A participant in a Multi-employer H&W Plan got divorced. Under the terms of the SPD, he was to notify the Plan immediately about this event. He did not do so. The Plan did not find out (and had no way to find out) that he was divorced.

His ex-wife subsequently incurred medical bills which were submitted to the Plan for payment. Still believing that the ex-wife was the participant's beneficiary (as his spouse), the Plan made those payments.

It was not until three years later that the Plan found out about the divorce.

The Plan would like to bring suit against the participant for the money it paid out due to his failure to notify (as required by the SPD).

A couple questions:

1) What basis does a Plan have to pursue such an action against a participant; and
2) Should the action be brought in federal or state court?

I have done research on the issue and have come up empty-handed. Just wondering if anyone else has run into this situation and how they addressed it.

Thanks a lot.

Your basis is fraud. The participant should have notified you of the change. As for any legal questions, you should rely on your attorney(s) for advice. Good luck.

L:

What was the fraud committed by the Participant? Failure to notify the plan of the change in marital status is not fraud because the participant did not profit from such failure to notify. Further the participant can claim the he was not aware of such a duty to notify the plan because he never read the spd.

To prove fraud you have to prove that the employee intended to proft from providing false information. The plan's only recourse is against the spouse who will deny any knowledge of ineligibility.

The case would have to be brought in Fed ct. since it involves overpayment of benefits.

The participant was, or should have been aware, that the divorce resulted in the ex being non-qualified for coverage. They did profit, someone paid the medical bills for an ineligible person. Failure to know that something is a crime is not a defense.

But if the person who profited was someone other than the participant there is no basis for fraud. You are ignoring that the ex was the person who profited from the coverage not the P. Failure to be aware of a plan provision does not create liability for the P. Bad results for the plan do not mean that a participant must pay to make the plan whole.