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.

How Important is Your Summary Plan Description ... Supreme Court to Weigh In

Yesterday, the US Supreme Court heard oral arguments in CIGNA Corp v Amara. The crux of the case appears to be whether a participant was likely harmed by reliance on the SPD rather than the plan document. As many readers will know, most ERISA SPD's (at least in my experience) contain language saying that where the SPD and the plan document differ, the document will govern.

In a case where the two differ in a material fashion, does the participant have the right to rely on the SPD (which he or she has necessarily received) or does the language in the plan document govern, regardless? Plan sponsors would like to believe that the document governs, but the Supreme Court may decide this, perhaps once and for all.

In the instant case, it appears that the SPD promised more generous benefits than did the plan document. CIGNA through its counsel that regardless of any discrepancy, a plaintiff needs to demonstrate that they have been harmed [by their reliance on the SPD].

The Supreme Court has asked some challenging questions. Quoting:

Chief Justice Roberts: "The whole point of these plans is to give people some comfort and assurance" [about retirement].  "And your formulation would put that up in the air and say: 'We don't know if you are going to be harmed or not; wait until you are 65 and we will see.'"

Associate Justice Kagan:  "[T]he SPD can't negate the force of ERISA," Kagan said, "and if ERISA says that the summary has to be consistent with the plan documents, nothing in the SPD can negate that requirement." 

Associate Justice Kagan:  "So doesn't this give an incredible windfall to your client, Cigna, or to other companies that commit this kind of intentional misconduct if you hold them to this detrimental reliance standard?" 

The case has not been decided yet. Frankly, I'm not a particularly experienced observer and I don't know how long it usually takes. I also don't know which justices tend to give away their positions with their lines of questioning. However, I find this interesting from several standpoints:

• I have rarely seen an SPD that does not have some discrepancies from the associated plan document.
• If the Supreme Court finds for plaintiffs, how many employers will be scurrying to check their SPDs to see that they comport with plan documents?
• Will the drafters of the SPDs, if they are outsiders be checking their E&O coverage?
• Would an end result of a decision in favor of plaintiffs cause employers to simply provide fewer ERISA plans?

Stay tuned ...