Amara v. Cigna Corp.

Citations: 559 F. Supp. 2d 192; 45 Employee Benefits Cas. (BNA) 1062; 2008 U.S. Dist. LEXIS 45947; 2008 WL 2403772Docket: 3:01CV2361(MRK)

Court: District Court, D. Connecticut; June 13, 2008; Federal District Court

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Janice C. Amara, representing herself and others, is pursuing a case against CIGNA Corporation and the CIGNA Pension Plan regarding statutory violations related to the transition from a defined benefit pension plan to a cash balance plan. The court, having previously determined liability, is now addressing the appropriate relief for those violations, which primarily involve inadequate notices and disclosures to employees. The court acknowledges the complexity and uncertainty surrounding remedy choices due to unclear statutory provisions and existing case law, leading to a sua sponte stay of its judgment to seek guidance from the Second Circuit before proceeding.

Two preliminary procedural questions are raised: the appropriateness of class treatment for certain issues and the remedies available in an ERISA class action certified under Rule 23(b)(2). Plaintiffs argue there are no remaining individual issues, while CIGNA contends that several individual issues require separate consideration, including potential individual prejudice, employee knowledge of the transition, the need for specific notices regarding benefit accrual, and the impact of waivers signed by employees. CIGNA seeks either to decertify the class or to initiate individual discovery and hearings on these matters.

CIGNA seeks approval to depose approximately 25,000 class members, but the Court sides with the Plaintiffs. CIGNA's argument centers on two documents: a Stipulation from March 10, 2006, and a Rule 23(c)(1)(B) Order from March 12, 2007. The Stipulation allows limited discovery involving 16 selected class members to assess the likelihood of prejudice and harmless error, with the Court to determine if similar discovery should extend to the entire class. CIGNA previously contested several class claims, arguing they involved individual issues. The Court finds CIGNA's interpretation of the documents incorrect, noting the Stipulation states the trial aims for a final judgment on likely prejudice and harmless error for all testifying class members. After the trial, the Court would decide if individual hearings were needed, which it ultimately did not require. The Court’s Rule 23(c)(1)(B) Order similarly acknowledged the potential for a collective determination on these issues. The Court concluded that Plaintiffs demonstrated likely harm and prejudice without necessitating individualized evidence, thus rejecting CIGNA's arguments.

The Court's ruling aligns with established case law, such as Frommert, which does not necessitate individual proof from each plaintiff due to the collective nature of the harm caused by CIGNA's misleading communications. All class members received identical notices and disclosures, resulting in uniform impact. The Court asserts that its decision applies broadly to the entire class, with no remaining individual issues regarding likely prejudice or harmless error.

CIGNA has conceded that the uniform communications were inadequate in addressing claims of likely prejudice but contends that before any absent class member can receive a remedy, the Court must determine whether those members had "actual knowledge" of the inadequately disclosed information. CIGNA fails to substantiate this claim, particularly as it has not demonstrated that any employee possessed actual knowledge from official CIGNA sources regarding undisclosed information related to the transition to Part B.

The Court emphasizes that only official communications from CIGNA can clarify the insufficiencies in the disclosures. CIGNA's suggestion that informal communications, such as office gossip, could mitigate the misleading nature of the official notices is rejected, as there is no legal precedent supporting such a claim. The Court cites previous cases where additional official communications were provided by employers to correct omissions, contrasting them with CIGNA's lack of similar efforts.

CIGNA is tasked with proving that any errors in the case were harmless, but has only provided speculative arguments regarding potential insights from numerous depositions. Consequently, the Court denies CIGNA's request for extensive additional discovery. The Court also dismisses CIGNA's assertion that the timing of an employee's actual knowledge of facts related to Part B should be considered on an individual basis. CIGNA's claim that employees who received but did not read misleading notices should not be presumed to have suffered harm is rejected. The Court critiques CIGNA's reliance on Cement Workers District Council Welfare Fund v. Lollo to assert that a plaintiff must demonstrate personal knowledge of misrepresentations under ERISA. The Court clarifies that Lollo involved third-party reliance in a fraud context, which differs from the statutory violations at issue. CIGNA's burden of proof cannot be shifted to the Class, and the Court notes the difficulty employees might face in recalling specific publications from ten years prior. Additionally, CIGNA's references to individual issues regarding 204(h) notices and waivers are deemed insufficient, as they are only mentioned in footnotes, indicating a lack of confidence in these claims. The Court agrees that a 204(h) notice is warranted only for employees likely to experience a reduction in future benefit accrual, clarifying that prior statements do not constitute a ruling on this issue.

