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The U.S. Supreme Court issued an opinion on May 16 that clarifies when a participant or beneficiary may recover “other appropriate equitable relief” under 29 U.S.C. § 1132 (a)(3) for an ERISA violation. In CIGNA Corp. v Amara, 131 S. Ct. 1866 (2011), the Court considered the relief available to a class of participants and beneficiaries of CIGNA’s pension plan who alleged that CIGNA had intentionally misrepresented plan changes. In Amara, CIGNA informed the class that it intended to replace its existing pension plan with a new plan that it claimed would give them “significantly enhanced” benefits, the same benefit security as the earlier plan, and steadier benefit growth. However, once the new plan was implemented, it did not provide the promised benefits, and according to the district court, the new plan actually provided less favorable benefits to the class in a number of respects.

The district court found that the disclosures CIGNA made prior to implementation of the plan were incomplete and misleading, and that CIGNA had intentionally misled the class, in violation of its reporting and disclosure obligations under 29 U.S.C. §§ 1022 and 1024 (dealing with SPDs and other disclosures). Based upon these violations, the court found that the class was entitled to seek relief under 29 U.S.C. § 1132(a)(1)(B).  The court found that relief was limited, however, to those class members who suffered “likely harm,” although each individual member did not need to prove individualized harm.  Rather, the court found that the evidence raised a presumption of harm that CIGNA could try to rebut with contrary evidence, and that CIGNA did not rebut the presumption.  The court also found that it could invalidate the plan amendments under § 1132 (a)(1)(B), and could enjoin enforcement of the new plan.  The court also found that under this same remedial provision it could reform the plan to allow class members to receive benefits that were lost as a result of the plan amendments.  Accordingly, the court awarded additional benefits to those class members that had already retired and had began receiving benefits under the new plan, and increase the value of the accounts of the other affected plan participants.

In reviewing the lower court’s decision, the Supreme Court found that the court erred because § 1132 (a)(1)(B), which allows participants and beneficiaries to recover “benefits due . . . under the terms of [the] plan,” and to “enforce” the plan’s terms, did not authorize the relief granted.  This was so, the Court found, because instead of seeking to enforce the plan’s terms, the district court had “changed” those terms through its reformation of the plan and its injunctions.

Also, the Court found that the district court’s decision to “enforce” the plan summaries and descriptions provided by CIGNA to participants and beneficiaries was not authorized under § 1132 (a)(1)(B). Significantly, the Court state that “we cannot agree that the terms of statutorily required plan summaries…necessarily may be enforced ….as the terms of the plan itself.”   The Court found that other provisions of ERISA suggested that these disclosures were not intended to be part of the plan or to be enforced through this remedial provision.  The Court reasoned that it is the plan sponsor’s (typically the employer) duty to draft the terms of the plan, while the administrator is responsible for providing summary plan descriptions and other disclosures. Given these separate roles,  the Court found, “we have no reason to believe that the statute intends to mix the responsibilities by giving the administrator the power to set plan terms indirectly by including them in the summary plan description.”

After concluding that § 1132 (a)(1)(B) did not authorize the district court to grant such relief, the Court went on to find that § 1132 (a)(3) could allow for such relief.  This was so because § 1132(a)(3) allows a court to award “other appropriate equitable relief” to redress violations of ERISA or the plan’s terms. This provision thus allows relief that was typically available in equity.  The Court found that, “The case before us concerns a suit by a beneficiary against a plan fiduciary…about the terms of a plan…It is the kind of lawsuit that, before the merger of law and equity, [plaintiffs] could have brought only in a court of equity, not a court of law.”  The district court’s injunctions fit within this equitable relief category, as did its reformation of the plan to remedy CIGNA’s misrepresentations about the new plan.  The Court also found that the district court had essentially held CIGNA to what it had promised–that the new plan would not take away benefits employees had already accrued, which resembled the equitable remedy of estoppel.  The court further found that the monetary compensation awarded by the district court to those individuals who had already retired was equitable in nature, as it flowed from the trustee’s breach of fiduciary duty, and/or was necessary to prevent the trustee’s unjust enrichment as a “surcharge” against the trustee.   

