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If the Supreme Court had accepted the arguments of the plan participants, the Labor Department and the 2nd Circuit, that would have posed “a substantial threat to employer plan sponsors by subjecting them to class-wide relief for a miscommunication without requiring any showing of harm,” Myron Rumeld, a employee benefits partner in the New York office of Proskauer Rose L.L.P., says in a comment on the case.
If the participants had prevailed, a court could have enforced the terms of an SPD as understood by the participants, rather than terms of the plan itself, Rumeld says.
The Supreme Court now has made it clear that plan participants must show that an employer committed fraud in an SPD, or that an error caused harm, before they can ask a court to impose forms of equitable relief such as equitable estoppel, plan reformation, or surcharge, Rumeld says.
“The Supreme Court rejected the notion that there is a ‘one size fits all’ approach to claims based on faulty communications, such that all participants automatically recover additional benefits that were never intended under the terms of the plan,” Rumeld says. “The court correctly concluded that the SPD is merely meant to be a summary of the plan, and thus the mistaken terms of the SPD should not be enforced as a contractual matter.”
Rumeld
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