly, we conclude that the committee was not aware of the true value of Stark’s pension benefit at the time it made misrepresentations to Stark,” the court said.  

The court also noted a review of the several months before and after receiving her plan benefits indicates Stark did not alter her discretionary-spending habits. According to Stark’s own calculations, her discretionary spending in some months before the plan went into effect was higher than in-plan months, while discretionary spending in some months after the extra benefits were cancelled was higher than in-plan months. In addition, Mars eventually repaid the plan for the extra benefits paid to Stark, such that Stark was allowed to keep the entirety of the overpayments, and Mars offered her a one-time opportunity to change her benefits enrollment to reinstate her to pre-distribution status. “Thus, any detriment that Stark would otherwise have suffered—either by having to make reimbursement payments to the committee, or by no longer accruing interest on an unexercised plan—has been undone by Mars’s contribution,” the court concluded.  

Because it concluded that any misrepresentation made by the committee was not made negligently, it also agreed with the judgment of the district court that Mars and the plan committee did not breach any fiduciary duties.  

The opinion in Stark v. Mars Inc. is at http://www.ca6.uscourts.gov/opinions.pdf/13a0460n-06.pdf.