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Dodging the Benefits Bullet

Monday, July 11, 2011
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When workers read company material about their employee benefits, they take for granted that it's reliable.

But a group of Cigna workers learned the hard way that employers don't always deliver accurate information -- and now, they have learned that their legal recourse just got smaller.

In Cigna Corp. vs. Amara, the U.S. Supreme Court acknowledged that the Philadelphia-based health insurer's summary-plan description gave inaccurate details about its pension plan, but ruled in May that the document was not part of the actual plan.

The ruling denied employees the ability to sue the company for benefits they believe they deserve based on that faulty information.

In 1998, Cigna converted its defined-benefit plan to a cash-balance retirement plan and, during the rollout, sent employees informational kits as well as newsletters with titles such as "Introducing Your New Retirement Program."

In their class-action lawsuit, the employees argued that the conversion information they received in the summary plan description was inaccurate and, even though the court agreed, it ruled in favor of Cigna.

That decision reversed a 2nd U.S. Circuit Court of Appeals ruling stating that SPDs should be enforced just like plan documents.

Myron D. Rumeld, a partner at Proskauer, agrees with the High Court's decision.

"The court correctly concluded that the SPD is merely meant to be a summary of the plan and thus, the mistaken terms of the SPD should not be enforced as a contractual matter," says Rumeld, who co-heads the employee benefits, executive compensation and ERISA litigation practice center at the New York-based law firm.

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The Supreme Court sent the case back to a lower court to decide whether the company owes employees any financial damages -- but, now, not everyone in the 27,000-person class may be eligible, says Vance E. Drawdy, labor and employment attorney in the Greenville, S.C., office of Ogletree Deakins.

He says the onus is on the individual employees to show they've been harmed by following information in the SPD. If they can't, they will likely get nothing.

"The Supreme Court changed the burden of proof from employer to employee," says Nancy G. Ross, a partner in the Chicago office of McDermott Will & Emery.

At the same time, however, she notes, "the Supreme Court has given no guidance in how the District Court should go about determining whether a participant suffered actual harm."

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