In a case that will result in significant changes to laws covering employee benefits, the Supreme Court this week ruled in Amara v. Cigna. The case was brought on behalf of 25,000 Cigna employees who disagreed with the company’s handling of changes in its pension plan back in 1998. The employees claimed that the company misled them that a new plan, which actually froze pensions of older, retired workers was “an overall improvement in retirement benefits.”
The Supreme Court ruled that a lower court could award the employees the benefit Cigna led them to believe they had coming. Viewing the ruling as a victory for employees, the assistant secretary of labor at the U.S. Department of Labor’s Employee Benefits Security Administration, which filed a brief on behalf of the Cigna employees, said the court’s decision “goes a long way toward restoring…common fairness.”
Analysts say employers scored a win, too. In the same case, the court agreed with Cigna that when there are conflicts between documents employers give to employees (“summary document”), and those not seen by the employees (“plan document”), employees do not have grounds to sue to enforce the terms of the summary document.
The lower court had ruled that Cigna deliberately provided misleading information to employees and successfully concealed the pension freeze, depriving employees from taking action, such as protesting or seeking employment elsewhere. Cigna argued that employees were legally entitled only to the less-generous benefits described in the formal plan document, which they did not see. Justice Stephen Breyer wrote, “It is not difficult to imagine how the failure to provide proper summary information, in violation of the statute, injured employees.”
Cigna employees could receive an estimated $70 million in pension benefits.