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Accuracy required: the Supreme Court decides a key question regarding Erisa-mandated program descriptions.

Most employee benefit plans, including life, health, disability and pension plans, are governed by the federal Employee Retirement Income Security Act of 1974. The main purpose in enacting Erisa was to protect the interests of plan participants and beneficiaries. Toward this end, Erisa mandates certain disclosure and reporting requirements, including that employers create and distribute a Summary Plan Description, known as an SPD, of all benefit plans.

Significantly, Erisa requires that SPDs be "written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan" But what happens when there is a conflict between the terms of the SPD and the plan documents? The majority of the courts have held that the document more favorable to the employee controls.

Recently, in Cigna Corp. v. Amara, the U.S. Supreme Court addressed a case where provisions in the SPD differed from those of the plan documents. The Court held that the disclosures set forth in the SPD could not be enforced as terms of the plan itself. However, rather than consider whether there was a conflict between the SPD and the plan document, the Supreme Court focused on the division of authority between the plan's sponsor and the plan's administrator. Tim Court explained that the plan sponsor (the employer) "creates the basic terms and conditions of the plan," while the plan administrator "manages the plan" and "provides participants with the summary documents that describe the plan (and modifications) in readily understandable form." The Court rejected the argument that the terms of the SPD are terms of the plan for several reasons. First, it was never the intent of Erisa to give "the administrator the power to set plan terms indirectly by including them in the summary plan descriptions." Second, this would run afoul of the SPD's objective to provide a clear, simple communication: "To make the language of a plan summary legally binding could well lead plan administrators to sacrifice simplicity and comprehensibility in order to describe plan terms in the language of lawyers."

The Court concluded that "the summary documents, important as they are, provide communication with beneficiaries about the plan, but their statements do not themselves constitute the terms of the plan."

Amara involved a class-action suit against Cigna, arising from the conversion of its defined-benefit pension plan to a cash balance plan, and Cigua's failure to accurately disclose the terms of the new plan and how the conversion would affect pension benefits that had already accrued. The U.S. District Court in Connecticut found that Cigna's disclosures violated its obligations trader Erisa, and reformed the new plan to conform to the representations Cigna had made to its employees. Amara makes clear that the disclosures set forth in the SPD are not part of the actual plan. Thus, if the SPD is less favorable than the plan, it will not control.

And if the SPD is more favorable than the plan, a participant need only show "harm and causation" from the disclosure violation to enforce the more favorable terms.


Listen to an interview with Frank N. Darras at

Best's Review columnist Frank N. Darras is the founding partner of DarrasLaw, in Ontario, Calif He is a plaintiff's lawyer representing disabled insureds. He can be reached at
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Title Annotation:Regulatory/Law: Legal Insight
Author:Darras, Frank N.
Publication:Best's Review
Date:Nov 1, 2011
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