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Cigna Corp. v. Amara

Supreme Court Requires Employers to Accurately Notify Employees of Pension Plan Changes

The U.S. Supreme Court ruled that workers who can show that employers breached fiduciary duties in notifying them about a pension plan change are entitled to recover damages without jumping through additional hoops.  


In changing its pension plan from a traditional plan to a cash balance plan in 1998, Cigna altered the method of benefits calculation. A trial court found that the way the calculations were explained in the summary plan that was distributed to employees was incomplete and misleading, and that the error was intentional. However, the underlying benefit plan with the full explanation did not contain the problematic representation, and in fact explained the benefit calculations accurately. The question then became: Which document determines the benefits employees receive — the one distributed widely, or the formal plan?

Employees argued that under the federal Employee Retirement Income Security Act (ERISA), employees should be able to rely on the language of the summary plan they received. CIGNA argued that each individual participant must show that he or she not only received inaccurate information, but that each participant relied on that information and suffered harm. Employees countered that adopting such a "detrimental reliance" standard would set an impossible test for employees — in this case, for example, it would be hard to prove because the summary plan description was silent on the relevant information.

Attorneys with AARP Foundation Litigation filed AARP's "friend of the court" brief urging the Court not to read hurdles into ERISA's statutory language that are not there. Due to the complexity of the summary plan description, employees should not have the burden of proving detrimental reliance or prejudice. The brief pointed out that misrepresenting plans automatically harms employees because they will forego making employment decisions that they might have made had they realized their benefits were lower than they anticipated.

Though it did not completely toss out the detrimental reliance standard in all cases, and though it relied on a different specific provision of ERISA than that invoked by the workers, the Court ruled that "Information-related circumstances, violations, and injuries are potentially too various in nature to insist that harm must always meet that more vigorous ‘detrimental harm' standard." It agreed that where as here the plan breached its fiduciary duty to employees, the workers did not have to prove that they detrimentally relied on the intentional misrepresentation.

What's at Stake

Accumulating and effectively managing retirement assets is crucial for a secure retirement, so it is particularly important that as pension plans are modified, participants are given accurate information. The main tool for protection of employee benefits — ERISA — imposes specific duties on administrators of employee benefit plans and requires rigid adherence not only to the substance but to the timing of notices, disclosures and information about plans, particularly about plan changes. Congress has repeatedly emphasized the importance of strict adherence to these requirements and has placed the onus on employers to show they have adhered to the law.

Case Status

Cigna Corp v. Amara
was decided by the U.S. Supreme Court and was remanded to district court for determination of the appropriate remedy.

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