Inglis is tasked with providing deep technical expertise for
Nuveen Asset Management to further develop the firm’s proprietary pension
analytics and risk models.
The broader pension investment strategy team crafts and
delivers customized investment strategies to defined benefit pension plans,
public funds, foundations and endowments, insurance companies and other
institutional investors.
Inglis was previously a principal at the Terry Group. Before
that, he was chief actuary at Vanguard, where he advised pension clients on liability-driven
investment (LDI) strategies. Inglis spent 25 years with Watson Wyatt in a
number of consulting, risk management and actuarial roles before joining
Vanguard.
Nuveen says Inglis is recognized as a thought leader in the
institutional space, having published key papers on cash balance plans and
pension plan terminations. Speaking regularly on a wide variety of pension and
risk management topics, he is a fellow of the Society of Actuaries and holds
the chartered financial analyst (CFA) designation.
Inglis will report to David Wilson, head of the
institutional solutions group.
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The 2nd U.S. Circuit Court of Appeals has agreed with a
district court’s reformation of CIGNA Corporation’s cash balance pension plan,
and decided the court had discretion to reform the plan.
The appellate court noted that in the Supreme Court’s
review of an earlier decision in the case, the high court agreed that courts
usually treat Employee Retirement Income Security Act (ERISA) plans as trusts.
But, when considering whether reformation is a remedy under ERISA, the high
court exclusively referred to principles of contract law, not trust law.
The 2nd Circuit said that focus is consistent with rules
governing the restatement of trusts, which hold that trust reformation is
dictated by principles of contract law where consideration is involved in the
creation of a trust. Under contract law, when one party causes another to agree
to a contract by using fraud or intentional misrepresentation, a court may
reform that contract to reflect the terms as represented to the defrauded
party.
“To hold otherwise would produce the unreasonable result
that a pension plan could only be reformed when the employer is mistaken about
its attributes, but not when employees are deceived,” the appellate court wrote
in its opinion.
The long-running case stems from CIGNA’s conversion in 1998
from a traditional defined benefit pension plan to a cash balance pension plan.
Under the new plan, participants were guaranteed to receive at least the value
of their already-accrued benefits from the traditional plan if the value of
their cash balance account at retirement amounted to less than the value of
traditional plan benefits. In communications to employees, CIGNA said the
initial account balance of the cash balance plan represented the full value of
benefits accrued in the traditional plan for each participant.
However,
the initial account balance was actually lower since the conversion of
traditional plan benefits to the cash balance plan included an adjustment for
the provision that an employee’s beneficiaries were guaranteed to receive the
employee’s benefit whether or not the employee died before retirement. Also,
the accounts of employees in the cash balance plan were subject to a formula
affected by interest rates, which could result in an experience called “wear
away,” with which it was possible for an employee to work years after the plan
conversion date before benefits in the cash balance plan equaled benefits
accrued in the traditional plan.
In its first decision, the district court 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 court made its
decision pursuant to relief provided under ERISA Section 502(a)(1)(B).
The case was appealed to the 2nd Circuit, which affirmed the
district court’s decision, and that led to a petition to the Supreme Court to
hear the case. The high court said in its opinion
that Section 502—which speaks of “enforcing” the plan’s terms, not changing
them—does not suggest that it authorizes a court to alter those terms where the
change seems less like the simple enforcement of a contract as written and more
like an equitable remedy. However, the Supreme Court remanded the case back to
the district court for consideration of whether reformation of the plan was a
remedy pursuant to ERISA Section 502(a)(3). The district court reached the same
conclusions in its second decision as in the first. The case was again
appealed to the 2nd Circuit.
In its latest opinion, the appellate court agreed with the
lower court finding that CIGNA engaged in fraud or similarly inequitable
conduct. CIGNA’s deficient notice led to its employees’ misunderstanding of the
content of the contract, and CIGNA did not take steps to correct its
mistake.
On this appeal, the plaintiffs in the case disagreed with
the provision of A + B benefits, saying some employees that earlier terminated
employment would not benefit or be made worse off by that calculation. CIGNA
used this to argue that its disclosures were accurate with respect to those
participants, so there was no fraud. But, the court said that even if some
employees who already terminated received a benefit under Part B as large as
under the A + B remedy, CIGNA’s statements to those employees were still
deceptive because they concealed the possibility of wear away of their accounts
had they remained employed, and misled them about the conversion of their
accrued benefits into the Part B plan. “Regardless of how benefits actually
accrued, at the time of conversion, their Part B benefits were at risk of wear
away due to fluctuating future interest rates,” the court wrote.
CIGNA
argued that misleading representations made in the plan’s summary plan
description (SPD) are inconsistent with contract law allowing reformation of
terms of a plan due to fraud or misrepresentation because the SPD does not
constitute terms of the plan. The 2nd Circuit noted that the district court did
not read CIGNA’s communications about the plan to be terms of the plan but as
evidence of fraud and evidence of what CIGNA’s employees understood the
transition from Part A to Part B to entail. The appellate court also agreed
with the district court that, in this case, reforming the CIGNA plan based on
CIGNA’s misleading representations does not impermissibly grant plan
administrators the power to set plan terms.