CIGNA's assessment of "relevant facts and circumstances" regarding the provision of 204(h) notices should have been conducted at the same time as the notices were disseminated. Evaluating these factors post hoc is impractical, particularly a decade later, as CIGNA would struggle to reconstruct the knowledge surrounding employee retirement benefits at that time. The Court emphasizes that CIGNA cannot evade accountability for misleading statements in the notices issued to class members, except for rehires. 

CIGNA's defense based on waivers signed by absent class members has been inadequately substantiated, as the Court previously ruled that CIGNA failed to demonstrate that these waivers intentionally relinquished the claims presented by the plaintiffs. Consequently, the Court finds no remaining individual issues pertinent to CIGNA's liability.

Additionally, the Court addresses the compatibility of certain remedies under ERISA with the constraints of Rule 23(b)(2) class actions. Plaintiffs are invoking ERISA sections 502(a)(1)(B) and 502(a)(3), which allow for recovery of benefits due under the plan and for equitable relief against violations of ERISA provisions or plan terms.

Rule 23(b)(2) of the Federal Rules of Civil Procedure allows for class actions seeking final injunctive or declaratory relief when the opposing party has acted against the class as a whole. The Second Circuit has indicated that if monetary claims outweigh claims for injunctive relief, Rule 23(b)(2) certification may not be suitable. In Robinson v. Metro-North Commuter Railroad Co., the court established that certification requires: 1) reasonable plaintiffs would pursue the suit for injunctive or declaratory relief even without monetary recovery, and 2) the relief sought is both necessary and appropriate if the plaintiffs prevail. Certification should not be used to support claims primarily aimed at monetary recovery, especially if the requests for injunctive relief are minimal or insincere.

The principle of "cohesion and unity" among class members allows for incidental damages, as these damages are linked to a finding of liability based on class-wide relief. The Court evaluated whether the monetary relief sought by the Plaintiffs constitutes non-incidental damages, which would make Rule 23(b)(2) certification inapplicable. After reviewing the case and relevant precedents, the Court concluded that the monetary relief is incidental to the injunctive and declaratory relief sought, allowing for Rule 23(b)(2) certification.

The Court noted that the judge who initially certified the class lacked the Second Circuit's guidance from Robinson, leading to necessary findings being absent. However, the Court determined that the class would have qualified for Rule 23(b)(2) certification under Robinson since CIGNA's actions affected all class members similarly. The primary relief sought includes a declaration of invalidity for Part B and an injunction for the plan administrator to amend records for benefits under Part A. CIGNA applied Part B uniformly and provided identical notices to class members, ensuring that any ordered relief could be applied universally without regard to individual circumstances. Monetary relief would be a direct consequence of the equitable relief, calculated mechanically and not dependent on individual claims.

In Parker v. Time Warner Entm't Co. L.P., the Court affirmed that reasonable plaintiffs would seek injunctive and declaratory relief based on the benefits for the Class, irrespective of the potential for monetary recovery. The Court deemed that some form of the requested relief was necessary and appropriate due to the plaintiffs' success on certain claims. This conclusion is bolstered by similar determinations made by other courts. Although there is no direct Second Circuit precedent, the Seventh Circuit, as articulated by Judge Posner in Berger v. Xerox Corp. Retirement Income Guarantee Plan, recognized the viability of recovery under ERISA Section 502(a)(1)(B) by a Rule 23(b)(2) class. The Seventh Circuit rejected Xerox's argument that the suit sought only monetary damages, emphasizing the importance of distinguishing between declaratory/injunctive and monetary relief. The class in Berger sought a declaration that Xerox's computation method for lump sums was unlawful, which was deemed to be a common ground among class members. The Court noted that a declaratory judgment often precedes further relief, whether injunctive or monetary, and that anticipated follow-on relief must be a direct consequence of the declaration. In the current case, the plaintiffs share a common issue regarding the transition to Part B and related notices, with any recalculated benefits being a direct result of the Court's relief. Additionally, the Eleventh Circuit has permitted Rule 23(b)(2) certification for ERISA claims, while two district courts in the Second Circuit have also certified similar classes in cases involving transitions from defined benefit to cash balance plans.

