Supreme Court: Employee Retirement Income Security Act Allows District Court to Reform Pension Plan

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on May 16 ruled that although Section 502(a)(1)(B) of the Employee Retirement Income Security Act does not permit a district court to reform the terms of a pension plan, Section 502(a)(3) does authorize such relief (CIGNA Corporation, et al. v. Janice C. Amara, et al., No. 09-804, U.S. Sup.).

Janice Amara filed a class action against CIGNA Corp. and the CIGNA Pension Plan (collectively, CIGNA), claiming that CIGNA's Jan. 1, 1998, conversion from a traditional pension plan to a cash balance plan violated ERISA and that CIGNA violated certain of ERISA's disclosure requirements during the transition.  Amara sought relief under ERISA Sections 502(a)(1)(B) and 502(a)(3). 

The U.S. District Court for the District of Connecticut ruled that CIGNA violated its disclosure obligations, which caused the participants "likely harm."  The District Court reformed the new plan and ordered CIGNA to pay benefits according to the reformed plan under Section 502(a)(1)(B).  The Second Circuit U.S. Court of Appeals affirmed in a summary order. 

The Supreme Court concluded that Section 502(a)(1)(B), which authorizes a plan participant or beneficiary to bring a civil action to recover benefits due under the plan, does not authorize a court to alter the terms of the plan, "at least not in the present circumstances, where that change, akin to the reform of a contract, seems less like the simple enforcement of a contract as written and more like an equitable remedy." 

However, the Supreme Court held that Section 502(a)(3), which authorizes "appropriate equitable relief" for violations of ERISA "or the terms of the plan," does confer on the District Court the power to reform the plan. 

Because the District Court had not determined if an appropriate remedy may be imposed under Section 502(a)(3), the Supreme Court vacated the judgment and remanded, instructing the District Court that whether a showing of detrimental reliance must be proved will depend on the specific remedy but that, "to obtain relief by surcharge for violations of [ERISA's disclosure provisions], a plan participant or beneficiary must show that the violation injured him or her.  But to do so, he or she need only show harm and causation." 

Justice Stephen G. Breyer wrote the opinion, in which Chief Justice John G. Roberts and Justices Anthony M. Kennedy, Ruth Bader Ginsburg, Samuel Anthony Alito and Elena Kagan joined.  Justice Sonia Sotomayor took no part in the consideration or decision of the case. 

Justice Antonin Scalia filed an opinion concurring in the judgment, in which Justice Clarence Thomas joined. 

[Editor's Note:  Full coverage will be in the May issue of Mealey's Litigation Report: ERISA.  In the meantime, the opinion is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #54-110511-039Z.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.] 

For more information, call editor Joan Grossman at 215-988-7727, or e-mail her at joan.grossman@lexisnexis.com. 

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