CIGNA Corp. v. Amara
179 L. Ed. 2d 843, 563 U.S. 421, 2011 U.S. LEXIS 3540 (2011)
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Rule of Law:
ERISA § 502(a)(1)(B) authorizes a participant to sue to enforce the terms of a pension plan as written, but it does not grant courts the power to reform or alter those terms. The authority to grant equitable remedies such as plan reformation or monetary surcharge for fiduciary breaches, like providing misleading information, arises from ERISA § 502(a)(3).
Facts:
- Prior to 1998, CIGNA Corporation provided its employees with a defined-benefit pension plan that guaranteed a specified annuity upon retirement based on salary and years of service.
- In 1998, CIGNA converted its pension plan to a 'cash balance' plan, where the company made annual contributions to an individual account for each employee.
- CIGNA distributed newsletters and summaries to its employees describing the new plan as a 'significant enhancement' and an 'overall improvement' in retirement benefits.
- The new plan was, in fact, less generous for many employees, as it eliminated valuable early retirement benefits, shifted interest-rate risk from CIGNA to the employees, and created a 'wear away' period during which some employees' benefits would not grow for several years.
- Internal CIGNA documents showed the company intentionally focused on not providing employees with 'before and after' comparisons of the plan changes to obscure the negative impacts.
- The new plan saved CIGNA approximately $10 million annually.
Procedural Posture:
- Janice Amara, on behalf of a class of CIGNA employees, sued CIGNA Corporation in the U.S. District Court for the District of Connecticut for violating ERISA's disclosure requirements.
- The District Court (a trial court) found that CIGNA's notices were incomplete and misleading in violation of ERISA and caused the employees 'likely harm.'
- Relying on ERISA § 502(a)(1)(B), the District Court reformed the pension plan to provide more generous benefits and ordered CIGNA to pay benefits under the reformed plan.
- CIGNA appealed to the U.S. Court of Appeals for the Second Circuit (an intermediate appellate court).
- The Court of Appeals affirmed the District Court's judgment.
- The U.S. Supreme Court granted CIGNA's petition for a writ of certiorari to review the lower court decisions.
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Issue:
Does ERISA § 502(a)(1)(B), which authorizes a lawsuit to recover benefits 'due under the terms of a plan,' empower a court to reform the plan's terms and award relief based on those reformed terms in response to faulty plan summaries?
Opinions:
Majority - Justice Breyer
No. ERISA § 502(a)(1)(B) authorizes the enforcement of the plan's terms, not their alteration. The Court reasoned that summary plan descriptions (SPDs) and other disclosures are communications about the plan; they do not constitute the terms of the plan itself for the purposes of a § 502(a)(1)(B) claim. Therefore, a court cannot use this section to reform a plan based on statements made in a faulty summary. However, the relief granted by the lower court—including plan reformation, estoppel, and surcharge—is traditionally equitable in nature and is authorized under a different provision, § 502(a)(3), which allows for 'appropriate equitable relief' to redress ERISA violations. The case was remanded for the lower court to consider relief under § 502(a)(3) and to determine if the employees suffered 'actual harm,' which does not always require a showing of detrimental reliance.
Concurring - Justice Scalia
No. The Court is correct that § 502(a)(1)(B) does not authorize relief for misrepresentations in a summary plan description because an SPD is not part of the plan itself. However, the majority's extensive discussion of the availability of relief under § 502(a)(3) is unnecessary and improper dicta. The District Court expressly declined to rule on the § 502(a)(3) issue, and the parties did not brief or argue it before the Supreme Court. The Court should have simply reversed the judgment on the § 502(a)(1)(B) holding and remanded without offering an advisory opinion on an issue not properly before it.
Analysis:
This decision clarifies the distinct functions of ERISA's primary enforcement provisions, limiting § 502(a)(1)(B) to claims for benefits strictly 'under the terms of the plan.' By doing so, it prevents plan summaries from effectively amending formal plan documents through litigation under that section. More significantly, the ruling revitalizes § 502(a)(3) as a powerful tool for plaintiffs, affirming that traditional equitable remedies like reformation and surcharge are available to correct fiduciary breaches, such as misleading communications. This expands the potential remedies for participants who have been harmed by faulty information, even if they cannot prove specific detrimental reliance, by focusing instead on the concept of 'actual harm.'
