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May 2011

Cigna Corp. v. Amara - Summary Plan Description Is Not Part of An ERISA Plan

§ 502(a)(1)(B) Of The ERISA Does Not Authorize Relief For Misrepresentations In A Summary Plan Description

(May 16, 2011) __ U.S. __ 2011, No. 09?804; 11 C.D.O.S. 5787

On May 16, 2011, Justice Breyer of United States Supreme Court delivered the opinion of the Court holding that a summary plan description is not part of an ERISA plan, and that as a result, a plan participant or beneficiary may not recover for misrepresentations in an summary plan description under ERISA §502(a)(1)(B).

Cigna Corporation ("Cigna") had issued a pension plan in 1998 for its employees providing retiring employees with a defined benefit in the form of an annuity calculated on the basis of the employee's pre-retirement salary and length of service.  Cigna created a new plan that provided most of its retiring employees with a lump sum cash balance calculated on the basis of a defined annual contribution from Cigna as increased by compound interest.  Cigna told employees that the new plan provided "an overall improvement in retirement benefits" and guaranteed that retiring employees would receive at least as much as the benefits to which they were entitled as of January 1, 1998.  The employees challenged Cigna's adoption of the new plan, claiming in part, Cigna had failed to provide proper notice of the changes to the benefits, particularly because the new plan in certain respects provided less generous benefits. 

The Cigna employees filed a class action on behalf of approximately 25,000 beneficiaries in district court challenging the adoption of the new plan.  The district court held Cigna's disclosures violated ERISA and the notice failures caused the employees "likely harm."  In doing so, the district court did not require each individual member of the relevant Cigna employee class to show individual inquiry.  Rather, the district court found (1) that the evidence presented had raised a presumption of "likely harm" suffered by the members of the relevant employee class, and (2) that Cigna failed to rebut that presumption.  The district court, relying on Section 502(a)(1)(B) of ERISA, reformed the new plan and ordered Cigna to pay benefits accordingly.  On appeal, the Second Circuit Court of Appeals issued a brief summary order affirming the district court's decision.

The parties filed cross-petitions for writs of certiorari to the United States Supreme Court.  The Supreme Court granted Cigna's petition to consider whether a showing of "likely harm" is sufficient to entitle plan participants to recover benefits based on faulty disclosures. 

Cigna argued § 502(a)(1)(B) did not authorize the district court to enter the kind of relief requested.  The Supreme Court agreed that § 502(a)(1)(B) does not permit a court to change the terms of the plan as they previously existed.  Instead, a court is only permitted to enforce the plan terms.  The Supreme Court also held the summary plan descriptions provide communication with beneficiaries about the plan, but that the statements do not themselves constitute the terms of the plan for purposes of § 502(a)(1)(B).

Although the Supreme Court declined to extend relief under § 502(a)(1)(B), it did hold the types of remedies entered by the district court fall within the scope of the term "appropriate equitable relief" as set forth in § 502(a)(3).  In exercising its authority under § 502(a)(3), the Supreme Court explained a lower court may impose a remedy equivalent to estoppel, reformation of contract or surcharge where a showing of detrimental reliance is made.  In making this showing, a plan participant or beneficiary must only show harm and causation rather than demonstrate the more rigorous standard implicit in the words "detrimental reliance." 

The Supreme Court held that because the district court had not determined an appropriate remedy may be imposed under § 502(a)(3), the judgment was vacated and remanded to the district court to revisit its determination of an appropriate remedy for the violations of ERISA.

Justice Scalia, with whom Justice Thomas joined, concurred in the opinion.  The concurring Justices did not join in the opinion because they believed there was "no need and no justification for saying anything more" than § 502(a)(1)(B) of the ERISA does not authorize relief for misrepresentations in a summary plan description. 

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