Tuesday, February 22, 2011

When the SPD is Wrong

Today, I return to an old discussion, the litigation in CIGNA Corp v Amara . This case has made it to the US Supreme Court, and in fact, oral arguments have been heard. The circumstances in this case are not unusual. A summary plan description (SPD) for an ERISA plan promised more generous benefits than were actually available under the terms of the plan. The SPD, of course, contained language saying, in essence, that where the SPD and plan document disagree, the document shall govern.

I have mixed feelings on this case. Should plan participants be entitled to a windfall merely because their employer (or some outside vendor) wrote a bad SPD? Shouldn't participants who reasonably made plans based on communications from their employer receive what was promised to them in writing?

Should an employer who cavalierly published an incorrect SPD get off scot free? Should an employer who erred in publishing an incorrect SPD be on the hook for the entire discrepancy?

This is one case where I am awfully glad that I don't sit on the Supreme Court. While I can't say that I am confident that they will use proper logic or come to a proper decision, this one is not easy. While the correct answer may be somewhere in the middle of the extremes that I posed in my questions in the two preceding paragraphs, I suspect there is no legal support for middle ground. More than likely, an extreme it shall be.

As I said when I wrote on this case a few months ago, many SPDs that I have read are seriously flawed. They are often drafted by junior communications consultants or legal assistants for review by in-house benefits specialists. None of these people try to make mistakes, but many companies do cut corners.

Historically, companies have not lost these cases. But, as I read the tea leaves from the questions asked by justices during oral arguments (some are in my original post ), I think that CIGNA could be in trouble on this one.

The message that will be sent is that companies need to get it right. The cost of an incorrect SPD could be huge. Perhaps it will be money spent wisely to get it right.


  1. Of course companies should get it right! To excuse harmless mistakes carte blanche would allow employers to do exactly what CIGNA did in this case.: deceive their employees. I went out on disability due to Multiple Sclerosis only to be told by my employer that the SPD which promised me 60% pay should I not be able to work my regular occupation was faulty. In the fourth district where I reside I would need to show that I relied on this information! No one told me when I read the SPD that I needed to send a registered letter to my employer stating I had done so in case I ever needed to claim these benefits. This is absurd! False advertising is false advertising no matter how you try to justify otherwise.

  2. Anonymous, I feel for you on this one. And, you are correct that in the 4th Circuit, you are very unlikely to find a sympathetic court. Assuming your facts are correct, this certainly doesn't make your employer correct, but as many have found, this is not a war that an individual employee, no matter how wronged and no matter how harmed can win. If I knew who you were, I might offer additional thoughts, but as it stands, this is all I can give you.