An SPD is not the Plan: Why Amara v. Cigna is a Mixed Blessing

Since it is hot off the presses, I would be remiss in not at least commenting on the the Supreme Court's recent decision in Amara v. Cigna. The Court declares quite plainly that plan summaries, like summary plan descriptions and summaries of modifications, are not the "plan" provisions that can be enforced under ERISA. Instead, the formal plan document is what controls the benefits and courts cannot change the benefits provided by the plan. Were it that simple, the Amara case would be a huge boon for every plan sponsor struggling with plan communications. Factually, the case arose from Cigna's conversion of its pension plan into a case balance plan. The participants sued, claiming that Cigna did not satisfy the ERISA disclosure requirements during the transition. The District Court agreed and "reformed" the new plan, then ordered Cigna to pay benefits under the reformed plan. The Second Circuit agreed but the Supreme Court did not. First, the Supreme Court found that ERISA only grants the ability to enforce plan terms, not to change them. So the District Court could not modify the terms of the plan. Second, and something that can be seen as a boon to plan sponsors, administrators and fiduciaries, the Court found that claims for benefits under ERISA 502(a)(1)(B) cannot be based on wrong information in summary documents. The claim for benefits can only be based on what the plan provides. Third, the Court rejected the idea that it was enough to show "likely harm" to pursue a claim. There has to be actual harm. So plaintiffs have to show they actually suffered some loss. But it is not all rosy. The Court went on to find that "equitable remedies" under 502(a)(3) might include monetary damages. Or it might include equitable estoppel. Which means that while the District Court could not reform the plan, it might be able to find some other form of remedy to compensate the plaintiffs. Just not plan benefits. So while this case affirms that ERISA does not provide specific relief for misrepresentations, it does clear the way somewhat for courts to re-evaluate what equitable remedies might be in these situations. So what does that mean for us? Well, step one is to see what our plan document is. If you have a "wrap document" where the SPD and plan document are rolled into one, this may have no bearing on you. But if you have separate SPDs and plan documents, now would be a good time to review them to make sure they don't conflict. More importantly, make sure your plan document actually provides the benefits you think it provides. Step two: set up a process for verifying content of plan summaries and plan communications against the plan document before they are sent to participants. Follow this process as a means to weed out misrepresentation issues and, ideally, prevent misrepresentation lawsuits. Step three: don't change your plan terms without carefully considering steps one and two and consulting with your benefits counsel. The Cigna plan changed in 1998 and they have been fighting this lawsuit since 2001. That's a lot of money on legal fees on the back end that might have been avoided by some due diligence on the front end. So be comfortable calling your attorney at Fox Rothschild sooner, rather than having to call us later.

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