ERIC Argues that Court Should Not Rewrite Plan Documents

For Immediate Release

Washington, DC – The ERISA Industry Committee (ERIC), along with the U.S. Chamber of Commerce, on September 6 filed with the U.S. Court of Appeals for the Second Circuit an amicus brief in Osberg v. Foot Locker, Inc. The brief urged the Court to uphold the decision of the district court which dismissed the claims of plaintiffs seeking reformation of the plan and surcharge (effectively money damages) against a plan sponsor regarding the communication of their retirement plan amendment from a traditional defined benefit plan to a cash balance plan. 

The case involves alleged misleading summary plan description (SPD) explanations of the conversion of the sponsor’s pension plan from a traditional formula to a cash balance formula.  The plan conversion itself, which is not at issue in this case, provided for possible wear-away of the old formula benefit and guaranteed the greater of the old formula benefit earned to the date of conversion and the new cash balance account.  Participants claimed that: (1) the plan sponsor was required to inform employees about the possible period of “wear-away” after the traditional defined benefit plan was converted to a cash balance plan; (2) its alleged failure to do so was a breach of the fiduciary duty rules for SPDs; and (3) the plan should be reformed or the sponsor surcharged for a monetary reward.

Prepared by Covington & Burling LLP, the brief argues that the plan sponsor’s SPD and other plan communications properly summarized the plan amendment, did not give rise to any right to equitable remedies (of the type found available by the U.S. Supreme Court in Amara v. Cigna, which is also before the Second Circuit on remand), and that the applicable statute of limitations had expired prior to the filing of the lawsuit.

In particular, the brief indicates that a court should not rewrite a plan document, or penalize the administrator who follows the plan document, merely because a SPD does not disclose wear-away in pension accruals (although it did summarize the basic interaction of the old and new formulas under the plan).  The brief explains that SPDs are intended to describe the key terms of a plan, not the effect of those terms on participant’s varying circumstances.  Furthermore, the type of relief requested by the participants (i.e., equitable remedies such as reformation and surcharge) are applied only in rare cases that would not include a mere ambiguity in an SPD. The brief also argues that the time had expired to file a lawsuit because it wasn’t brought until years after the plan amendment.

The plaintiffs and the Department of Labor, in its amicus brief, have essentially argued for strict liability in plan communications and the broad equitable remedies mentioned above. They argue that relief should be provided not based on any showing of actual harm to participants, but merely on the basis that an SPD may have not been perfect.

“This is a very important case.  Plan communications should not be converted into absolute guarantees and leave plan sponsors at risk of substantial liabilities for good faith mistakes or communication ambiguities decades after they are made,” ERIC President Scott Macey said. 

Amicus Brief in Osberg v. Foot Locker, Inc.

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All media inquiries to The ERISA Industry Committee should be directed to:

Kelly Broadway, 202.627.1918, kbroadway@eric.org

About the ERISA Industry Committee
ERIC helps America’s largest employers stay ahead of employee benefit policy. ERIC member companies are leaders in every sector of the economy, and we represent them in their capacity as sponsors of employee benefit plans for their own workforce. Only ERIC provides the combination of intel, expertise, collaboration, and lobbying that exclusively serves the interests of large employers who provide health, retirement, and compensation benefits to their nationwide workforce.