Supreme Court Guidance Expected on Resolving Conflicts Between Benefit Plan Documents and Summary Plan Descriptions

An issue that employee benefits professionals frequently confront is resolving the conflict between the terms of a benefit plan’s summary plan description (“SPD”) and the equally clear but contradictory terms of the plan document. For example, the plan document may provide that no employee is eligible to participate in the plan until the one-year anniversary of employment. The SPD, on the other hand, provides that an employee is eligible to participate in the plan upon hiring, provided the employee is at least 18 years of age. Such inconsistencies, although regrettable, arise regularly and plan draftsmen try to address this issue by including language to the effect that in the event of an inconsistency between the SPD and the plan document, the plan document controls. During recent argument of an appeal by CIGNA, the Supreme Court signaled to the benefits community that it may not be so easy to harmonize inconsistencies between plan terms and the contents of the SPD. In this case, CIGNA v. Amara, 25,000 pension plan participants challenged a cash balance pension plan’s benefit calculation, and specifically a “wear away” provision that appeared in the plan document but in neither the SPD nor the annual Summary of Material Modifications that was distributed to all plan participants. The question before the Court is whether the “wear away” provision is enforceable against the plan’s participants. Two lower courts agreed that the plan participants were harmed by the SPD’s omission of the “wear away” provision, even though the “wear away” provision was included in the master plan document. CIGNA argues that the claimants’ plan benefits are subject to the “wear away” provision because CIGNA’s plan document clearly provides for a “wear away,” the plan document should prevail, and the SPD is not the plan document. This view met with stiff opposition from Justice Elena Kagan and from the Solicitor of Labor, who both were of the view during oral argument that an SPD is part of the pension plan and can be the basis for the recovery of plan benefits even if the plan document contradicts and is less favorable than the SPD. The Supreme Court should resolve this issue by June. In the meantime, it is prudent for all benefit plan sponsors to review regularly all SPDs and plan documents to ensure that recent plan amendments are reflected in the relevant SPD and an accurate, up-to-date SPD is distributed to plan participants in a timely manner. During the review, special attention should be paid to whether the SPD contains more favorable terms than the plan document, since this is a source of possible claims and litigation. For further information about this issue or any employee benefits matter, please contact Patrick McGovern at 973-535-7129, or Gina Schneider at 973-535-7134. The firm’s Employee Benefits Group assists its clients with compliance with the Employee Retirement Income Security Act, the Pension Protection Act and the COBRA law, and provides legal services regarding the design, updating, administration and winding down of benefit plans, including tax qualified plans and non-qualified plans such as deferred compensation plans. The Employee Benefits Group has special expertise in the areas of withdrawal liability under multi-employer pension plans, U.S. Department of Labor EBSA compliance audits, requests for IRS plan determinations, and deferred compensation arrangements (Code Section 409A). We also specialize in the representation of management, benefit plans and plan fiduciaries in disputed claims and litigation seeking plan benefits or alleging breach of fiduciary duty.