Kaiser Fights $800k Bene to Pres
By Philip A. Janquart
NEW YORK (CN) - In a federal court complaint, former Kaiser Permanente president John Baackes says the company wants him to return almost $800,000 it paid him in a lump-sum retirement benefit.
Baackes, who was employed with the company for over 20 years, says he received the benefit after he sent Kaiser Permanente Retirement Plan notice of his intended retirement, effective February 1, 2011, shortly after his 65th birthday.
Kaiser responded with a retirement calculation that included his years of service from approximately 1976 to 1998 and ultimately paid him a lump-sum of more than $782,000, which he rolled over into an IRA account on February 14, 2011.
Kaiser, however, notified Baackes March 1, 2011, by letter, that he was erroneously overpaid, stating that the discovery of his participation in another plan changed the previous benefit calculation.
"It was recently discovered that your termination date should have been October 1, 1998 [instead of November 13, 2001]," the letter stated. "It was also discovered that you were a participant in the Defined Contribution Plan from December 1, 1976 through December 31, 1996. Benefit service during the time you were participating in the Defined Contribution Plan should not be included in the pension benefit calculation. Therefore, your corrected benefit service should be 1.78 years."
But Kaiser, Baackes says, can't cite a provision in either plan that supports its overpayment claim - something that is required by the Employee Retirement Income Security Act - or show that the company made any contributions on his behalf to another plan that would preclude him from claiming years of service toward his retirement.
"Mr. Baackes' employer never made a contribution to any such plan on Mr. Baackes' behalf," the complaint stated. "Mr. Baackes was a participant in a 403(b) plan, but made all the contributions himself. The Plan has been made aware and is aware of this fact but nevertheless continues to assert that it made the overpayment it identified in the Notice and continues to claim that Mr. Baackes owes the lump sum payment back."
Baackes made an appeal based on the company's errors, but has yet to receive an answer. Kaiser did, however, send him a letter through its attorney, Benjamin Spater, identifying a separate reason for the decision.
"Instead, the Spater letter states that the Plan overpaid Mr. Baackes because the January 4, 2010 version of the Plan Document (11 years after Mr. Baackes left employment with defendant Kaiser) purported to exclude his pre-1996 employment with Kaiser's predecessor, CHP, from consideration as service creditable years," the complaint said.
Baackes' attorney says, however, the plan that was in effect during his employment does not contain any such provision or exclusionary language, Baackes pointing out in his appeal letter that the company is merely attempting to find a scenario that fits its claim.
"It is well established that the Plan may not make its reasons for its determination a moving target," he said in his appeal letter. "A plan cannot test out one reason and then substitute another. A plan is bound by the reason it sets forth in its initial determination. Here, the initial determination was as set forth in and limited by the 'Overpayment Notice' and, under applicable case law set forth below, is bound by that initial determination. Moreover, even if the plan is not bound by the overpayment notice as an initial determination, it is bound by the overpayment notice as a 'denial' of a claim."
Baackes seeks a court order prohibiting the plan from "relying upon the new reasons set forth in the Spater letter to justify its position in this case," as well as a determination from the court annulling the plan's determination that it overpaid him retirement benefits and declaring he has the right to retain the lump sum
Baackes is represented by Mark Walsh of Gleason, Dunn, Walsh & O'Shea.