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Pension plan recovers overpayments made to deceased

Level Chan and Dante Manna

On October 31, 2019, the Supreme Court of Canada issued its decision in Threlfall v Carleton University, 2019 SCC 50, dismissing an appeal from the Quebec Court of Appeal. Carleton University successfully recovered $497,332.64 of pension payments it had made in respect of a retiree, Mr. R, after his death.

While the decision is based on specific provisions of the Civil Code of Quebec (“C.C.Q.”) and the applicable pension plan, it provides some guidance for pension plan administrators on death of beneficiaries and the ability to recover overpayments:

  • Entitlement to a pension benefit ends on death, subject to the plan terms (e.g. survivor benefits).
  • The person responsible for the beneficiary’s estate (e.g. the executor) may be held personally liable for overpayments and be required to repay funds.
  • Plan administrators should act as soon as they become aware of a death and can get retroactive recovery even if time has passed, and payments have been made, since the death.

Facts of the case – presumption of life

Mr. R, who suffered from Alzheimer’s, disappeared one day while walking near his home in rural Quebec. He died shortly thereafter but his remains were not discovered for several years. In his absence, he was presumed alive under art. 85 of the C.C.Q. and Carleton continued making his pension payments. That presumption lasts for up to seven years or until the absentee is located.

Mr. R.’s remains were located just before the end of the seven year period but his death was declared to have occurred at the beginning of the period (i.e. when he went missing). The C.C.Q. did not explicitly address Mr. R’s rights where the presumption of life had been rebutted.

Court decision – payments end on death, which occurred on disappearance

The Supreme Court majority’s decision confirmed restitution to Carleton retroactive to the date of Mr. R.’s actual death, rather than when his remains were found. While he was presumptively entitled to receive payments during the seven year period, those rights ended when his death was declared to be the earlier date.

The majority rejected the alternative, saying the C.C.Q. should not be interpreted so as to create a windfall to Mr. R or his beneficiaries at Carleton’s expense. They found that pension plans cannot be expected to continue benefits indefinitely and said that “Life, at some point, must move on,” and at that point (seven years, in Quebec), the protection of the absentee’s interests “take[s] a back seat to long-term certainty and pragmatism”.

Plan allowed to recover even though it had continued payments

Carleton was not initially notified of Mr. R’s mysterious disappearance. It learned of the story nearly a year later from media reports about Mr. R.  At that time, Carleton nearly stopped making payments to Mr. R. When it was presented a demand letter by Ms. T, who had been appointed to serve as tutor (guardian) in his absence and liquidator of Mr. R’s succession (executor of his estate), it reluctantly continued payments “without admission”. The courts concluded, based in part on Carleton’s reluctance to continue the payments, that the payments were made in error and could be recovered and not, contrary to Ms. T’s argument, made with liberal intention (gratis).

Unambiguous language terminating benefit

Like the lower courts, the Supreme Court majority agreed that the plan “unambiguously” terminated Carleton’s obligations on the date of death based on:

  • the plan text providing that payments cease when “the Member’s death occurs” (rather than when the Member’s death is certified); and
  • a memorandum of election in which Mr. R chose to draw a “single life pension”, payable monthly for his “remaining life only”, with all payments to stop upon his “death”.

The majority held that the words “life”, “remaining lifetime” and “death” were sufficiently clear and did not require further definition.

Guardian/executor required to repay overpayment

Carleton named Ms. T as defendant, both personally and in her capacities as tutor and liquidator.  The trial judge held that Ms. T could be personally liable, and that aspect was not challenged in either appellate decision.

Guidance for plan administrators

While the Carleton University decision relates specifically to an ambiguity in the C.C.Q., it is helpful to pension plans in that:

  • There is recognition that pension benefits end on death, subject to the terms of the pension plan. The termination of a lifetime benefit upon death of the individual (and entitlement to any survivor benefits) should be stated in clear language, both in the plan text and any election forms signed by the individual;
  • Courts can take a pragmatic approach to interpreting absentee legislation, affording plans:
    • the certainty of relying on the date of death provided in official documents; and
    • the finality that such certainty will be reached within a prescribed period;
  • A plan can be aware of a beneficiary’s absence and continue making payments “without admission”, while still preserving the right to argue those payments were made in error and recover overpayments; and
  • A claim to recover overpayments can be made against an estate executor or absentee guardian personally as well as the estate or absentee.

This update is intended for general information only. Should you have questions on the above, please contact a member of our Pensions & Benefits group.

 

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