Pension Fraud

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 What Is a Pension?

A pension can best be described as a series of payments made to an individual upon their retirement. These payments, typically disbursed at regular intervals, are derived from an investment fund the retiree contributed to during their working years.

This investment fund is established based on specific terms agreed upon between the employee and their employer as part of a legally binding arrangement. The specific details, such as the types of benefits or assets an employee is entitled to are outlined in the “pension plan.”

The employee’s salary, length of employment, age at retirement, and other benefits are taken into account when calculating the pension disbursements, depending on the specific terms of the pension plan.

What Is Pension Fraud?

Pension fraud involves the use of deception or misrepresentation in relation to a pension claim.

Typically, pension fraud arises in one of two scenarios:

  1. A fraudulent act occurs during the distribution of pension benefits or payments; or
  2. An individual commits fraud with the intent to steal another person’s pension funds.

The first type of pension fraud typically involves a conflict between an employee and their employer, where the employer is accused of acting fraudulently concerning the employee’s pension benefits.

The second type of pension fraud encompasses a variety of scams or schemes aimed at acquiring a retiree’s personal information, which is then used to steal or misappropriate their pension savings. Mortgage fraud schemes, for example, can be employed to obtain sensitive information under the guise of a mortgage arrangement between the victim and the fraudster.

What are Some Examples of Pension-Related Fraud?

Examples of pension-related fraud committed by an employer may include:

Misrepresenting the Monthly Payment Amount the Retiree will Receive

An employer tells an employee that they will receive a monthly pension payment of $3,000 upon retirement. However, the actual amount they are entitled to is $4,000. The employer knowingly provides false information to reduce their pension obligations, which constitutes fraud.

Providing False Information About the Transferability of the Retiree’s Pension Rights or Benefits

An employee is informed by their employer that their pension benefits cannot be transferred to a surviving spouse or beneficiary in the event of their death. In reality, the pension plan does allow for the transfer of benefits upon the employee’s death. The employer’s deceitful actions deny the employee’s family the financial support they are entitled to.

Supplying Incorrect Information Regarding an Employee’s Contributions to Their Retirement Fund

An employer reports that an employee has contributed $50,000 to their pension fund over their years of employment. However, the employee has actually contributed $75,000. The employer’s false reporting results in the employee receiving lower pension benefits than they are rightfully owed.

Various Related Issues, Such as Tax or Insurance Fraud, Connected to the Pension Plan

An employer falsifies the value of the pension plan’s assets to reduce the company’s tax liabilities. This manipulation not only results in tax fraud but also jeopardizes the solvency of the pension plan, putting the retirement benefits of the employees at risk.

In another example, an employer purchases an annuity contract to fund their employees’ pension benefits but misrepresents the cost of the annuity to the employees, pocketing the difference. This act of insurance fraud undermines the employees’ trust in the pension plan and may result in them receiving lower benefits than expected.

Other examples of pension fraud unrelated to an employer may include:

  • Mortgage or loan fraud schemes involving the withdrawal of funds from a pension.
  • Fraud targeting elderly individuals or those with substantial savings, particularly when the perpetrator is a caretaker or nursing home employee.
  • Abuse of power of attorney privileges leading to fraudulent activity.
  • Digital or online theft of funds from pension accounts.

Pension fraud may also involve a trustee or another third party responsible for overseeing the pension holder’s assets. Such cases may involve violations like commingling the pension’s assets with their own or using the pension funds for personal gain (e.g., purchasing expensive gifts for themselves).

How Is Pension Fraud Remedied?

Pension fraud is typically addressed through civil lawsuits against the party responsible. In most cases, courts will issue a damages award to help the victim recover their lost pension funds or benefits.

Damages in pension fraud cases can include:

  1. Compensatory damages: These damages are intended to compensate the victim for their financial losses resulting from the fraud, such as the amount of pension benefits that were wrongfully withheld.
  2. Consequential damages: These damages cover additional financial losses that resulted from the fraud, such as costs incurred in attempting to recover the lost benefits or any financial hardships that arose due to the withheld pension benefits.
  3. Punitive damages: In cases where the fraud was particularly egregious or malicious, the court may award punitive damages to punish the wrongdoer and deter similar fraudulent actions in the future.

When filing a civil lawsuit for pension fraud, it is advisable to follow these steps:

  1. Consult with an attorney: An experienced attorney who handles pension fraud or employment law cases can help you understand your legal options, assess the strength of your case, and guide you through the filing process.
  2. Gather evidence: Collect relevant documents and evidence, such as pension plan details, correspondence with the employer or pension plan administrator, and financial records that demonstrate the fraud.
  3. Draft a complaint: With the help of your attorney, draft a legal complaint outlining the allegations of fraud, the parties involved, and the damages you are seeking.
  4. File the complaint: Submit the complaint and required filing fees to the appropriate court. The court will then serve the defendant with a copy of the complaint, allowing them to respond.
  5. Litigation process: The litigation process may involve discovery (exchanging evidence and information between parties), settlement negotiations, and possibly a trial if a settlement cannot be reached.

Additionally, criminal charges may be filed in instances involving tax fraud or other white-collar crimes. Criminal penalties may include substantial fines, jail time, or both, depending on the severity of the case.

To file criminal charges for pension fraud, the following steps should be taken:

  1. Report the fraud: Contact your local law enforcement agency or the appropriate regulatory body, such as the Department of Labor, to report the suspected fraud.
  2. Provide evidence: Provide any relevant documents and evidence that support your allegations of fraud.
  3. Investigation: Law enforcement or the regulatory agency will conduct an investigation to determine if criminal charges are warranted.
  4. Prosecution: If the investigation reveals sufficient evidence to support the allegations, the prosecutor’s office may decide to file criminal charges against the party responsible for the fraud.

Should I Hire a Lawyer for Help With Issues Involving Pension Fraud Claims?

Given the significant amount of funds often involved in pension benefits and retirement plans, it is advisable to consult a local employment lawyer for assistance in managing or negotiating a pension plan that meets your needs.

An experienced workers’ compensation lawyer can help protect your interests and offer legal advice on potential fraud schemes that could affect your pension fund.

Additionally, if you need to file a pension fraud claim, a lawyer can represent you in court and determine the best course of legal action to recover damages owed to you.

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