Retirement Plans May Also Taketh Away

Zirbel v. Ford Motor Co., No. 20-1149 (6th Cir. 2020)
Retirement Plan Allowed to Recoup Former Spouse’s Overpayment

Dated: November 16, 2020
Recommended for Publication
Affirming

“The safe way to double your money is to fold it over once and put it in your pocket.” – Kin Hubbard

Now imagine that ice cream cost a quarter million dollars

The lesson first: Make sure the QDRO is approved by the plan and keep a written record of the determination letter in your client’s file. You must also review this letter and make sure the plan’s interpretation and implementation of the QDRO mirrors the intent of the parties and/or the Court. Simple lesson, right?

Now the story: As part of the parties’ divorce, Wife was assigned a portion of Husband’s Ford Motor Company pension benefit accrued during their marriage. Ford paid Wife a lump-sum of $351,000; however, Ford later learned that Wife was mistakenly overpaid by $243,000 and asked Wife to return the payment. Wife refused. Wife then unsuccessfully appealed to the third-party actuarial service that operated Ford’s benefit plan and to the committee that oversaw the pension plan. The committee informed Wife she could apply for a hardship reduction, which would require full disclosure of her finances, but Wife declined.

The Court affirmed the lower court’s summary judgment, requiring that Wife repay Ford Motor Company the $243,000 overpayment. The Court found that Ford had obtained an equitable lien on the funds and rejected Wife’s arguments that Ford was equitably estopped from recovering the payment and that the repayment was inequitable. The Court specifically noted that “[d]ecisions that respect a plan’s terms aren’t arbitrary or capricious.” The Court also considered whether Ford’s counterclaim for repayment, brought under ERISA, allowed for equitable relief since the plan’s reimbursement provision gave it a right to recover a particular fund: the overpayment.

The Court explained that as soon as Wife received the overpayment, a lien attached, permitting the plan to seek equitable restitution in the amount of $243,000. W argued that the funds were no longer in her possession since she had used them to pay taxes, made gifts to her kids and invested the funds; however, the Court reasoned that simply commingling funds did not extinguish the lien. Additionally, Wife would have had to show Ford made fraudulent representations to her, that she did not know the truth behind Ford’s representations, and that she justifiably relied on Ford’s representations to her detriment to allow for equitable estoppel. The Court noted Wife was unable to satisfy those requirements.

Editor’s Note: EZ QDRO Law would like to give a QDRO-shout-out to Terri Mohan for making sure this case didn’t slip past our QDRO eyes.

Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.