Lawyers representing the class of retirees from CIGNA will argue that their clients are entitled to "hundreds of millions" of dollars in retirement benefits as a result of misrepresentations made by CIGNA, according to a report in yesterday’s Hartford Courant.
The Courant — which finally reported on the decision 5 days after it came out and well after we posted on it — barely mentions the argument of whether the new cash balance plan is age discriminatory (which the court found it wasn’t). Instead, it focuses on the fact that CIGNA failed to mention that the benefits could be subject to "wear-away".
Eager to claim victory, the class representative attorneys now say that the disclosure argument is vitally important to the case:
Friday’s ruling will serve as "an excellent blueprint for other courts to scrutinize these disclosures" that companies make concerning conversion to cash balance plans, said Tom Moukawsher in Hartford, co-counsel representing the CIGNA employees. "This court decision is a precedent for looking at the underbelly of the disclosures for basic honesty."
Certainly the court was disturbed by communications by CIGNA. For example, in a Newsletter discussing the changes, the Court found that: "nothing in the Newsletter indicated to plan participants that their rate of benefit accrual might decrease, much less by a significant margin. And yet that is exactly what happened." (Decision at 80.) Indeed, as the Court said later:
Taking all of this information into consideration, the Court concludes that CIGNA was aware of the significant reduction in the rate of future benefit accrual that would affect at least a substantial proportion of its employees as a result of the transition to Part B, that CIGNA wished to avoid the employee backlash likely to result from a thorough discussion of these aspects of Part B, and that CIGNA sought to negate the risk of backlash by producing affirmatively and materially misleading notices regarding Part B. As a result, its § 204(h) notice failed to meet ERISA’s stringent standards.
As I indicated previously, both parties have until March 17th to brief the issue of what the appropriate remedy would be in this situation.
Although the lawyers for the class have reason to be pleased with the decision, certainly CIGNA and other companies nationwide must be relieved that the underlying conversion from a defined benefit plan to a cash balance plan itself has been upheld. If the court had found that the conversion was discriminatory, it could have had an impact nationwide; the decision here may have a more modest impact given the evidentiary findings of the court that are particular to this case.