WASHINGTON BUREAU – Members of the Supreme Court seem to be divided on the standard that should be used when determining whether all beneficiaries of a pension plan should receive additional benefits because the plan’s summary plan description (SPD) was inaccurate.
The case before the court, CIGNA Corp. vs. Amara, No. 09-804, concerns a move by CIGNA Corp., Philadelphia (NYSE:CI), to switch to a cash balance pension plan in 1998.
The lead plaintiff in the case, Janice Amara, was a participant in the plan.
The lawyers representing Amara and the other 27,000 plan participants say the SPD gave incomplete, inaccurate information about how the conversion would work and how the new plan would perform.
A federal judge in Connecticut said the plan participants were “likely harmed” and deserved damages. The district court verdict was sustained by the 2nd Circuit U.S. Court of Appeals.
According to comments made during oral arguments Tuesday, the damages could amount to about $70 million if the district court award is upheld.
CIGNA appealed to the Supreme Court.
Other circuits have come to different conclusions about the issues involved in the case, and the Supreme Court’s interpretation of the Employee Retirement Income Security Act (ERISA) in this case will be of critical importance to plan sponsors, according to Myron Rumeld, a partner in the New York office of Proskauer Rose L.L.P.
There would be “a tremendous amount of exposure to plan sponsors any time a summary plan description is challenged as misleading and inaccurate if participants can recover from the plan on a class-action basis,” Rumeld said.
If the plan participants go on to win the case, one problem would be that the participants would be collecting damages based on their misunderstanding of what the plan offered, Rumeld said.
“In other words, the plaintiffs want to collect on something the plan never intended to provide just because the plan summary was inaccurate in characterizing what the plan would provide,” Rumeld said.