Judge Janet C. Hall in Richards clarified that class certification under Rule 23(b)(2) is permissible even when both equitable and monetary relief are sought, provided the district court assesses the significance of the remedies in light of the case's facts. The ruling established that injunctive relief can include the recovery of unlawfully withheld past payments. In a similar case, In re Citigroup, a class was certified under Rule 23(b)(2) because plaintiffs' requests for injunctive and declaratory relief were deemed to outweigh other claims. The court emphasized the distinction between injunctive relief under Rule 23(b)(2) and monetary damages under ERISA Section 502(a)(3).

The court then turned to the plaintiffs' requests for relief under ERISA, seeking a declaration that Part B of the plan is void and an injunction to revert to Part A or correct identified misrepresentations. The court needed to evaluate the availability of such relief under ERISA Section 502(a)(1)(B) and the equitable catch-all provision under Section 502(a)(3). CIGNA argued that since Part B was lawful, it could only be liable for violations related to notices about the transition to Part B. The court referenced the ruling in Frommert, which held that court-ordered plan reformation due to misleading disclosures falls under Section 502(a)(1)(B). It concluded that the plaintiffs' request for recalculation of benefits was appropriate under this provision, negating the need for additional equitable relief under Section 502(a)(3).

Relief under 502(a)(3) is only permissible when other ERISA remedy provisions are inadequate. Section 502(a)(3) is viewed as a "catch-all" provision, primarily used when relief cannot be obtained through 502(a)(1)(B). The Second Circuit previously limited claims of inadequate disclosures to plan administrators, allowing claims for benefits against the plan or administrators/trustees in their official capacities. In Crocco, the court ruled that an employer cannot be deemed a de facto co-administrator if a designated administrator exists per ERISA requirements. CIGNA contends that plaintiffs can only pursue claims against the plan administrator for benefits resulting from disclosure violations, arguing that the plaintiffs' failure to name the administrator undermines their claims under both 502(a)(1)(B) and 502(a)(3). The Court counters CIGNA's argument, emphasizing that the Second Circuit has not differentiated between benefits as stated in the plan and those affected by misleading disclosures. The case of Frommert illustrates that benefits due to misleading information fall within the scope of 502(a)(1)(B). The Court concludes that the CIGNA Plan is a suitable defendant, asserting that both the plan and its administrators/trustees can be held liable for benefit recovery claims.

If a summary plan fails to adequately inform employees of their rights, ERISA allows participants and beneficiaries to file civil actions against plan fiduciaries for damages resulting from such failures under 29 U.S.C. § 1132(a)(1)(B). The court holds that any remedial benefits resulting from misleading statements in CIGNA's disclosures are considered benefits under the plan, making CIGNA liable for them under § 502(a)(1)(B). The court does not need to determine if relief could also be sought under § 502(a)(3), noting that the Second Circuit has ruled that relief under § 502(a)(3) is not available if the same relief is accessible under § 502(a)(1)(B). However, ambiguity exists regarding scenarios where relief under § 502(a)(1)(B) might be unavailable, raising questions about the appropriateness of seeking relief under § 502(a)(3) in such cases. The Supreme Court has limited the types of relief available under § 502(a)(3), particularly distinguishing between equitable and legal relief. Previous rulings, including Mertens and Great-West, clarify that claims for monetary compensation are typically deemed legal remedies, which may restrict the ability to frame such claims as equitable under § 502(a)(3). The Second Circuit's observations suggest that attempts to recast claims in equitable terms may not alter the fundamental nature of the claim as one for monetary damages.

