Clear communication vital for plan changes
Posted On: May. 29, 2011 12:00 AM CSTTHE U.S. SUPREME COURT decision on CIGNA Corp.'s conversion of its traditional final average pay pension plan to a cash balance plan and how that conversion was communicated is important for several reasons.
The most important point is that participants who want damages as a result of misleading summary plan descriptions must prove that they suffered actual harm, rather than, as the trial judge ruled, “likely harm,” a fuzzy standard that strikes us as difficult to prove or disprove and one that would lead only to more litigation.
Also rejected was a suggestion by the U.S. solicitor general that summary plan descriptions can be enforced as the terms of a plan. If that were the case, Justice Stephen Breyer wrote in the 8-0 ruling, summary plan descriptions would be rewritten in dense legal language. With that, their functionproviding employees clear, concise information about benefit plans to employeeswould be lost.
Surely just as important as the decision itself is a message about benefit communications that this case delivers to all employers.
Employees sued CIGNA, charging that the summary plan descriptions about the late 1990s plan conversion did not explain that the new plan was in some ways less generous than the prior plan.
It probably is human nature to want to put a positive spin whenever there is change. Employees deserve to know in the clearest ways possible the positive and negative aspects of benefit plan changes.
That is a challenge that employersfor their own interest and the interest of their employeesmust strive to meet.