Judge Nixes Cigna's Pension Math in Long-Running Case

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By Jacklyn Wille

Jan. 19 — In the latest installment of a 15-year legal battle, a federal judge ordered Cigna Corp. to change the way it calculated its workers' pension benefits, despite noting that the ruling would cause the company to make some overpayments (Amara v. CIGNA Corp., D. Conn., No. 3:01-cv-02361-JBA, 1/14/16).

The lawsuit—which challenged Cigna's 1998 decision to convert its workers' retirement benefits from a traditional defined benefit pension plan to a cash balance plan—ultimately resulted in a seminal U.S. Supreme Court case on judicial remedies under the Employee Retirement Income Security Act, along with a court ruling awarding plan participants increased benefits. In this most recent decision, Judge Janet Bond Arterton of the U.S. District Court for the District of Connecticut Jan. 14 rejected several of Cigna's proposed methods for calculating the pension benefits it owes workers under the previous court rulings in this case.

Arterton acknowledged that her Jan. 14 ruling would “inevitably lead to some overpayment on Cigna's part,” because she barred the company from discounting participants' opening account balances and forced it to use a different offset for Social Security benefits.

However, she said that any ambiguities or close calls in the calculations should be resolved in the participants' favor, because Cigna misrepresented the effects of the pension plan conversion and failed to keep detailed records that would support its calculations.

Despite criticizing several aspects of Cigna's proposed methodology, Arterton nevertheless found that the company wasn't required to make special adjustments for early retirement benefits, survivor's benefits or certain other discrete issues. On that point, Arterton noted that early court orders relieved Cigna of any obligation to provide additional relief for particular class members.

Arterton also rejected the participants' request that Cigna be ordered to create a compliance plan explaining how it will pay the required benefits. According to Arterton, the Cigna defendants “have not yet shown themselves to be noncompliant.”

Finally, Arterton ordered the company to provide records backing up its claim that more than 9,000 of the class members weren't entitled to any relief whatsoever.

Fifteen-Year Battle

The case stemmed from CIGNA's decision to convert its traditional defined benefit pension plan to a cash balance plan in 1998.

A group of participants filed a lawsuit in 2001, and in February 2008, the District of Connecticut determined that Cigna violated ERISA's notice and disclosure requirements when it issued plan communications that failed to explain that participants' benefits would be subject to “wear away” (33 PBD, 2/20/08).

Four months later, the district court fashioned a remedy consisting of all accrued benefits under the defined benefit plan plus all accrued benefits under the cash balance plan—a remedy the U.S. Court of Appeals for the Second Circuit referred to as “A+B” benefits.

The district court specifically said that the remedies would fall under ERISA Section 502(a)(1)(B), which provides a claim for plan benefits, rather than Section 502(a)(3), which allows appropriate equitable relief to remedy fiduciary breaches (116 PBD, 6/17/08).

The Second Circuit affirmed this ruling without written rationale (192 PBD, 10/7/09).

The Supreme Court reviewed these rulings and unanimously held that ERISA Section 502(a)(1)(B) didn't permit the district court to reform the terms of the Cigna plan. However, it instructed the lower courts to consider whether a similar remedy could be available under Section 502(a)(3) (95 PBD, 5/17/11).

On remand, the district court analyzed the issue under Section 502(a)(3) and ordered Cigna to reform its plan to provide increased benefits (245 PBD, 12/26/12).

The Second Circuit affirmed this order in 2014 . The parties then began litigating over the proper methodology for carrying out the courts' directives.

The participants were represented by Law Offices of Stephen R. Bruce; Harris, Wiltshire & Grannis; Green & Sklarz; and Walsh Woodard. Cigna was represented by Robinson & Cole and Morgan Lewis & Bockius.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com