Supreme Court Sends Back Cash Balance Notice Decision

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.   

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“).