The claimant sues the ERISA plan for long term disability benefits, but refuses to reimburse Social Security repayments. What to do? Counterclaim.

Here’s the case of Bigda v Principal Life(D. Mass. February 3, 2011)(court allows plan administrator to pursue counterclaim for reimbursement).

FACTS: Bigda sought long term benefits under an ERISA plan. The administrator counterclaimed and asserted a constructive trust theory seeking reimbursement after Social Security issued benefits. (Bigda had signed a Reimbursement Agreement, promising to “to repay …within 30 days of the date the first money is received from social security.”) Bigda then moved to dismiss the counterclaim.

HELD: Motion to dismiss counterclaim DENIED.

  • The administrator presented the relevant contracts and paperwork confirming the agreement to repay benefits. These facts were sufficient for the plan to state a claim.
  • The Court rejected Plaintiff’s argument that the counterclaim was barred under 42 U.S.C. 407 which protects Social Security payments from being subject to legal process. The Court said: “[T]he funds…Principal is seeking are not the SSDI benefits….Although the amount in question happens to be the same as the amount of [Plaintiff’s] retroactive SSDI benefits, the funds [targeted] do not come from SSDI.