Employees in Chicago and the rest of Illinois lost another potential remedy in ERISA disputes yesterday, but may have gained others. The Supreme Court issued its opinion in Cigna v. Amara yesterday, which arrested any expansion of a remedy for a claim for benefits due under ERISA § 502(a)(1)(B), but may have expanded "other appropriate equitable relief" under ERISA § 502(a)(3).
Cigna v. Amara concerned an employer's conversion from a defined benefit pension plan to a cash balance plan. The new plan contained "a phenomenon known in pension jargon as 'wear away'". Id. at 8. In a "wear away," employees could be required to work for several years, or 6-10 in this case, for benefits accruing under the new plan to catch up to those existing under the old plan, effectively resulting in employees working for 6-10 years accruing no benefits. Cigna, however, failed to tell this to its employees in the required disclosures.
The employees claimed they were entitled to the benefits due pursuant to the summary plan description, which misrepresented the terms of the plan. This theory, dubbed the "but for" theory, asserts a claim for benefits due under ERISA § 502(a)(1)(B) but for the breach of fiduciary duty. The Supreme Court reasoned that this theory is inapplicable in this case, because the SPD is not the plan or part of the plan--it is a summary of the plan. Moreover, the plan pays the benefits, but the plan administrator is responsible for issuing the plan summary accurately describing the plan.
The Court went on to state that the lower court should consider whether the case is proper for "other appropriate equitable relief," and proceeded to give guidance on that remedy. According to the Court, a court could use § 502(a)(3) to reform a plan, estoppel, or surcharge. The last remedy discussed, however, came as a surprise because courts and defense lawyers have long held the position that monetary compensation was not available under ERISA § 502(a)(3). However, the Supreme Court appeared to bless a case by a participant or beneficiary against a plan administrator seeking monetary compensation under the surcharge theory. Justices Scalia and Thomas concurred in the judgment, stating that this § 502(a)(3) guidance was not necessary to resolve the issue presented to the Court and would not necessarily be precedent in future cases.
We expect the Court's guidance here to be discussed in a currently pending case in the Seventh Circuit Court of Appeals, Kenseth v. Dean Health. If you have questions about your rights to benefits under an employee benefit plan, contact an ERISA lawyer.