The Court has confirmed that Plaintiffs are entitled to full relief under ERISA § 502(a)(1)(B), thus not addressing potential relief under § 502(a)(3). A primary issue is the November 1997 Signature Benefits Newsletter, which CIGNA claims serves as its ERISA § 204(h) notice. The Court previously found that transitioning to Part B significantly reduced future benefit accruals, necessitating a § 204(h) notice for CIGNA's employees. It noted challenges in determining whether CIGNA provided all necessary information per Treasury regulations, particularly regarding the clarity of the amendment summary for average plan participants. Due to material misrepresentations in the § 204(h) notice, the Court focused on CIGNA's misleading statements that led participants to believe reductions in benefit accruals were not a result of Part B. 

The appropriate remedy for CIGNA's violation of ERISA requirements is in question. Plaintiffs argue for invalidation of the amendment related to the defective notice, supported by legal precedent from *Frommert*, which stated that lack of proper notice prevents the application of certain provisions. They request that all employees affected post-January 1, 1998, who would earn less under Part B than under the previous Part A formulas, be restored to the Part A benefits in effect as of December 31, 1997, until valid notice is provided. 

CIGNA contests this claim, arguing that the requested remedy does not correlate with the harm suffered and would result in a windfall, as employees had been informed about earning benefits under Part B. Additionally, CIGNA asserts that Amendment 4, which froze Part A benefit accruals, was validly noticed, and that rehires were not entitled to § 204(h) notices, limiting any potential remedy for this group.

The Court concurs with CIGNA that its prior determination in the Liability Decision regarding the lack of a required 204(h) notice for rehires prevents extending relief to rehired employees for CIGNA's 204(h) violation. However, rehires are still eligible for relief concerning misrepresentations in their Summary of Material Modifications and Summary Plan Descriptions. CIGNA's argument about the amendment of 204(h) is weak; the 2001 amendment introduced a provision for addressing egregious failures related to plan amendments, suggesting that previous versions of the statute could support remedies not explicitly stated prior to 2001, as seen in the case of Frommert.

The Court identifies unique circumstances stemming from Amendment 4, which froze benefit accruals under Part A as of December 31, 1997, while CIGNA had validly issued a 204(h) notice regarding this freeze. The notice assured employees that a new plan, Part B, was forthcoming and would retroactively apply benefits to January 1, 1998. This freeze acted as a temporary measure during the transition to a cash balance plan. The Court notes no challenge has been raised against the validity of the 204(h) notice or Amendment 4 by the Plaintiffs. CIGNA clearly communicated to employees that benefits under Part A would cease after the freeze date, a fact corroborated by expert testimony. Plaintiffs, however, seek to have all employees continue receiving benefits under Part A post-freeze, but they have not substantively challenged the freeze itself, potentially missing an opportunity to argue that it was a pretext to circumvent proper notice for Part B.

The 204(h) notice for the freeze, while technically accurate, could be deemed void due to its inclusion within a document containing materially misleading statements about Part B. It is suggested that CIGNA employees may have only accepted the freeze under the belief that a comparable retirement plan would be retroactively implemented. However, the plaintiffs did not raise these arguments, and the Court will not do so for them. CIGNA references Treasury Regulation 1.411(d)-3, which states that separate amendments are considered one plan amendment only if they share the same adoption and effective dates. Amendments 4 and 5 had different dates, leading CIGNA to assert they cannot be treated as a single amendment for invalidation purposes. The Court acknowledges the regulation's intent to prevent employers from reducing benefits unlawfully but expresses concern that CIGNA might exploit a technicality regarding the freeze to deny employees necessary notice under 204(h). The Court previously chose to overlook the freeze's impact when assessing whether a significant reduction in future benefit accrual occurred, thus triggering the notice requirement.

Despite concerns of legal manipulation, the Court distinguishes between disregarding a freeze's effect for notice purposes and voiding the underlying amendment, which the plaintiffs have not challenged. The plaintiffs fail to justify that the defective notice for Amendment 5 should affect Amendment 4, which all parties acknowledge employees were aware of. The Court recognizes the disparity in ignoring Amendment 4 as a remedy for the notice failure regarding Amendment 5. Furthermore, Amendment 5 created a new defined benefit program, contrasting with the narrower amendment in Frommert, which only addressed interest computation for prior employees returning to Xerox. The potential impact of invalidating Amendment 5 on CIGNA's retirement program would be significant, even though Part A remained operative for some employees until March 31, 2008, suggesting a manageable transition for class members.

