In CIGNA Corp. v. Amara, 2011 WL 1832824 (U.S. 2011), current and former employees claimed that CIGNA's communications regarding the conversion of its traditional defined benefit plan to a cash balance plan were misleading and false. The participants alleged that the SPD, SMM and ERISA section 204(h) notice: (1) failed to describe the effect of "wear-away" on benefits, (2) misstated the amount of the initial "deposit" to participants' cash balance accounts and (3) misrepresented that participants would receive the full value of their frozen benefits plus new annual benefit accruals.
The district court agreed with participants and held that CIGNA's descriptions of the cash balance plan were incomplete, inaccurate and misleading. The district court ordered that the plan be reformed to reflect the benefits that were described to participants and that CIGNA pay these greater benefits in accordance with ERISA section 502(a)(1)(B), which permits lawsuits to enforce rights or to recover benefits due under the terms of a plan. The Second Circuit affirmed, but issued no opinion.
The U.S. Supreme Court vacated the district court's decision, holding that the district court did not have authority to reform the terms of the plan under ERISA section 502(a)(1)(B). The Court also held that CIGNA's communications were not part of the actual plan and could not be enforced as such.
In lengthy dicta, the Supreme Court addressed whether the district court's reformation of the plan could be considered "appropriate equitable relief" permitted under ERISA section 502(a)(3). The Court concluded that the district court's action resembles different remedies traditionally available in a court of equity (contract reformation, estoppel and surcharge) and remanded the case to the district court to determine an appropriate remedy
Reinhart Comment: This case will likely lead to increased litigation to address fiduciary breaches. In the past, lower courts have construed Mertens v. Hewitt Associates, 508 U.S. 248 (1993), and later Supreme Court, cases to preclude recovery of monetary relief against fiduciaries under ERISA section 502(a)(3). In CIGNA, the Court has strongly suggested that "make-whole" relief in the form of monetary compensation will be available under equitable principles to redress fiduciary breaches.