CIGNA ERISA Lawsuit Has Something for Everyone

Washington, DCDepending on who you ask, the recent Supreme Court ruling involving a CIGNA ERISA plan was either good for employers, good for employees or a mixed bag for both. The Supreme Court's ruling, which had elements that favored both sides of the ERISA plan lawsuit, could have a huge impact on lawsuits involving employee stock option plans and other ERISA benefits plans. Exactly what that impact is, remains to be seen.

The ERISA (Employee Retirement Income Security Act) lawsuit in question was CIGNA Corp., et al v. Amara et al., and was filed after CIGNA Corporation made changes to its pension plan. According to CCH Pension (05/24/11), CIGNA informed its employees in November 1997, via newsletter, that the pension plan would be changed to a cash balance plan. Employees were told that the changes would "significantly enhance" the pension plan and would provide an improvement in retirement benefits.

The district court found that the new plan did not have benefits that were as good as the benefits provided under the old plan, contradicting the statements made in the company newsletter. The Supreme Court agreed, and found that further consequences included that the risk of a fall in interest rates would no longer be shouldered by CIGNA but would instead fall to employees, which was not explained in the newsletter.

The district court ordered CIGNA to pay benefits under ERISA sec. 502(a)(1)(B). The Supreme Court, however, said that ERISA Sec. 502(a)(3) was more appropriate for compensating the plaintiffs. What this means, according to Connecticut Law Tribune (06/06/11), is that where before, ERISA limited remedies to equitable relief—often not including monetary damages—now, when employees can show they were harmed by a failure to properly represent changes to a pension plan, monetary damages could be awarded.

CIGNA did obtain a victory for employers, as well. The Supreme Court also found that the court cannot order that a pension plan be changed simply because the plan itself differs from the explanation given to employees. In other words, even if the summary that employees are given is different from the plan itself, this does not mean employees can file a lawsuit to have the plan changed.

In the CIGNA case, plaintiffs had filed a lawsuit alleging they should have been given benefits as they were described in the summary, which differed from benefits provided by the actual plan. The Supreme Court, however, found that it was not permitted to change the terms of an ERISA plan.

But, where plan participants are harmed by improper notice, specifically by misleading information, there is a possibility of being awarded monetary damages, which is a victory for the plaintiffs.