CIGNA faces challenges in fully transitioning its employee population to Part B of its benefits plan, as it would need to extend Part A to an additional 10,000 to 20,000 employees, complicating and delaying the process. The higher benefit accrual rate under Part A would also incur significant costs. The Court is hesitant to mandate a return to Part A, particularly since Part B is legally valid under ERISA and CIGNA provided its employees with substantial and accurate information regarding benefits accumulation. Although the Second Circuit has ruled that lack of proper notice under ERISA § 204(h) renders plan amendments ineffective, invalidating Part B would harm Plaintiffs by reverting to a less beneficial freeze rather than restoring a viable plan. The Court believes that while ERISA § 204(g) protects benefits accrued under Part B before judgment, the outcome would result in a freeze of Part B, which would not benefit the Plaintiffs and contradict ERISA’s focus on worker protection. The Court acknowledges concerns about CIGNA's freeze and its implications for notice requirements, recognizing that CIGNA’s failure to provide valid notice allowed for the implementation of Part B without transparency regarding benefit reductions. Thus, the Court has opted not to invalidate Part B, allowing CIGNA to avoid consequences for its deficient notice.

The 204(h) notice, as interpreted by the statute and the Second Circuit, aims to revert plan participants to the more favorable provisions established before the amendment, allowing CIGNA to reintroduce Part B after providing a proper notice. This would leave participants with no actual benefit and CIGNA with minimal inconvenience, stripping employees of leverage to influence CIGNA's reconsideration of Part B. The court noted that CIGNA did not intend for the freeze to be permanent, and there was no evidence suggesting a deliberate attempt to avoid responsibilities under 204(h) or to prevent a return to Part A. The court acknowledged that the combination of a freeze with retroactive benefits might be more advantageous to employees than a freeze without such benefits. Consequently, the court did not find evidence of bad faith from CIGNA regarding the freeze and recognized that if other employers tried to misuse freezes to sidestep 204(h) provisions, regulatory measures could be implemented by the Treasury Department and the IRS.

Although a return to Part A was deemed an inappropriate remedy for CIGNA's violation of 204(h), the court mandated that new 204(h) notices must be issued to all class members, including rehires, after judgment, complying with current Treasury Regulations. These notices should detail the impact of the transition to Part B on retirement benefits. The court emphasized that, despite the improper notice, the plaintiff qualifies for alternative relief due to materially misleading information in CIGNA's Summary of Material Modifications (SMM) and Summary Plan Descriptions (SPDs), which are essential for employees to understand their pension benefits as required by ERISA.

ERISA and its regulations mandate specific disclosure requirements, which CIGNA's Summary Plan Descriptions (SPDs) and Summary of Material Modifications (SMM) failed to meet due to material misrepresentations. The Court identified three key deficiencies: 

1. The disclosures did not inform employees about the potential for "wear away" and its impact on benefit accruals.
2. Participants were misled to believe that all accrued benefits under Part A, including early retirement benefits, would be safeguarded in the opening account balance or as part of the Part B protected minimum benefit.
3. The disclosures inaccurately suggested that accrual rates under Part B were comparable to those under Part A.

To remedy the first two violations, the Court highlighted that CIGNA's communications led participants to reasonably expect that Part B would protect all Part A benefits and that benefits would accrue immediately. The Court noted that applying an "A+B" approach—where employees receive all Part A benefits alongside any accrued Part B benefits—would eliminate the issues of wear away and clarify the inclusion of early retirement benefits, thus negating the need for an opening account balance. CIGNA's annual accrual notices were otherwise accurate, except for the omission regarding potential non-accrual of benefits.

The Court has determined that misleading statements in the Summary Plan Materials (SMM) and the Summary Plan Description (SPDs) regarding the transition to Part B and early retirement benefits have become binding terms of the Plan, as established by the Frommert precedent. The Court's remedy is to provide benefits under ERISA § 502(a)(1)(B). Both CIGNA and the Plaintiffs object to the proposed relief; CIGNA argues against any relief and suggests recalculating opening account balances using a formula for participants aged 55 or older, which the Court rejects. This rejection is based on CIGNA's failure to account for all early retirement benefits in the opening balances. 

