RECOVERY OF RETIREMENT PLAN OVERPAYMENTS.

SEC. 301. RECOVERY OF RETIREMENT PLAN OVERPAYMENTS.(a) Overpayments Under ERISA.—Section 206 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056) is amended by adding at the end the following new subsection:“(h) Special Rules Applicable to Benefit Overpayments.—“(1) General rule.—In the case of an inadvertent benefit overpayment by any pension plan, the responsible plan fiduciary shall not be considered to have failed to comply with the requirements of this title merely because such fiduciary determines, in the exercise of its discretion, not to seek recovery of all or part of such overpayment from—“(A) any participant or beneficiary, “(B) any plan sponsor of, or contributing employer to—“(i) an individual account plan, provided that the amount needed to prevent or restore any impermissible forfeiture from any participant’s or beneficiary’s account arising in connection with the overpayment is, separately from and independently of the overpayment, allocated to such account pursuant to the nonforfeitability requirements of section 203 (for example, out of the plan’s forfeiture account, additional employer contributions, or recoveries from those responsible for the overpayment), or “(ii) a defined benefit pension plan subject to the funding rules in part 3 of this subtitle B, unless the responsible plan fiduciary determines, in the exercise of its fiduciary discretion, that failure to recover all or part of the overpayment faster than required under such funding rules would materially affect the plan’s ability to pay benefits due to other participants and beneficiaries, or “(C) any fiduciary of the plan, other than a fiduciary (including a plan sponsor or contributing employer acting in a fiduciary capacity) whose breach of its fiduciary duties resulted in such overpayment, provided that if the plan has established prudent procedures to prevent and minimize overpayment of benefits and the relevant plan fiduciaries have followed such procedures, an inadvertent benefit overpayment will not give rise to a breach of fiduciary duty. “(2) Reduction in future benefit payments and recovery from responsible party.—Paragraph (1) shall not fail to apply with respect to any inadvertent benefit overpayment merely because, after discovering such overpayment, the responsible plan fiduciary—“(A) reduces future benefit payments to the correct amount provided for under the terms of the plan, or136 STAT. 5336 “(B) seeks recovery from the person or persons responsible for the overpayment. “(3) Employer funding obligations.—Nothing in this subsection shall relieve an employer of any obligation imposed on it to make contributions to a plan to meet the minimum funding standards under part 3 of this subtitle B or to prevent or restore an impermissible forfeiture in accordance with section 203. “(4) Recoupment from participants and beneficiaries.—If the responsible plan fiduciary, in the exercise of its fiduciary discretion, decides to seek recoupment from a participant or beneficiary of all or part of an inadvertent benefit overpayment made by the plan to such participant or beneficiary, it may do so, subject to the following conditions:“(A) No interest or other additional amounts (such as collection costs or fees) are sought on overpaid amounts for any period. “(B) If the plan seeks to recoup past overpayments of a non-decreasing annuity by reducing future benefit payments—“(i) the reduction ceases after the plan has recovered the full dollar amount of the overpayment, “(ii) the amount recouped each calendar year does not exceed 10 percent of the full dollar amount of the overpayment, and “(iii) future benefit payments are not reduced to below 90 percent of the periodic amount otherwise payable under the terms of the plan. Alternatively, if the plan seeks to recoup past overpayments of a non-decreasing annuity through one or more installment payments, the sum of such installment payments in any calendar year does not exceed the sum of the reductions that would be permitted in such year under the preceding sentence. “(C) If the plan seeks to recoup past overpayments of a benefit other than a non-decreasing annuity, the plan satisfies requirements developed by the Secretary of Labor for purposes of this subparagraph. “(D) Efforts to recoup overpayments are—“(i) not accompanied by threats of litigation, unless the responsible plan fiduciary makes a determination that there is a reasonable likelihood of success to recover an amount greater than the cost of recovery, and “(ii) not made through a collection agency or similar third party, unless the participant or beneficiary ignores or rejects efforts to recoup the overpayment following either a final judgment in Federal or State court or a settlement between the participant or beneficiary and the plan, in either case authorizing such recoupment. “(E) Recoupment of past overpayments to a participant is not sought from any beneficiary of the participant, including a spouse, surviving spouse, former spouse, or other beneficiary. “(F) Recoupment may not be sought if the first overpayment occurred more than 3 years before the participant 136 STAT. 5337 or beneficiary is first notified in writing of the error, except in the case of fraud or misrepresentation by the participant. “(G) A participant or beneficiary from whom recoupment is sought is entitled to contest all or part of the recoupment pursuant to the claims procedures of the plan that made the overpayment to the extent such procedures are consistent with section 503 of this title and in the case of an inadvertent benefit overpayment from a plan to which paragraph (1) applies that is transferred to an eligible retirement plan (as defined in section 402(c)(8)(B) of the Internal Revenue Code of 1986) by or on behalf of a participant or beneficiary—“(i) such plan shall notify the plan receiving the rollover of such dispute, “(ii) the plan receiving the rollover shall retain such overpayment on behalf of the participant or beneficiary (and shall be entitled to treat such overpayment as plan assets) pending the outcome of such procedures, and “(iii) the portion of such overpayment with respect to which recoupment is sought on behalf of the plan shall be permitted to be returned to such plan if it is determined to be an overpayment (and the plans making and receiving such transfer shall be treated as permitting such transfer). “(H) In determining the amount of recoupment to seek, the responsible plan fiduciary may take into account the hardship that recoupment likely would impose on the participant or beneficiary. “(5) Effect of culpability.