After the Supreme Court’s decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2012) (“Amara“), it is unclear as to what happens to a plan term that is not included in the summary plan description (the “SPD”). Skinner v. Northrop Grumman Retirement Plan B, No. 10-55161 (9th Cir. 2012), has an interesting discussion of this issue.
In this case, the plaintiffs sued Northrop Grumman and the Northrop Grumman Retirement Plan B (the “Plan”), under ERISA § 502(a)(1)(B) and § 502(a)(3), to enforce their understanding of their rights under the Plan. The plaintiffs claimed that the defendants had reduced their retirement benefits under the Plan by applying an actuarial reduction that was not described in the Plan’s summary plan description (again, the “SPD”), although it was included in the Plan’s master document. The issue for the Ninth Circuit Court of Appeals (the “Court”): after Amara, can the plaintiffs rely on the SPD -which conflicts with the terms of the Plan document-to disregard the actuarial reduction when determining the amount of their retirement benefits under the Plan?
The Court stated that, in Amara, the Supreme Court ruled that an SPD is not part of a plan; the SPD provides communication to participants about the plan, but it’s provisions do not constitute the terms of the plan for purposes of § 502(a)(1). Thus, the plaintiffs cannot rely on the discrepancy between the SPD and the Plan document, in this case, to disregard the actuarial reduction. As such, they may not obtain benefits under § 502(a)(1)(B) (which allows a participant to sue for benefits).
The question becomes whether there are any equitable remedies available under ERISA § 502(a)(3), which allows a participant “to obtain other appropriate equitable relief” to redress ERISA violations. In dictum, the Amara court stated that, under appropriate circumstances, § 502(a)(3) may authorize three possible equitable remedies: estoppel, reformation, and surcharge. These remedies may be disposed of as follows:
–The plaintiffs conceded that did not rely on the inaccurate SPD, so that they cannot claim estoppel.
–The Plan may be reformed to eliminate the actuarial reduction only in the case of mistake or fraud. Mistake requires that the Plan does not reflect the intent of its drafter, and there is no evidence of that here. Similarly, there is no evidence that the actuarial reduction appears in the Plan document due to fraud or any fraudulent inducement or misleading information. As such, reformation is not available.
–Surcharge would obtain upon a breach of fiduciary duty. Here a duty may have been breached, since the fiduciaries of the Plan had a statutory duty to provide participants with an SPD that was sufficiently accurate and comprehensive to reasonably apprise them of their rights and obligations under the Plan, that is, in this case, to clearly describe the actuarial reduction. However, under the surcharge remedy, the fiduciary is liable for benefits it gained through unjust enrichment or for harm caused as the result of its breach. Here, there were no such benefitsw, particularly because the plaintiffs conceded that they did not rely on the SPD. Thus, no surcharge.
The result-the Court found that the actuarial reduction-even though omitted from the SPD-may be taken into account in determining the plaintiffs retirement benefits under the Plan.