ERISA § 502(a)(1)(B) generally allows a participant or beneficiary to sue for plan benefits. In Cigna Corp. v. Amara, the Supreme Court ruled that ERISA § 502(a)(1)(B) provides a cause of action to enforce a plan’s terms, but not to enforce the terms of a summary plan description (SPD), and not to rewrite a plan to conform to what may be more participant-favorable terms in an SPD.

The Supreme Court appears to have overruled the many court decisions which have held that where there are conflicts between the SPD and the plan, the SPD could be enforced if it was more beneficial to the participant. This participant-friendly rule, established under ERISA § 502(a)(1)(B), is contrary to the Supreme Court’s ruling in the Amara case.

The implications of the Amara case are broader than the Supreme Court’s holding, because the Supreme Court majority and concurrence stuffed their opinions with so much more than the holding in the case.

Although the majority opinion tries to open wide the door for “make whole” relief as a form of equitable relief under ERISA § 502(a)(3) — something that no holding of the Supreme Court has ever done — the concurring opinion penned by Justice Antonin Scalia provides an outline for defeating or minimizing any such claims.

Practical Implications of Amara

  1. Who provides the plan; who provides the SPD?

As a matter of law, the SPD is provided by the administrator, not the plan sponsor. In the Amara case, CIGNA was both the plan sponsor who wrote the plan and the administrator who wrote and provided the SPD to participants. CIGNA acted in different capacities: as plan sponsor when writing the plan, and as administrator “when preparing the SPD.” ERISA carefully distinguishes between the roles of plan sponsor and administrator. An ERISA administrator’s duty to provide employees with an SPD arises under ERISA § 104(b)(1), and not by reason of its relationship to the sponsor. Justice Scalia explained in the Amara ruling that the plan administrator does not act as an agent of the plan sponsor, when the administrator provides the SPD to participants. The administrator is a legally distinct entity. In his concurrence, Justice Scalia wrote that “it is incoherent to think of the administrator as agent and the sponsor as principal.”

Therefore, it is all the more important (a) for the plan sponsor to follow the plan procedure for adopting amendments to the Plan and (b) for the plan administrator to review and approve the SPD for dissemination to participants and beneficiaries. Without regard to who drafts the SPD, the plan administrator must adopt it, because it is the plan administrator who is providing it to participants as a summary of plan terms.

  1. Can an SPD be one of the “documents and instruments governing the plan,” under ERISA § 404(a)(1)(D), even if the SPD cannot be the plan document and even if the SPD cannot be enforced under ERISA § 502(a)(1)(B)?

It appears that the answer is “yes,” if the plan document so provides. The government filed an amicus brief in the Amara case and argued that the SPD was enforceable under ERISA § 502(a)(1)(B). The Supreme Court rejected this argument and ruled “that the summary documents, important as they are, provide communication with beneficiaries about the plan, but that their statements do not themselves constitute the terms of the plan for purposes of §502(a)(1)(B).”

The government’s starting point in making its argument was that the SPD is a governing document and instrument under ERISA § 404(a)(1)(D). On this issue, the Supreme Court majority did not opine. On the other hand, in his concurrence, Justice Scalia opined that an SPD can be used to amend a plan, if the plan provides this as an amendment procedure. While this may appear to be inconsistent with another of Justice Scalia’s statements — that the SPD “would not fulfill its purpose of providing an easily accessible summary of the plan if it were an authoritative part of the plan itself ” — nothing in ERISA limits a plan document having multiple amendment procedures.

  1. What does the Amara ruling portend for those plans that use a wrap plan document,which incorporates the terms of SPDs, insurance contracts, administrative service documents, and even employee handbooks, as part of the terms of the plan?

The use of wrap plans does not appear to be undermined by the Amara rulings, and the use of wrap plans appears to be supported by the 404(a)(1)(D) position espoused in the government’s amicus brief, discussed above.

One critical element continues to be compliance with the delegations of authority to amend the plan terms and to amend any of the wrapped documents. This critical element has long been stressed in Supreme Court cases and was again stressed in the Amara case. “The answer will depend on a fact-intensive inquiry … into what persons or committees … possessed plan amendment authority, either by express delegation or impliedly, and whether those persons or committees actually approved the new plan provision contained in the revised SPD … If the new plan provision is found not to have been properly authorized when issued, the question would then arise whether any subsequent actions, such as the executive vice president’s letters informing respondents of the termination, served to ratify the provision ex post.” Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 85 (1995).

Thus, a plan sponsor may provide in the plan document that it reserves the discretionary right to modify or amend the plan in any respect, at any time and from time to time, retroactively or otherwise, by a duly executed written instrument adopted by the plan sponsor’s board of directors or the board’s designee. The plan sponsor may also provide that the administrator has the limited right but not the duty to amend any provision of the plan that is administrative, procedural, or ministerial in nature.

  1. What does the Amara ruling portend for the not uncommon practice of uninsured welfare plans that use the same written instrument as both the plan document and the SPD?

Although this practice may have been consistent with the government’s position (as reflected in its amicus brief), in light of the unanimous rulings in Amara, this practice is questionable. Nonetheless, in Amara the Supreme Court was not presented with a case where the only governing document and instrument was the SPD.

The Amara ruling does not necessarily overrule cases like Sengpiel v. BF Goodrich Co., 156 F.3d 660, 668 n.6 (6th Cir. 1998), where the appellate court stated: “At the time the relevant SPDs were issued, there were no actual ‘plans’ separate and apart from the SPDs themselves. Accordingly, the only relevant plan documents are the SPDs.” The appellate court relied on the ruling in Sengpiel this past month in Shaffer v. Rawlings Co., No. 10-3083., (6th Cir. May 18, 2011), slip opinion at 8. Yet another appellate court took the same position in Admin. Committee of Wal-Mart Stores v. Gamboa, 479 F.3d 538, 544-45 (8th Cir. 2007): “Where no other source of benefits exists, the summary plan description is the formal plan document, regardless of its label … and it fulfilled ERISA’s disclosure requirements.”

After Amara, plan sponsors will have to weigh the costs and benefits of the use of only an SPD.