Companies that discover pension overpayments can demand participants pay back the money or see their future benefits slashed. By Eleanor Laise, Senior Editor June 26, 2012 EDITOR'S NOTE: This article was originally published in the July 2012 issue of Kiplinger's Retirement Report. To subscribe, click here.Retirees collecting a steady monthly pension benefit have a great foundation for retirement security -- unless one day their pension plan demands some money back. SEE ALSO: A New Chapter of Pension Plan Woes A growing number of retirees are finding their reliable pension income suddenly disrupted by a "recoupment," in which a plan administrator orders a participant to return benefit amounts that he was accidentally overpaid. The overpayments can stem from a plan math error or misapplication of plan rules. Retirees often have no idea they've received excess benefits until the plan hands them the recoupment bill. When administrators discover the mistake, often during a plan audit, they generally demand full repayment in a lump sum or by slashing future monthly benefits. Recoupment can turn into a triple whammy for retirees: Plans first adjust monthly benefits to the correct amount, then demand repayment of excess benefits paid in years past, and sometimes ask for interest on those overpayments. Recoupment can continue even after plan participants have died, leaving survivors to pay the bill. "The retiree rarely, if ever, knows a mistake has been made," says Karen Ferguson, director of the Pension Rights Center, an advocacy group. "So they spend the money and many years later are told to pay it all back right now." Advertisement Although recoupments aren't new, some pension experts say they've seen an uptick in recent years as cash-hungry plans scrutinize records more closely. Overpayments can come back to bite plan participants long after they began. After a years-long court battle, the Oregon Public Employees Retirement System is now proceeding to recover roughly $165 million in overpayments from more than 29,000 benefit recipients. Many of the beneficiaries retired between 2000 and 2004. The affected Oregon retirees who receive monthly benefits will be asked to repay the entire amount in a lump sum, set up a payment plan or see their monthly benefit reduced. Those without ongoing monthly benefits, such as people who received a lump sum at retirement, must make a lump-sum repayment or set up a payment plan. Marc Feldesman, who has been receiving monthly benefits from the Oregon plan since retiring in 2002, says he'll have to repay about $14,000. "It has caused a lot of aggravation," says Feldesman, 65, a former college professor and administrator in Lake Oswego, Ore. "I gave up a very good job in exchange for this permanent benefit, and at no time was there a little asterisk" indicating that the benefit could change, he says. Fighting the Pension Plan Advertisement Retirees may have more power to fend off a recoupment than they -- or their plan administrators -- realize. In an advisory opinion that's not widely known among administrators, the federal Department of Labor has said that plans can consider the hardship to a participant when determining whether to seek recovery of overpayments. By pointing to this advisory opinion, as well as the fact that participants generally don't even realize they're getting the incorrect amount, attorneys are often able to get recoupments sharply reduced or waived, says Jeanne Medeiros, managing attorney at the New England Pension Assistance Project. Given the possibility of a waiver, participants faced with a recoupment should seek legal help. The U.S. Administration on Aging's Pension Counseling and Information Program offers free assistance. Find a program in your area at www.pensionrights.org/counseling-projects, or go to www.pensionhelp.net to connect with other organizations offering free help. Most participants, of course, would rather avoid a repayment request in the first place. One preventive measure is to carefully read your summary plan description and check individual benefit statements to ensure they correctly reflect your years of service and other details. "If it looks as though there's an obvious mistake in your favor, don't just keep quiet," Ferguson says, because you're setting yourself up for a recoupment down the road.