Canada: U.S. Supreme Court Rules On Remedies For Deficient Plan Communications

The U.S. Supreme Court does not often issue decisions interpreting the Employee Retirement Income Security Act (ERISA), so when the Justices speak, the issues are significant. The Court recently issued a long-awaited decision on the remedies available to participants whose plan communications fail to inform them of significant restrictions on benefits.

The full implications of CIGNA CORP. v. Amara will not be clear until it has been interpreted in subsequent decisions. However, the fact that both plan sponsors and plaintiffs' counsel have called the decision a victory suggests that while CIGNA may have won the immediate battle, careless fiduciaries may have lost the war. A new menu of remedies for misrepresentations to participants appears to be available without having to show in all cases that participants relied on those communications.

CIGNA CORP. v. Amara was a class action challenge by plan participants in a cash balance conversion. In such a conversion, a traditional defined benefit plan is converted to a quasi-defined contribution plan in which benefits are expressed as a notional account balance. Pre-conversion benefits are required to be preserved. As a result of the conversion, plaintiffs' benefits were frozen for a time following conversion, because their pre-conversion benefits were treated as a minimum benefit and exceeded their new accruals under the plan. Plaintiffs claimed that they had been told in plan communications that they would continue to earn benefits and sued for additional benefits they claimed had been promised.

Participants convinced both a district court and the Court of Appeals for the Second Circuit that CIGNA should be responsible for paying the greater benefits promised to participants, because their Summary Plan Descriptions (SPDs) and the required explanations given to participants in pension plans when their future accrued benefits are to be reduced had deliberately misled participants about the level of their benefits and failed to explain the minimum benefit rule. Plaintiffs reasonably expected to receive the sum of their pre-conversion and post-conversion benefits, and the lower courts rewrote, or "reformed" the plan to provide them without requiring a specific showing of individual harm caused by the misrepresentation, called detrimental reliance. A reasonable assumption of "likely harm" was found to be sufficient.

The Supreme Court overturned the lower court decision, but it remanded the case, and in doing so, laid out a blueprint for how the district court could nonetheless award the benefits to which participants thought they were entitled under the equitable relief provisions of ERISA. The Supreme Court also ruled that detrimental reliance (such as declining a job offer in order to keep benefits described in the SPD) was not required for all of the forms of relief available. The CIGNA decision therefore has important implications for fiduciaries seeking to avoid future litigation as well as for ERISA litigators.

The Court ruled on the following significant questions:

1. Are SPDs (the required basic disclosure documents under ERISA) part of the terms of every plan?

Although it is common for SPDs to contain disclaimers that the plan will govern, in the case of any conflict between the SPD and the plan text, most courts have refused to enforce the disclaimers where the SPD conflicts with the plan document. The Obama administration urged the Court to rule that plans were bound by the SPDs, as terms of the plan, which would have made disclaimers unenforceable, but the Court clearly found that the SPD was intended to be only a summary and was not part of the documents establishing the plan.

2. Is a suit to reform (rewrite) the plan to include benefits promised by the SPD a suit to recover benefits provided by the terms of the plan (under ERISA 502(a)(1))?

The answer to this was clearly no. The lower courts had erred in relying on this provision to award benefits to the CIGNA plaintiffs.

3. Does this mean that plaintiffs had no remedy?

The Court spelled out the basis on which promised benefits could have been awarded by the district court under a provision of ERISA, 502(a)(3), providing for equitable remedies. This was a surprise to many practitioners, since the Court had previously ruled in Mertens v. Hewitt Associates (508 U.S. 248 (1993)) that monetary damages were not available in a suit against a non-fiduciary under Section 502(a)(3), and the plaintiffs as well as the district court below had assumed along with other courts and many in the ERISA litigation bar that it was not available.

4. What equitable remedies did the Court find under 502(a)(3)? Do they require detrimental reliance?

The court explained that reformation of a plan document was permitted under Section 502(a)(3), as were suits for promissory estoppel and fiduciary surcharge, which is an award of monetary compensation for a loss caused by a fiduciary breach. Estoppel actions required detrimental reliance, but the others could require only a showing of "actual harm," which the Court said might be loss of a right protected under ERISA. Had the district court relied on 502(a)(3) to reform the plan, the Court would presumably have affirmed the decision. Since detrimental reliance is not required in all 502(a)(3) lawsuits, it will not be necessary to show that all members of a class actually read and relied on the SPD, which could be an impossible standard to meet in ERISA class action litigation.

5. What does this mean for plan administrators and sponsors?

Courts will not reform plan documents automatically to award any greater benefits that appear to be promised by the SPD. Although the court did not discuss disclaimers or whether the CIGNA notices had them, it appears that disclaimers will be enforceable in typical circumstances. However, the wise fiduciary will review all plan communications carefully and will not risk being found to have deliberately misled participants about benefits, triggering plan reformation without a requirement of detrimental reliance.

6. Best Practices after CIGNA CORP. v. Amara

The decision provides useful guidance for fiduciaries seeking to reduce their litigation risk. Summary Plan Descriptions and other required notices are often drafted by outside service providers, such as insurance companies, recordkeepers and consultants. All too often, these communications are distributed by busy fiduciaries without substantive review, even if they contain an alert to have them reviewed by legal counsel because they must satisfy detailed legal requirements. Some best practices to help avoid litigation over promised benefits are:

  • Avoid using your required communications as plan marketing tools. If your goal is to encourage employees to participate and to prevent them from complaining about changes, you are likely to lose track of legal requirements to disclose benefit limits and restrictions.
  • Always subject communications to a review to make sure that they satisfy all applicable legal requirements before distributing them.
  • If participants are being told about elections, provide adequate information so they can make informed decisions, including any applicable fees that may apply.
  • Consider "test driving" your communications. Have them reviewed by a test group of participants to determine how much they understand.
  • Don't rely solely on disclaimers even if you include them in your documents. It is best practice to review the plan and the SPD to ensure that there are no conflicts.

If CIGNA CORP. v. Amara leads to increased litigation, as some predict, and a lawsuit is commenced, you and your plan will be in a better defensive position if these practices have been followed.

Carol Buckmann has practised in the employee benefits field for over 25 years, advising clients on all aspects of employee benefits and retirement plans, including questions relating to 401(k), defined benefit and employee stock ownership plans, welfare plans, fiduciary responsibility, prohibited transactions and plan asset issues arising in investment fund formation. Sandra Cohen leads the U.S. compensation and benefits team, advising Canadian and U.S. corporations on executive compensation and employee benefits matters.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions