CIGNA Corp. v. Amara
Issues
When a corporation’s summary plan description and actual retirement benefit plan are inconsistent, is the proper standard for measuring harm a standard of “likely harm” rebuttable by the defendant after a showing of “harmless error,” or must a plaintiff show “detrimental reliance” on the inconsistency?
CIGNA Corporation changed its employee retirement plan from a traditional defined benefits plan to a cash balance plan. Under the Employee Retirement Income Security Act (“ERISA”), companies that change their retirement plan must release a summary plan description (“SPD”) that outlines the changes for employees in a manner that the average employee can understand. CIGNA released an SPD that described the change but did not mention a “wear-away” period during which the enrolled employees would continue earning credits under the plan while their minimum benefit would remain the same for a period of time. The Respondents, current and former CIGNA employees, sued in federal court, alleging that the inconsistency between the SPD and the actual benefit plan violated ERISA. The district court found for the plaintiffs, using a standard of “likely harm” to determine whether the employees were harmed by the inconsistency between the SPD and the original plan, and the Second Circuit affirmed. CIGNA appealed, arguing that a showing of “detrimental reliance” on the part of the employees is required before they can receive a remedy. The Court’s decision will likely affect the contents of SPDs and the availability of pension benefit plan class actions.
Questions as Framed for the Court by the Parties
Whether a showing of "likely harm" is sufficient to 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.
Respondents, Janice C. Amara and others (collectively “Amara”), are current and former employees of CIGNA Corporation. See Amara v. CIGNA Corp., 534 F. Supp. 2d 288, 295 (D. Conn.
Edited by
Additional Resources
· United States Department of Labor: Employee Retirement Income Security Act
· Society for Human Resource Management, Allen Smith: Supreme Court Will Review ERISA Plaintiffs' Showing in Summary Plan Description Case (July 7, 2010)
· Richard Glass: Is It Time to Re-Examine What it Means to Fulfill Your 401(K) Fiduciary Responsibilities? (Mar. 10, 2008)