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Retirees who said their pension plan's summary plan description (SPD) misstated what their actual benefit would be under the terms of the plan were not entitled under ERISA §502(a)(3) to recover using the equitable remedies of reformation or surcharge, the U.S. Court of Appeals in San Francisco (CA-9) has ruled.
The SPD contained ambiguous statements regarding the plan's "annuity equivalent offset," which plan administrators used to reduce annual benefit amounts based on the participant's age at retirement. Prior to the Supreme Court's ruling in CIGNA Corp. v. Amara, the Ninth Circuit had ruled the presence of ambiguity in the SPD entitled the retirees to a trial to enforce their rights under the plan under ERISA §502(a)(1)(B).
Impact of Amara
On remand, the district court again ordered summary judgment in favor of the employer, and the retirees again appealed. The Ninth Circuit delayed hearing arguments on the second appeal pending the outcome of Amara.
Then, in Amara, the High Court held that statements in an SPD do not constitute terms of the plan for purposes of ERISA §502(a)(1)(B). As a result, the retirees could not move forward with their claims to enforce their rights under the plan.
Reformation and surcharge
However, in Amara, the Supreme Court suggested that retirees barred from relief for a misleading SPD under ERISA §502(a)(1)(B) could, under ERISA §502(a)(3), turn to the equitable remedies of estoppel, reformation, and surcharge. Although conceding they presented no evidence that estoppel was appropriate, the retirees did seek reformation and surcharge.
CCH Note: The Ninth Circuit, noting that retirement plan documents are similar to both trusts and contracts, evaluated the retirees' equitable claims under both the law of trust and of contract.
The court rejected both equitable claims made by the retirees. Reformation is appropriate only in cases of mistake or fraud. The retirees presented no evidence that the plan failed to capture its drafter's true intent, nor did they show the plan contained terms induced by fraud or undue influence.
Turning to surcharge, the court noted that plan administrators had a duty under ERISA to provide an accurate SPD. The remedy of surcharge could hold the plan administrative committee liable for the benefits it gained through unjust enrichment or for harm caused as a result of breaching this duty. However, the retirees failed to show either that the administrative committee gained a benefit from failing to deliver an accurate SPD or that the retirees were harmed by the inaccurate SPD.
Source: Skinner v. Northrop Grumman Retirement Plan B (CA-9).
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