In October 2022, the Nova Scotia Supreme Court released a decision dealing with pension benefits paid in error to a pension plan member (Belmont Financial Services Incorporated v. Watters, 2022 NSSC 292). The Court concluded that repayment was required.
Belmont Financial Services Incorporated (“Belmont”) was retained by a union to administer various benefit plans, including a pension plan, of which Mr. Watters was a member. He transferred his pension benefit to another plan, after which time retroactive benefits were added to his pension entitlement. He did not complete the paperwork to transfer this smaller retroactive amount to his new pension plan and was confused about his entitlement to his prior pension benefit, even after meeting with Belmont.
When Mr. Watters initiated pension payments from the plan administered by Belmont, he was unaware that the monthly amounts he received were much larger than he should have been receiving. After three years of payment, Belmont realized they had made an administrative error in not removing the transferred amounts from their calculations and advised Mr. Watters of this error. By then, Mr. Watters had been overpaid by over $42,000.
The court reviewed cases related to mistaken payments and found that a mistaken payment was on its face required to be repaid. Although Mr. Watters had spent the money in question as it was paid to him, he was not able to prove that he had relied specifically on the amounts in question such that there was a “juristic reason” to not require repayment. In this context, the court noted that the overpayment to Mr. Watters, if not addressed, would affect the other members of the pension plan.
Mr. Watters counterclaimed that Belmont was negligent in making the payments. While the court accepted there was a misrepresentation, Mr. Watters was not able to prove that he had relied on the payments provided by Belmont or the misrepresentation to his detriment.
This case may provide comfort to administrators in relation to overpayments that occur in the context of administering a pension plan. However, it also provides a cautionary tale regarding the effort and cost of resolving such errors as well as the potential for a different result if the member has proof of reliance on the overpayment. Finally, it is always important to be sensitive to the financial distress that can be experienced by members as a result of any error.
This blog provides some of the highlights of the case, not a full review. If you wish to discuss the case in more detail in relation to a particular pension plan or circumstance, please contact one of Cavalluzzo’s experienced pension lawyers, listed below.