NU Online News Service, May 17, 1:53 p.m.EDT

WASHINGTON -- The U.S. Supreme Court has significantlynarrowed the grounds an employee can use to sue for additionalpension benefits based on errors in a plan's summary plandescription (SPD).

An SPD should be accurate, but it need not be as complete as theunderlying plan documents, and participants cannot sue to enforcetheir interpretation of the SPD in the same way that they could sueto enforce the actual terms of the plan, the court has held in an8-0 ruling in CIGNA Corp. v. Amara,.

CIGNA Corp., the company that sponsored the pension planinvolved in the case, moved in 1998 to convert a traditionaldefined benefit pension plan, which used a funding formula basedon the assumption that an employee would spend many years atthe company, into a cash balance plan. An employer that sponsors acash balance plan simply puts in a set amount of cash each year.The amount of benefits accrued each year is the sum of thecontribution and interest earnings on the contribution.

Janice Amara, the lead plaintiff in the case, and otherplaintiffs argued that the SPD for the new plan -- thedocument that was supposed to describe the plan in terms thatparticipants could understand -- was misleading, because it saidemployees would do at least as well as in the old plan and failedto explain that a drop in interest rates could affect the ultimatebenefits.

A U.S. District Court judge in Connecticut ruled that the CIGNASPD was incomplete and inaccurate, that the participants were"likely harmed" by the inaccuracies, and that all 27,000 planparticipants should share in a recovery.

A panel at the 2nd U.S. Circuit Court of Appeals upheld thelower court ruling. The U.S. Labor Department; and the Obamaadministration's solicitor general supported the plan participantswhen CIGNA appealed the 2nd Circuit ruling to the SupremeCourt.

Lawyers for CIGNA estimated that, if the Supreme Court had sidedwith the plaintiffs, CIGNA might have had to pay out as much $70million.

When analyzing the case, the Supreme Court considered provisionsof the Employee Retirement Income Security Act of 1974 (ERISA) suchas Sections 102(a), 104(b) and 204(h), which set plan disclosurerequirements, and ERISA Section 502(a)(1)(B), which authorizes aplan participant or beneficiary to sue to recover benefits dueunder the terms of a plan.

Members of the Supreme Court held that ERISA Section502(a)(1)(B) did not give the district court authority to reformCIGNA’s plan, but that ERISA Section 502(a)(3) does give aparticipant, beneficiary, or fiduciary an opportunity to seek"other appropriate equitable relief" to redress violations of ERISAor the [plan’s] terms.'”

The Supreme Court ordered that the terms of the plan bereformed, and it ordered CIGNA to enforce the plan as reformed. Thecourt also remanded the case to the 2nd Circuit, and it askedthe 2nd Circuit to consider providing the plan participants withequitable relief.

But the court prevented lower courts from imposing "equitablerelief," such as a surcharge, without getting proof either that SPDerrors were the result of fraud or that the errors had led toserious harm.

"To make the language of a plan summary legally binding couldwell lead plan administrators to sacrifice simplicity andcomprehensibility in order to describe plan terms in the languageof lawyers," Justice Stephen Breyer writes in the opinionfor the court. "Consider the difference between a will and thesummary of a will or between a property deed and its summary. ...None of this is to say that plan administrators can avoid providingcomplete and accurate summaries of plan terms in the mannerrequired by ERISA and its implementing regulations."

But, if the court had agreed with the Obama administration'ssolicitor general and treated an SPD as a legally bindingdocument, that "might bring about complexity that would defeat thefundamental purpose of the summaries," Breyer says. "Forthese reasons taken together we conclude that the summarydocuments, important as they are, provide communication withbeneficiaries about the plan, but that their statements do notthemselves constitute the terms of the plan for purposes of[Section] 502(a)(1)(B)."

Chief Justice John Roberts and Justices Anthony Kennedy, RuthBader Ginsburg, Samuel Alito Jr. and Elena Kagan joined in theBreyer opinion.

Justice Antonin Scalia filed a separate opinion concurringin the judgment, and Justice Clarence Thomas joined in the Scaliaconcurrence.

Justice Sonia Sotomayor took no part in the consideration ordecision of the case.

"CIGNA is pleased that the U.S. Supreme Court has orderedthe lower court to reconsider its initial decision and undertakefurther proceedings in the case," CIGNA says in a statement aboutthe ruling.

Ellen Doyle, a Pittsburgh lawyer who helped represent the planparticipants in the class-action lawsuit, called the ruling a"significant loss for employees."

In the future, employees may not be able to determine what aplan promises without going through litigation, Doyle says.