Plaintiffs contest CIGNA's assertion that this recalculation would eliminate wear away, citing their expert, Claude Poulin, who supports their position. The Court notes that participants like Ms. Hogan, with over 55 points as of December 31, 1997, benefitted from more favorable conversion rates. CIGNA also opposes the A+B remedial approach, claiming it contradicts the terms of the Part B SPD by resulting in zero balances for all participants, a contention the Court dismisses. 

Additionally, CIGNA acknowledges that subsequent disclosures post-transition were accurate, limiting the number of affected documents. The Plaintiffs argue that the A+B approach is inadequate because not all class members faced wear away, and those who did may have experienced further benefit reductions due to Part B's lower accrual rates. They estimate that wear-away periods account for only 20-25% of overall benefit losses, although they acknowledge that many class members suffered significant losses due to wear away. Mr. Poulin's testimony indicates that while not every employee experienced wear away, a significant majority did.

Plaintiffs utilized the testimony of CIGNA's expert, Lawrence Sher, indicating that CIGNA reasonably anticipated that opening balances for a significant group of employees would fall below their protected benefits under the old plan. Although a return to Part A would provide greater recovery for Plaintiffs, this alone does not undermine the adequacy of the A+B remedy, particularly in light of Mr. Poulin's testimony about the detrimental impact of "wear away" on benefits, with no supporting evidence from the trial record for Plaintiffs' claims. Consequently, the Court dismisses objections from both parties regarding the A+B remedy, deeming it meaningful and appropriate.

The Court addresses a third misrepresentation concerning comparable benefits, noting that misleading statements appeared in the Summary of Material Modifications (SMM) and the 204(h) notice but not in the Summary Plan Documents (SPDs), which is atypical. Despite the importance of SMMs under ERISA, they are only required in specific situations and can be superseded by timely SPDs. The Court is hesitant to treat misleading SMMs as equivalent to misleading SPDs or to reform the plan terms based on the SMM. Even if treated as such, issues persist with statements claiming no reduction in CIGNA’s retirement contributions and assertions that new hires could earn comparable benefits to longer-serving employees. While the Court agrees that these statements imply some comparability of benefits between Parts A and B, it finds that they differ from CIGNA's claims regarding wear away, as there are no specific remedies for the former. The Court concludes that to make the statements accurate as requested by Plaintiffs would require a complete rewrite of the Plan’s provisions, which the Court cannot authorize, a position echoed by Plaintiffs.

The Court mandates that the CIGNA Plan compensate class members with all accrued Part A benefits and Part B benefits under the A+B framework. The Court identified two deficiencies in CIGNA's benefit election notices: the failure to inform employees that early retirement benefits were available only through the Part A annuity, and the omission of information regarding when Part A benefits exceeded Part B benefits, known as the Minimum Benefits Rule. The revised notices under the A+B approach will rectify these issues by ensuring that all Part A benefits, including early retirement benefits, are automatically provided in annuity form, while Part B benefits can be offered as either a lump sum or annuity, making the Minimum Benefits Rule moot.

Additionally, all retirees will be eligible for amended notices reflecting these changes. The Court also addresses the conversion of previously paid lump sums into annuities, specifically whether retirees who opted for lump sum payments must repay part of that amount to receive additional annuity benefits. CIGNA contends that retirees whose lump sums exceed the equivalent annuity payments must reimburse the difference before beginning to receive annuity benefits. CIGNA argues this is essential to maintain fairness within the Plan and to prevent retirees from receiving a windfall that they were not originally promised or entitled to due to the lack of relevant information at the time of their election.

CIGNA contends that the retirement Plan was financially structured with the expectation that most employees would opt for a lump sum, which has proven true. They argue that significant changes in actuarial assumptions resulting from the proposed remedies could jeopardize the Plan's funding. Plaintiffs oppose any requirement for a payback of lump sums, proposing instead an equitable setoff where the Plan would receive credit for the lump sum paid (plus reasonable interest) while bearing responsibility for the difference between the full-value Part A annuity and the reduced monthly payments derived from the lump sum. This would ensure retirees receive the appropriate value without needing to repay any portion of their lump sum.

