This is about the guy's Social Security money. You could argue that he shows up with unclean hands at court, after all he knew he had been declared dead since 2005 and did nothing about it in the intervening years.
I would guess that the limit is so people don't cheat the system. Someone could "disappear" for three years, let their loved ones collect life insurance or in this case SS benefits, then come back and say it was all a mix up. That's the only reason I could think of. It makes me wonder if something happened in a past case that prompted them to create the three year limit.
That should be covered by 'fraud' related laws and he would have to be jailed and pay his dues to the society. Not by keeping him still labelled as 'dead'.
Recovery of the defrauded money (life insurance, social security benefits etc) from the family/beneficiaries is a tricky one. The law/judge would have to look into the knowledge/involvement of the family regarding the fake 'death' situation. Also any benefits they would have received from state (like child support obtained from state in lieu of a paying spouse, unemployment benefits that the spouse would have earned for the family had he been 'present' and unemployed rather than fakely dead etc) if the person were not fake dead but rather just "unemployed and/or unable-otherwise to pay child support" should not be recovered from the family.
Life insurance payments are to be considered 'windfall' and would have to be recovered from family to as much extent possible without making them any worse off than they were just before the person fake died.
The obligatory references are Le Gentil (http://en.wikipedia.org/wiki/Guillaume_Le_Gentil) and the Uttar Pradesh Association of Dead People (http://en.wikipedia.org/wiki/Association_of_the_Dead)