Compliance May 16, 2011

Supreme Court Sends Back Cash Balance Notice Decision

The U.S. Supreme Court sent back a lower court decision that ordered CIGNA Corp. to reform its cash balance plan in awarding relief to participants on a conversion notice violation for further examination.
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The District Court found that CIGNA’s disclosures violated its obligations under statutes 102(a), 104(b), and 204(h) of the Employee Retirement Income Security Act (ERISA). In determining relief, it found that CIGNA’s notice defects had caused the employees “likely harm.” It then reformed the new plan and ordered CIGNA to pay benefits accordingly, finding its authority in ERISA §502(a)(1)(B), which authorizes a plan “participant or beneficiary” to bring a “civil action” to “recover benefits due . . . under the terms of his plan.”   

However, the high court said in its opinion that provision—which speaks of “enforc[ing]”the plan’s terms, not changing them—does not suggest that it authorizes a court to alter those terms here, where the change, akin to reforming a contract, seems less like the simple enforcement of a contract as written and more like an equitable remedy. The Supreme Court also rejected the Solicitor General’s alternative rationale that the District Court enforced the summary plan descriptions and that they are plan terms.   

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That reading cannot be squared with ERISA §102(a),which requires plan administrators to furnish summary plan descriptions, but does not suggest that information about the plan provided by those disclosures is itself part of the plan.  

A group of participants filed a lawsuit in 2001 contending that the cash balance program was age discriminatory, violated ERISA’s anti-backloading rule, and resulted in the forfeiture of accrued benefits. The participants further alleged that CIGNA’s notice of the plan conversion did not comply with ERISA.   

In 2008, the U.S. District Court for the District of Connecticut found the plan was not age discriminatory (see “Court Clears CIGNA of Cash Balance Wrongdoing“).  

The case is CIGNA Corp. v. Amara, U.S., No. 09-804.
Products May 16, 2011

Principal Develops Tools for Small-Business Needs

The Principal Financial Group has introduced benchmarking tools and a tax credit calculator for small businesses.
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The offerings, unveiled during National Small Business Week (May 16-20), include a benchmarking tool that shows benefits offered by award-winning small businesses and national averages so employers can see how they compare. The tool, which includes other considerations for brokers, allows owners to assess benefits beyond insurance and includes ways to better manage benefits.  

Other features include:  

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  • Guide to benefits best practices  
  • Benefits best practices checklists for voluntary, retirement, wellness and health care  
  • Best practices in communication and education  
  • Best practices in building and managing benefits  

“Small business owners recognize a strong employee benefits package usually pays off for the business as well as for employees,” said Amy Friedrich, vice president specialty benefits for the Principal Financial Group. “But there’s no one-size-fits-all approach, which is why we work with advisers and their small-business customers to find innovative ways to offer affordable benefits.”  

Through additional tools like a tax calculator, owners can determine if they are eligible for a tax credit on their group health insurance premiums as part of the Patient Protection and Affordable Care Act. Many small businesses are eligible, yet only a quarter of small business owners realize they may qualify for credit, according to Principal.  

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