Supreme Court Vacates Ruling Ordering Remedies for Deficient SPDs

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In a long-awaited decision, the U.S. Supreme Court May 16 vacated a federal district court's ruling that had ordered CIGNA Corp. to reform its pension plan as a remedy for the plan administrator's violations of the Employee Retirement Income Security Act's notice provisions (CIGNA Corp. v. Amara, U.S., No. 09-804, 5/16/11).

Writing for the court, Justice Stephen Breyer found that ERISA Section 502(a)(1)(B), which allows plan participants and beneficiaries to bring lawsuits to enforce the “terms of the plan,” was not the proper channel through which the district court could remedy CIGNA's ERISA violations.

The notice violations occurred in summary plan descriptions issued to plan participants, and the court resolutely found that SPDs are not themselves “plans" that can be enforced under Section 502(a)(1)(B).

Breyer and five other justices went on to say that ERISA Section 502(a)(3)'s equitable remedies provision could possibly provide remedies to the CIGNA plan participants. But in a concurring decision, Justice Antonin Scalia said that while he concurred with the court that the district court could not issue its remedies order under Section 502(a)(1)(B), he disagreed that it was necessary for the court to delve into the possible remedies that would be available under Section 502(a)(3).

Justice Sonia M. Sotomayor did not participate in the decision.

One of Many Lawsuits Alleging Discrimination

The Supreme Court announced in June 2010 that it would take up the issue of whether pension plan participants must show that they were “likely harmed" by a deficient SPD before they will be entitled to recover plan benefits as set out in the SPD (61 BTM 212, 7/6/10). The certiorari grant came one month after Acting Solicitor General Neal Kumar Katyal filed a brief with the high court, urging it to turn away two certiorari petitions filed by CIGNA Corp. and participants in CIGNA's cash balance pension plan.

The case originated as one of the many lawsuits alleging that cash balance pension plans are age discriminatory. This notion that cash balance plans discriminate against older workers has been shot down by all federal appeals courts, and the Supreme Court had repeatedly declined to entertain the issue.

Like the other federal courts, the U.S. District Court for the District of Connecticut ruled in February 2008 that CIGNA's cash balance plan did not discriminate against older workers.

However, the district court found that CIGNA violated ERISA's notice and disclosure requirements when it gave participants notice of the conversion from a traditional defined benefit plan to a cash balance plan without explaining, for example, that the plan would result in a “wear away” of benefits.


The full text of the opinion is at http://op.bna.com/pen.nsf/r?Open=jmer-8gwkvw.