The Court acknowledges the validity of both parties' positions, particularly CIGNA's concern for the Plan’s financial stability and the Plaintiffs' argument against encumbrances that could undermine the relief offered. The Court determines that no payback will be required. It rejects CIGNA’s assertion that retirees with larger lump sums would be less affected by a payback, emphasizing that retirees should not be required to provide significant cash upfront in the current economic environment. 

The Court’s remedy will ensure that CIGNA receives full credit for already disbursed lump sums and applicable interest. Upon annuitizing the lump sum plus interest, the Plan will deduct the monthly payment from the original Part A annuity amount. Retirees will receive a lump sum for past-due benefits as of the judgment date and ongoing monthly payments to cover the difference. These payments will follow the default ERISA requirement for a qualified joint and survivor's annuity, continuing for the retiree's lifetime and a proportionate amount for the surviving spouse.

The Court aims to ensure that the lump sum payments plus interest and annuity payments from the CIGNA Plan are mathematically equivalent to minimize potential overpayment by CIGNA. If any overpayment risk remains, CIGNA is deemed responsible due to its provision of inadequate benefit election forms. The Court holds that retirees who chose a lump sum should not be penalized, as they should still qualify for additional benefits now available to them. 

For retirees eligible for benefits under Part A, the Court mandates that they receive a notice detailing their additional benefits, including past-due amounts and future annuity payments, without needing to make an affirmative election. In contrast, retirees eligible for Part B benefits can choose between an annuity or a lump sum. The Court acknowledges plaintiffs' concerns that requiring action from retirees might limit the number receiving relief, hence Part B notices will allow a choice, with a default to a lump sum if no election is made within 90 days.

Retirees eligible for both Part A and Part B will get a hybrid notice, detailing automatic payments under Part A and an election for Part B benefits, with a similar default to a lump sum if no response occurs. The Court also indicates that providing additional annuities may not benefit retirees when their lump sum and annuity values are nearly equivalent, referencing a 5% equivalency standard from the 2003 Treasury Regulations. The CIGNA Plan may opt to provide supplemental lump sums for retirees whose lump sum value is at least 95% of their annuity's present value.

Should the A+B approach be rejected on appeal, the Court believes a remedy for CIGNA's misrepresentations in benefit notices is warranted, although the affected class may be small—estimated at 350 to 400 participants. The parties are to identify which retirees need new notices.

A cutoff date of September 30, 2004, is deemed appropriate by the Court for assessing CIGNA's failure to disclose early retirement benefits only in annuity form, as new Treasury regulations on this topic took effect on October 1, 2004. However, CIGNA's obligation to inform employees if their Part A benefits exceeded Part B benefits, as promised in the Part B SPDs, remains unaffected by these new regulations. Consequently, affected retirees are entitled to corrected notices regarding compliance with the Minimum Benefits Rule. 

The Court expresses concerns about CIGNA's approach to paybacks and opt-in requirements for retirees. CIGNA contends that offering an additional annuity without a payback requirement would lead nearly all eligible retirees to accept it, despite some preferring a lump sum. The Court finds it impossible to retrospectively determine retiree preferences and agrees with the Plaintiffs that retirees should automatically shift to annuity payment plans if their annuities have a greater present value than lump sums. 

The Court supports the Plaintiffs' argument that defective notices rendered any consent to lump sum payments invalid, requiring retirees to revert to the default benefit form, a qualified joint and survivor's annuity. Retirees misled by CIGNA should not be penalized for the company's failure to provide accurate information regarding benefit options. Therefore, new benefit election notices should not necessitate retiree elections, but rather should detail the amounts of lump sums and annuities to be received, along with justifications for the additional payments. 

The Court emphasizes that new notices must comply with current Treasury Regulations, as CIGNA's prior misleading disclosures negate its ability to rely on less stringent regulations. Lastly, while the Court previously rejected the Plaintiffs' claim under ERISA's anti-cutback provision concerning Part B, it did not address whether data mismanagement by CIGNA could result in a cutback, as this issue was not previously briefed by the parties.

