The nearly two-decade old CIGNA v. Amara case is not closed yet.
Plaintiffs in the case regarding CIGNA’s conversion from a traditional defined benefit (DB) plan to a cash balance plan have filed a motion to enforce court rulings and for sanctions.
A memorandum in support of the motion states, “Cigna is unilaterally and literally trying to rewrite this Court’s reformation and methodology rulings in ways that would take away, in Cigna’s own words, ‘hundreds of millions of dollars’ in the relief provided to remedy Cigna’s disclosure violations.”
A group of participants filed a lawsuit in 2001 contending that the cash balance program was age discriminatory, violated ERISA’s anti-backloading rule, and resulted in the forfeiture of accrued benefits. The participants further alleged that CIGNA’s notice of the plan conversion did not comply with ERISA.
In its first decision, the U.S. District Court for the District of Connecticut ruled there was no wrongdoing on CIGNA’s part in its calculation of benefits when it moved from the traditional plan (what the court calls Part A) to the cash balance plan (Part B), but it found CIGNA liable for inadequate disclosures relating to the conversion. The court applied the 2nd Circuit’s “likely harm” standard, a “presumption of prejudice in favor of the plan participant after an initial showing that he was likely to have been harmed,” and ordered “A + B” relief, whereby the CIGNA plan would provide class members with “all accrued Part A benefits in the form those benefits were available under Part A, plus all accrued Part B benefits in the form those benefits are available under Part B.”
The case made retirement plan media headlines when it was brought before the U.S. Supreme Court on the question of whether a court could order reformation of a plan. The high court said in its opinion, the provision of the Employee Retirement Income Security Act (ERISA)—which speaks of “enforc[ing]” the plan’s terms, not changing them—does not suggest that it authorizes a court to alter those terms here, where the change, akin to reforming a contract, seems less like the simple enforcement of a contract as written and more like an equitable remedy. The Supreme Court also rejected the Solicitor General’s alternative rationale that the District Court enforced the summary plan descriptions and that they are plan terms.
However, on remand, the District Court, and in an appeal, the 2nd U.S. Circuit Court of Appeals, agreed with the district court’s earlier reformation of CIGNA Corporation’s cash balance pension plan, and the appellate court decided the court had discretion to reform the plan.
Now, the plaintiffs in the suit argue that Cigna has violated the court’s rulings by:
- Using “lookback” interest rates from the date of the Part B lump sum distributions rather than from the Part A “Benefit Commencement Dates” to annuitize the offsets that this Court has allowed Cigna to take;
- Using “outdated” mortality tables from the date of the Part B lump sum distributions rather than the “successor” mortality tables applicable under the plan provisions on the “Applicable Mortality Table” to annuitize the offsets that this Court has allowed Cigna to take;
- Eliminating early retirement benefits until the “later of” the Part A early retirement age or the date the Part B cash balance account is distributed; and
- Refusing to pay “small benefit cashouts” to class members who have not received their Part B cash balance accounts.