In Cigna Corp. v. Amara, the U.S. Supreme Court ruled that summary documents that provide communications to participants and beneficiaries—specifically, summary plan descriptions (“SPDs”)—were not plan documents or binding contracts and, by themselves, did not constitute the terms of a plan for purposes of Section 502(a)(1)(B) of ERISA. Nonetheless, a deceptive SPD, or any plan writing that is created to intentionally mislead plan participants, could expose employers and plans to liability.

Additionally, the Supreme Court determined that equitable remedies available to plaintiffs under Section 502(a)(3) of ERISA can include the payment of money. Historically, courts have treated Section 502(a)(3) as a “catch-all” provision if the desired result couldn’t be found in other substantive sections. But courts had refrained from ruling that money damages were an appropriate remedy under Section 502(a)(3). After analyzing equitable remedies under the common law of trusts, the Supreme Court decided that both reformation and surcharge (i.e., money compensation) were appropriate remedies under Section 502(a)(3).

The case was sent back to the district court, which issued an opinion on December 20, 2012. The district court ruled that a surcharge was an equitable remedy allowed under Section 502(a)(3). The case is currently on appeal to the U.S. Court of Appeals for the Second Circuit.

Eight U.S. courts of appeal have cited to the Amara decision, but only three have directly addressed the surcharge issue. Of those, the Fourth and Fifth Circuits found that a surcharge was an appropriate Section 502(a)(3) remedy, while the Ninth Circuit declined to make that determination. In an interesting twist, the Third Circuit ruled that, if principles of equity are in play per Amara, defendants should be able to use the full arsenal of equitable defenses. The Supreme Court agreed to review the case, which was argued last November.

With the advent of the Amara decision, it is more important than ever that employers and plans be mindful of plan terms. Employers, fiduciaries, trustees, and administrators (which could include those working in human resources) must protect themselves by reviewing any and all communications regarding the plan and ensuring that those communications are truthful and easy to understand. Any communication that is misleading can and will expand or intensify the liability exposure of plans, fiduciaries, trustees, administrators, and/or employers, especially now that plaintiffs can more easily get money damages in ERISA actions. Additionally, criminal and civil penalties can also result from fiduciary breaches under ERISA.