DON’T FORGET THE EXCEPTIONS TO BENEFITS IN AN ERISA SPD

The importance of including all material terms of an ERISA plan in the summary plan description (“SPD”) was once again highlighted in a recent 6th Circuit decision that held that when there is a material difference between the language in the plan documents and the SPD, the plan participant is entitled to pursue an equitable remedy under ERISA section 502(a)(3), even if the claim for benefits under 502(a)(1) is not available. In Pearce v. Chrysler Group L.L.C. Pension Plan, No. 13-2374, 2015 WL 3797385 (6th Cir. June 18, 2015), Pearce was a 33-year Chrysler employee who, in October 2008, was offered a buyout package of $50,000 plus a $25,000 car voucher, which would have been in addition to his normal pension plan and 30-and-out benefits. He was encouraged to consult the SPD for more details. He declined the offer in November 2008 and was terminated on the same day for alleged improper use of a company vehicle. The next day he applied for the pension benefits, but was denied the buyout package because he had been terminated.

The SPD, which was allegedly the only plan document provided to Pearce, stated that in order to be eligible for the supplemental benefits, in this case the buyout package, he did not have to be actively employed at retirement but did have to retire and begin receiving pension benefits within five years of the last day of work for Chrysler. As such, it appeared to him that he was eligible for the buyout package. The pension plan language though had an exception that prevented “vested terminated employees” from receiving the buyout. After being denied benefits, he filed a lawsuit, which was eventually removed to federal court in Michigan, seeking plan benefits under ERISA section 502(a)(1) and equitable relief under section 502(a)(3). The district court granted summary judgment to the plan on both claims.

While the appeals court affirmed summary judgment on the section 502(a)(1) benefits claim based on its belief that CIGNA Corp. v. Amara, — U.S. –, 131 S.Ct. 1866, 179 L. Ed. 2d 843 (2011) requires that any conflict between the SPD and the pension plan language be resolved in favor of the plan language, it remanded the 502(a)(3) claim because it determined that Amara also “strongly suggest[s], if not hold[s], that conflicts between an SPD and the Pension Plan can be addressed under ERISA § 502(a)(3).” It went on to state that while an SPD does not have to include every detail of the pension plan, material limitations on a participant’s eligibility, which in this case was that being a “vested terminated employee” made one ineligible for supplemental benefits, are required to be included in the SPD and that a reasonable person in Pearce’s position would have read the SPD and believed he was eligible for the buyout package.

Based on this case and others in the ever-evolving post-Amara world, plans should be diligent in including all the pertinent benefit eligibility requirements and exceptions in their SPDs.

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