When a company switched from a defined benefit pension plan to a cash balance plan, it was sued by employees alleging it failed to provide the required notice that benefit accruals would be significantly decreased under the new plan, as well as other disclosure claims. The trial court felt that the company made misleading statements about the plan in order to ease the transition to a less favorable retirement program.
On May 16, 2011, the Supreme Court decided that it is enough for the employees to show actual harm from the improper disclosure in the summary plan description, and they need not show more proof of detrimental reliance to receive monetary compensation. If they can show reliance, additional compensation may be afforded, but such a showing is not required. The Court sent the case back to the trial court to determine what remedies might be available to the plaintiffs under normal equitable principles.
The decision is important in that it affirms that companies may be sued by employees who feel the disclosures of benefit plan changes are not adequate. Plan administrators will need to be especialy careful when describing plan changes and benefits to empoyees.