The district court for the District of Massachusetts held that a multiemployer pension plan may recoup the overpayment of benefits, notwithstanding the participant’s intervening bankruptcy.

The participant began receiving a disability pension under the plan in 1992. Disability pensioners were notified that disability pension payments would be discontinued if they returned to work or had sufficiently recovered so as to be able to return to gainful employment, and that they should notify the plan if they became employed.

Subsequently, the participant began work as a real estate agent without notifying the plan of his return to gainful employment. When the plan learned of the participant’s new employment, it terminated his disability pension. The participant brought suit, claiming that the termination of his disability pension violated the plan’s terms. The plan trustees counterclaimed for restitution of the overpayment of disability benefits for the period during which the participant was employed but failed to notify the plan of his employment. The court awarded judgment to the plan trustees.

Five months later, the participant filed for bankruptcy. The plan filed a proof of claim, asserting a right of recoupment for the overpayments made. In response to the participant’s objection to the proof of claim, the bankruptcy court abstained from further consideration, as the participant’s vested interest in the plan was not an asset of the bankruptcy estate.

More than ten years later, the participant applied for a normal retirement pension from the plan. The plan notified the participant that his normal retirement pension would be reduced by 20 percent each month until the overpayment was recouped. The participant filed suit, challenging the plan trustee’s reduction of his monthly pension benefits.

Citing explicit plan provisions authorizing the plan trustees to recoup overpayment of pension benefits through a reduction in future benefit payments, the district court held that the trustees were entitled to reduce the participant’s pension benefits until the overpayment was recouped. The participant’s bankruptcy did nothing to alter this result. In accordance with controlling precedent and because the debt the participant owed to the fund (i.e., the overpaid disability amounts) and the debt the fund owed to the participant (i.e., pension benefits) arose out of the same contract (i.e., the plan), the plan trustees’ right to recoupment survived the participant’s bankruptcy. (Celi v. Trustees of Pipefitters Local 537 Pension Plan, D. Mass. Nov. 28, 2011)