The importance of an accurate, up-to-date and comprehensive summary plan description (SPD) cannot be emphasized enough. Not only do ERISA and the Department of Labor regulations require it, but it has generally been held that where there are conflicts between the SPD and the official plan document, the SPD will control, usually to the detriment of the employer/insurer.
In 1993, the 4th Circuit applied this principle in Aiken v. Policy Management Systems Corp., 13 F3d 138 (4th Cir. 1993). In Aiken, the SPD conflicted with the official plan with respect to the payment of pension benefits. According to the SPD, plaintiff, an employee who resigned his position at the company, was permitted to receive a lump sum distribution of the funds in his pension account. The official plan document, however, provided for the distribution of vested benefits only upon satisfaction of the age requirement of the plan. The Court held that in order to recover benefits based upon a representation in the SPD, the participant must show either significant reliance upon the inconsistent plan description or possible prejudice flowing from the inconsistent plan provision. If the plaintiff was successful in doing so, he would gain the benefit of the provision in the SPD to the detriment of the employer.
In a more recent case, this principle was applied where the SPD did not contain a comprehensive description of requirements of the Plan. In McNutt v. J.A. Jones Construction Co., 33 F. Supp. 1375 (S.D. Ga. 1998), the Court refused to impose upon the plan participant the time requirements for filing a proof of loss for long term disability benefits where the SPD did not contain any discussion of time limitations. The Court reached this decision despite an express reference in the SPD that the participant should refer to other policy documents for details about the Plan. Clearly, what is omitted from the SPD is just as important and may have an even greater impact than what is actually contained in the SPD.
Where specific, significant provisions are included in the SPD, their descriptions should be accurate and up-to-date. In McCauley v. International Business Machines, Inc., 1999 U.S. App. LEXIS 794 (6th Cir. Jan. 22, 1999), the Court stated that even if statements in the SPD are truthful when written, future changes in events may make a previously truthful representation misleading. The Sixth Circuit held that an ongoing "duty to correct" is placed upon the employer based upon the provision of ERISA which requires the employer to publish and distribute an "accurate" SPD and the fiduciary duties of the employer. These factors impose a duty to correct upon an employer that knows or should know a statement in the SPD has become misleading to potential participants. The duty to correct was held to apply only to those representations made after the time the employer was deemed to have given "serious consideration" to a change in the retirement plan. The Court conducted a detailed analysis of the facts involving the new provision and focused on the time frame which the specific proposal was discussed for implementation by senior management. After determining this date, the Court held that IBM had a duty to correct statements in the SPD from that date forward.
While McNutt and McCauley are not controlling in the 4th Circuit, they illustrate the necessity of insuring that the SPD accurately and comprehensively addresses the provisions of the Plan so that those provisions may be applied and enforced. Although the SPD must be written in a manner calculated to be understood by the average plan participant, simplification of Plan provisions should not result in the omission of important provisions or the inclusion of inaccurate descriptions in the SPD. Plan Administrators need to remain vigilant in conducting periodic reviews of the SPD to insure that no conflicts exist between it and the Plan.
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