U.S. Supreme Court: Participants can enforce inaccurate SPD

When is the last time you reviewed and updated the summary plan description (SPD) for your company’s health plan or retirement plan? A recent decision by the Supreme Court makes it more important than ever that your plan’s SPD is up-to-date and accurate.

Cigna Corporation converted its defined benefit pension plan into a “cash balance” pension plan, but when it distributed the SPD for the converted plan, the SPD mistakenly led some participants to believe that they would be able to accrue benefits under the plan, when in fact they couldn’t. A group of employees sued, and the U.S. Supreme Court ruled that even though the employees hadn’t actually relied to their detriment on the erroneous statements in the SPD, they nevertheless could sue to force the employer to operate the plan as written in the SPD, despite the fact that the SPD was in error (Cigna Corp. v. Amara, US, May 2011).

Tips: This case will make it easier for plan participants to sue to enforce plan provisions contained in your plan’s SPD, even if the SPD is incorrect. The participant need not show that he or she relied on that incorrect provision and suffered harm as a result. For example, a retirement plan SPD describes the benefit calculation under the plan in a way that results in erroneously high retirement benefits. A plan participant need not show that he or she decided to retire based on those erroneous calculations, and then was harmed when the plan’s actual benefit calculations were applied. The employee could simply petition the court to enforce those enhanced benefit calculations.