The Sixth Circuit is fast making itself the center of case law on equitable remedies under ERISA. In Pearce v. Chrysler Group LLC Pension Plan, 2015 WL 3797385 (6^th Cir. June 18, 2015), the court held that a material conflict between an SPD and the plan permits a claim for equitable relief, apparently without any other element (like reliance) being required. For more discussion of the Sixth Circuit rulings on this subject in the last year or so, see Rochow 1, Rochow 2, and Stiso.

Shortly before it filed for bankruptcy, Chrysler offered Pearce a buyout package that would pay him about $75,000 (plus his normal pension benefits). At the time, Pearce was eligible for a supplemental pension benefit called “30-and-Out,” which paid an employee with 30 years of service an additional stipend until he became eligible for Social Security benefits. Pearce declined the buyout offer, and was promptly fired for alleged improper use of company vehicles.

There is no indication in the decision that Pearce’s eligibility for the 30-and-Out benefit impacted his decision to reject the buyout. To the contrary, it appeared to be irrelevant, because the court says it was “undisputed” that he was eligible for the benefit when he was offered the buyout, and that “Pearce was anticipating receiving” the benefit after he was terminated.

Chrysler did not pay the 30-and-Out benefit to Pearce, because the Plan provided that a terminated employee was not eligible, even if he met the other requirements on the date he was fired. Pearce argued that his rights were controlled by the SPD, which did not contain the exclusion for terminated employees. Let’s accept that the SPD conflicted with the Plan. The SPD, however, contained a statement that it was only a summary, and that, if it conflicted with the Plan, the Plan governed.

The Sixth Circuit held, consistent with Cigna Corp. v. Amara, 131 S. Ct 1886 (2011), that “it is clear that Pearce is not eligible for 30–and–Out benefits under terms of the Plan, and thus he cannot recover under ERISA § 502(a)(1)(B).”

However, the court then held that the district court had abused its discretion in denying, on futility grounds, Pearce’s motion to amend his complaint to add equitable claims of reformation, estoppel and surcharge under 1132(a)(3), because “a material conflict between the SPD and the Pension Plan can give rise to a claim for equitable relief.” The court stated: “It is irrelevant, for purposes of ERISA § 502(a)(3), that he is clearly excluded under the terms of the Pension Plan.” The Court did not address whether Pearce had met the pleading requirements for any of the particular equitable remedies he sought to allege, though it did state, in a footnote, that “We express no opinion on the merits of Pearce’s ERISA § 502(a)(3) claims other than that they are not futile.”

The decision makes abundantly clear that the Sixth Circuit requires a plan sponsor to toe a very fine line, because it must simplify and summarize complex plan language in an SPD, but it can be strictly liable if its summary fails to include any term that a court later decides was material to a subsequent dispute:

Though perhaps an aside, we think it is notable that inclusion of a single sentence, the exclusion clause (which is already required by 29 U.S.C. § 1022(b)), would have easily prevented this misunderstanding from arising. Accordingly, we do not run afoul of our longstanding recognition that “by definition, a summary will not include every detail of the thing it summarizes.” Lipker, 698 F.3d at 931 (internal quotation marks and citation omitted). Each detail of the Pension Plan need not be in (nor should be in) the SPD, but material limitations on a participant’s rights are required to be included.

Of course, every sentence in a Plan is material to some aspect of the Plan’s operation. Any provision in a Plan could be material to some benefit dispute that arises in the future. One wonders how a sponsor is supposed to summarize a plan in plain language, while making sure that no potentially material provision is omitted. It would appear that the most sensible course is to draft the Plan so that the Plan document itself can function as an SPD. But such “plain language” plans likely carry their own risks, such as a greater risk of ambiguity in the plan document itself.