The Gerontology Institute’s Pension Action Center is part of the McCormack Graduate School at UMass Boston. It provides free legal assistance to low- and moderate-income workers, retirees and their survivors in the six New England states and Illinois whose pension benefits have been wrongfully denied. This is one in an occasional series of posts about cases the center pursues on behalf of its clients.

 Pensions are supposed to provide modest but regular income to help retirees make ends meet. Imagine a pension plan that instead sends a beneficiary an unexpected bill for $37,000.

This actually happened to “Sue,” a Pension Action Center client from Bridgeview, Ill. The plan in question said it made a mistake long ago and, as a result, had been paying her too much for years. It wanted to settle the matter by cutting off all her payments in the future, starting immediately.

The PAC helpline has been receiving an increasing number of calls from clients like Sue dealing with pension plan “recoupments.” In those cases, pension plans seek to correct their own miscalculations by demanding repayment from unsuspecting beneficiaries.

It often takes plans years to discover their mistakes, due to poor compliance management. The overpayments add up month after month, often growing to tens of thousands, or even hundreds of thousands of dollars.

“When the plan finally discovers the error, it tries to recover the money from retirees, often regardless of their financial situation,” said PAC Director Anna-Marie Tabor. “This wreaks havoc on the lives of innocent retirees on fixed incomes, who cannot pay the money back.”

It certainly created a desperate problem for Sue, a 72-year-old grandmother who had been collecting pension benefits for 14 years.

The backstory: Sue and her husband divorced in the 1990s and, as part of the settlement, she was awarded one half of the pension benefit he earned as an hourly employee at a large transportation company during their marriage.

Sue worked as a waitress after the divorce, struggling to support herself and her children. She began receiving the pension benefit when her former husband took early retirement in 2004. She then retired from work outside the home and once again became a caregiver, this time for her three grandchildren.

That pension check became an important part of her income for years to come. Then Sue received a letter from the pension plan one day in 2018 demanding she return $37,000 in benefits it discovered had been mistakenly paid to her.

The problem: The early retirement of Sue’s ex-husband should have reduced the pension payment amounts. The plan discovered the error and adjusted her former spouse’s payments downward two years after his retirement. But it forgot to adjust Sue’s benefit and failed to notice the mistake until 2018.

Then the plan wanted its money back. But Sue’s only other income was a modest monthly Social Security payment and she had no savings. It was impossible for her to repay the plan and couldn’t make ends meet without the pension money she had been counting upon. Afraid of losing her house, she took a retail job to help close the gap and reached out to the PAC for help.

PAC attorneys were initially unable to negotiate a resolution with the plan. So they filed a claim on Sue’s behalf, arguing she had no knowledge of the overpayment and should not be required to compensate the plan for its own mistake. They explained Sue’s family and financial situation, and described the severe hardship that the recoupment would have on all of them.

The strategy worked. The pension plan relented and said it would restore Sue’s pension payment. The claim for $37,000 was eliminated and Sue no longer worries about losing her home.

“We were very happy to help Sue resolve a very serious pension problem she didn’t create or even know about for 14 years,” said Tabor. “But there are many retirees faced with sudden recoupment demands for huge payments they can’t possibly make. This is a growing problem retirement plans and regulators need to address.”