—Subparagraphs (A) through (F) of paragraph (4) shall not apply to protect a participant or beneficiary who is culpable. For purposes of this paragraph, a participant or beneficiary is culpable if the individual bears responsibility for the overpayment (such as through misrepresentations or omissions that led to the overpayment), or if the individual knew that the benefit payment or payments were materially in excess of the correct amount. Notwithstanding the preceding sentence, an individual is not culpable merely because the individual believed the benefit payment or payments were or might be in excess of the correct amount, if the individual raised that question with an authorized plan representative and was told the payment or payments were not in excess of the correct amount.” . (b) Overpayments Under Internal Revenue Code of 1986.—(1) Qualification requirements.—Section 414 is amended by adding at the end the following new subsection:“(aa) Special Rules Applicable to Benefit Overpayments.—“(1) In general.—A plan shall not fail to be treated as described in clause (i), (ii), (iii), or (iv) of section 219(g)(5)(A) (and shall not fail to be treated as satisfying the requirements of section 401(a) or 403) merely because—“(A) the plan fails to obtain payment from any participant, beneficiary, employer, plan sponsor, fiduciary, or other party on account of any inadvertent benefit overpayment made by the plan, or “(B) the plan sponsor amends the plan to increase past, or decrease future, benefit payments to affected 136 STAT. 5338 participants and beneficiaries in order to adjust for prior inadvertent benefit overpayments. “(2) Reduction in future benefit payments and recovery from responsible party.—Paragraph (1) shall not fail to apply to a plan merely because, after discovering a benefit overpayment, such plan—“(A) reduces future benefit payments to the correct amount provided for under the terms of the plan, or “(B) seeks recovery from the person or persons responsible for such overpayment. “(3) Employer funding obligations.—Nothing in this subsection shall relieve an employer of any obligation imposed on it to make contributions to a plan to meet the minimum funding standards under sections 412 and 430 or to prevent or restore an impermissible forfeiture in accordance with section 411. “(4) Observance of benefit limitations.—Notwithstanding paragraph (1), a plan to which paragraph (1) applies shall observe any limitations imposed on it by section 401(a)(17) or 415. The plan may enforce such limitations using any method approved by the Secretary for recouping benefits previously paid or allocations previously made in excess of such limitations. “(5) Coordination with other qualification requirements.—The Secretary may issue regulations or other guidance of general applicability specifying how benefit overpayments and their recoupment or non-recoupment from a participant or beneficiary shall be taken into account for purposes of satisfying any requirement applicable to a plan to which paragraph (1) applies.” . (2) Rollovers.—Section 402(c) is amended by adding at the end the following new paragraph:“(12) In the case of an inadvertent benefit overpayment from a plan to which section 414(aa)(1) applies that is transferred to an eligible retirement plan by or on behalf of a participant or beneficiary—“(A) the portion of such overpayment with respect to which recoupment is not sought on behalf of the plan shall be treated as having been paid in an eligible rollover distribution if the payment would have been an eligible rollover distribution but for being an overpayment, and “(B) the portion of such overpayment with respect to which recoupment is sought on behalf of the plan shall be permitted to be returned to such plan and in such case shall be treated as an eligible rollover distribution transferred to such plan by the participant or beneficiary who received such overpayment (and the plans making and receiving such transfer shall be treated as permitting such transfer).” . (c) Effective Date.—The amendments made by this section shall apply as of the date of the enactment of this Act. (d) Certain Actions Before Date of Enactment.—Plans, fiduciaries, employers, and plan sponsors are entitled to rely on—(1) a reasonable good faith interpretation of then existing administrative guidance for inadvertent benefit overpayment recoupments and recoveries that commenced before the date of enactment of this Act, and136 STAT. 5339 (2) determinations made before the date of enactment of this Act by the responsible plan fiduciary, in the exercise of its fiduciary discretion, not to seek recoupment or recovery of all or part of an inadvertent benefit overpayment. In the case of a benefit overpayment that occurred prior to the date of enactment of this Act, any installment payments by the participant or beneficiary to the plan or any reduction in periodic benefit payments to the participant or beneficiary, which were made in recoupment of such overpayment and which commenced prior to such date, may continue after such date. Nothing in this subsection shall relieve a fiduciary from responsibility for an overpayment that resulted from a breach of its fiduciary duties.