Employee benefit cases (better known as ERISA cases, after the Employee Retirement Income Security Act) aren’t the most exciting topic in the world. At this point, just by my very mention of ERISA, I’m imagining your mouse wandering off to view another page.
But yesterday, the U.S. Supreme Court agreed to hear an important case that arises out of Connecticut about retirement benefits and alleged misrepresentations by the company of those benefits. The case, CIGNA v. Amara, has been decided in the employees’ favor at the lower court and appellate court thus far, but the issues that it raises are incredibly complex. (The decision at the District Court level was 122 pages!)
I’ve discussed this case in various posts over the last three years here, here and here. The District Court said in early 2008 in words that would ring true even more:
Difficult, time-consuming, and expensive litigation with uncertain results – such as this case represents – is assuredly not a sensible way to manage the Nation’s retirement system for either employers or employees. Sadly, at least for now, litigation appears to be the only option available to them.
So, what’s the case about? Lawmemo does a good job recapping it here with copies of the briefs filed by the parties:
After CIGNA converted its traditional defined benefit pension plan to a cash balance plan, it issued a summary plan description (SPD) to plan participants. Amara brought a class action claiming that CIGNA failed to comply with ERISA’s notice requirements and SPD provisions. The trial court held for Amara; the 2nd Circuit affirmed. The finding was that the SPD misrepresented the terms of the plan itself. Although CIGNA argued that the plaintiffs failed to show injury, the court found that the participants had shown "likely harm" and that CIGNA had failed to establish harmless error.
The U.S. Supreme Court agreed to hear the case during its 2010-2011 term. The issue to be decided is as follows:
Whether a showing of “likely harm” is sufficient entitle participants in or beneficiaries of an ERISA plan to recover benefits based on an alleged inconsistency between the explanation of benefits in the Summary Plan Description or similar disclosure and the terms of the plan itself.
In other words, what is the proper standard for a court to use to determine whether there should be a recovery for an alleged discrepancy between a SPD and the actual plan itself? It remains to be seen where the court will come out on this but for those employers who converted their pension plans to 401(k) plans, the case will have national significance.
(In the interests of full disclosure, I should note that I am familiar with one of the named plaintiffs, although I have not discussed the case with her in any detail, nor do I have any role in the litigation.)