While CIGNA argued that the district court could not award relief unless the individuals showed “detrimental reliance” or prejudice flowing from any alleged misrepresentations, the Court found that this was not necessarily so.  Rather, the Court found, equity courts regularly reformed contracts where there were fraudulent omissions or statements that affected the substance of the contract.  Also, equity courts routinely “surcharged” trustees in an amount that would make beneficiaries whole by reason of a trustee’s breach.  Neither of these remedies expressly required a showing of detrimental reliance.  The Court did not establish a black line rule in all cases, recognizing that the remedy and proof required to establish the claim may vary depending on the facts.  The Court did agree with CIGNA that it would be err for a court to “surcharge” a trustee for breaches where no harm was occasioned, and that a fiduciary may be surcharged under § 1132(a)(3) only upon a showing of “actual harm” to be proved by a preponderance of the evidence.  The Court concluded that the individual need only show a violation, harm and causation.  The Court then remanded the claims to the district court for further consideration.

The full import of Amara is yet to be seen. However, there are some significant takeaways to note. First, the Court found that § 1132 (a)(1)(B) is limited to a claim to enforce contractual benefits or plan rights, and does not allow for equitable remedies or those remedies beyond what may be allowed by the terms of the plan.  This holding serves to limit the widely held view by lower courts that in the event of a conflict between the plan and SPD, a court may enforce the SPD under § 1132 (a)(1)(B). 

Second, the Court found that the terms of a plan summary or a similar statutorily required disclosure about a plan are not the equivalent of the terms of the plan itself and cannot be enforced as terms of the plan. This holding also goes against what many lower courts have found when considering whether and to what extent SPDs and other disclosures are part of the plan. It will be interesting to see what lower courts will do in light of this holding because many times there is no express trust or plan document and courts have enforced SPDs and other benefit summaries or descriptions as plan documents.

Thus, plan sponsors and administrators must be careful to review the their plans and plan summaries, and consider whether and to what extent they should draft formal welfare plan documents rather than rely upon insurance policies or summary booklets that describe benefits. Arguably, under Amara, these documents may be found to be insufficient to serve as formal plan documents. Also, plan sponsors and administrators should be careful to review plans and SPDs and other disclosures to ensure they are consistent with one another, and train claims personnel to review the terms of the plan in determining claims and to not simply utilize and rely upon a plan summary and assume that the plan and summary are consistent. 

Third, Amara seems to be inconsistent with or at least difficult to reconcile with Mertens v. Hewitt Associates, 508 U.S. 248 (1993), where the Court previously found that other appropriate equitable relief under § 1132(a)(3) was limited to traditional equitable remedies and did not include monetary recovery except in instances where the trustee was unjustly enriched by reason of its fiduciary breach and specific funds could be traced and disgorgement ordered.  Thus, while Amara seems to remove the argument that participants may enforce faulty SPDs or disclosures and seek recovery of monetary damages under § 1132 (a)(1)(B),  it appears to have opened a new outlet for plaintiffs to make such claims under § 1132(a)(3) without the previously required showing of detrimental reliance, allowing them to seek to “surcharge” the “trustee” for “actual harm” caused by breaches of fiduciary duty. It also appears to allow additional remedies, such as to reform the plan’s terms to accurately reflect the features misrepresented in prior disclosures (e.g., to require the plan sponsor to provide what it had promised). Depending on how the lower courts interpret Amara, this could be a dangerous proposition plan sponsors and others who promulgate SPDs and other disclosures in anticipation of plan changes. Although these disclosures are meant to summarize the actual changes, which means they should be succinct and less detailed than the plan itself, it may lead to overkill in such disclosures for fear of missing some detail whether important or not.  Plan sponsors and administrators must be careful in drafting SPDs and other disclosures, including disclosures concerning proposed or actual plan changes, and ensure they are as accurate and complete as possible.