Over the years, many federal courts have been asked to resolve conflicts between the terms of an ERISA plan's Summary Plan Description, and the language of the underlying plan itself. Last year, the U.S. Supreme Court accepted review of a case seemingly for the purpose of clarifying legal standards for resolving conflicts between the two documents. However, on Monday, the Court's opinion took a novel path that creates a potential remedy for participants who believe they were misled by the plan trustee.
In CIGNA Corp. v. Amara, CIGNA announced that it was switching its defined benefit pension plan to a cash balance plan. The plaintiffs alleged that communications to plan participants by CIGNA about the conversion made it appear as if their benefits were not being reduced. They sued under ERISA, seeking recovery of lost benefits consistent with the alleged misleading statements made in the summary explanation.
The district and appellate courts relied on ERISA §502(a)(1)(B) to determine that the plaintiffs were entitled to relief due to misrepresentations made in the SPD. The Supreme Court unanimously reversed this ground for relief. The Court concluded that §502(a)(1)(B) only allows courts to enforce plan terms, and not to reform them based on SPD misrepresentations. In this case, the plaintiffs were actually seeking enforcement of an earlier version of the pension plan.
However, in a separate 6-2 portion of the opinion, the Court found that ERISA §502(a)(3) may offer plan participants relief in these circumstances. This section allows courts to impose equitable relief against plans based on misrepresentations in the SPD. This relief can include traditional equitable measures, such as plan reformation and equitable estoppel, but also provides for a surcharge against a plan trustee consisting of monetary damages based on the misrepresentation.
Finally, the Supreme Court said that under §503(a)(3), plan participants do not need to demonstrate detrimental reliance on the misleading SPD in order to receive equitable relief. Instead, they only need to show that the violation caused them financial harm. This decision will impose an important new equitable remedy path for plan participants who believe that they were misled with respect to explanations of plan terms made by trustees.