Reducing Distributions to Recoup Overpayments (Posted September 8, 1999) Technical Tip 12: The following question and answer were from the IRS Q&A Session at the 1998 ASPPA Annual Conference: A participant in a large defined benefit plan elected early retirement at age 55. This entitled him to a monthly lifetime retirement benefit of $250.69, plus a pre-social security monthly allowance of $55.95 until he attained age 62. However, the plan administrators never reduced the monthly payment at age 62, continuing instead to pay $306.64 for the next 12 years after the retired participant reached age 62. The retiree did not realize there was an error. Now the employer discovers the mistake and first asked for a lump sum payback or installment payments with interest of 5.44%. The retiree wrote a letter and the employer has now decided to withhold 25% of the $250.69 each month until the overpayments is repaid. Is this an appropriate and legal method of correcting his error? IRS Response: We believe the plan administrator can offset the monthly payments until received. View all Tips © 1999-2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.