The parties informed the Court that a particular aspect of the Plaintiffs' claims was under settlement negotiation and did not require resolution in the Liability Decision. The Court expressed surprise and dismay at the revival of this claim in the Plaintiffs' post-trial Memorandum on Relief, as it had not previously been addressed. The Court will not reopen the trial record or conduct an additional trial on this matter but allows the Plaintiffs to pursue the claim in a separate action, noting that the statute of limitations would be tolled during this proceeding.

Regarding prejudgment interest on past-due benefits for retired class members, the Court retains discretion to award it, guided by factors from the Second Circuit. These include full compensation for damages, fairness, the remedial purpose of involved statutes, and any other relevant principles. This analysis applies solely to retirees already receiving benefits, while employees who will receive future benefits are excluded from such interest.

The Court concluded that the CIGNA Plan should not retain the time-value of improperly withheld funds from retired members, emphasizing that delayed benefit payments diminish the monetary value owed to beneficiaries. The Court cited the Second and D.C. Circuits, which suggest that prejudgment interest is generally appropriate to prevent unjust enrichment of fiduciaries and ensure beneficiaries are fully compensated for the loss of the use of their funds. Additionally, the CIGNA Plan will have a reasonable rate of return credited on lump sum payments to retirees, impacting the calculation of equitable setoffs.

The rate of prejudgment interest in this context is not strictly tied to the federal interest rate as established by 28 U.S.C. § 1961(a), as courts recognize that the appropriateness of such a rate depends on the specifics of each case. The Second Circuit has indicated that the court can consider various factors, including potential investment returns for the plaintiff and the borrowing costs for the defendant. The court in this instance deems the federal post-judgment interest rate unsuitable; instead, it advocates for a reasonable rate of return akin to that used by the CIGNA Plan for lump-sum payments, reflecting a moderate to long-range investment horizon.

The court asserts that this reasonable rate should apply to all benefits due from January 1, 1998, until the judgment date. Prejudgment interest is ordered under ERISA § 502(a)(1)(B), with some uncertainty regarding its availability under § 502(a)(3) following the Great-West decision. However, case law suggests that such interest could still be sought under § 502(a)(1)(B) to rectify the effects of a fiduciary breach. The rationale for awarding prejudgment interest is tied to the implicit understanding in pension plans that delayed benefits will accrue interest, thus ensuring beneficiaries receive the full value of their benefits at the time they are due. This interpretation aligns with common law contract principles and supports the objectives of ERISA by incorporating an implied provision for interest on overdue benefits.

An employer's timely payment of benefits is critical to prevent the accumulation of improperly retained funds, which can deprive beneficiaries of needed support without contractual repercussions. Although the CIGNA Plan's provisions are lawful, the Court emphasizes the need for implied contractual interest on withheld benefits, aligning with ERISA's intent and the parties' reasonable expectations. The Court finds CIGNA's transition to Part B unlawful due to misleading communications and has modified the terms accordingly. CIGNA is mandated to adjust its records to ensure all class members receive combined "A+B" benefits, reflecting their accrued entitlements under both parts, and to issue accurate 204(h) notices and a corrected Summary Plan Description for Part B. Additionally, new benefit election notices must be provided, adhering to ERISA requirements. Class members who retired before the judgment are entitled to prejudgment interest on benefits due from January 1, 1998, until the judgment date. Given the complexity and significance of the case, the Court deems a stay appropriate during the appeal process, allowing for potential adjustments to the injunction and ensuring the opposing party's rights are secured.

The Court evaluated the request for a stay based on four factors: (1) the potential for irreparable injury to the movant if a stay is denied, (2) the substantial injury that a party may suffer if a stay is granted, (3) the movant's demonstration of a substantial possibility of success on appeal, and (4) the relevant public interests. The Second Circuit's rulings indicate that the likelihood of success is inversely related to the probability of irreparable injury, implying that greater harm to one party can mitigate the need for high likelihood of success for the other. CIGNA failed to demonstrate irreparable harm if the stay is denied, while Plaintiffs would not experience substantial injury if the stay is granted. The Court identified a strong public interest in achieving clarity in this complex area of law, which influenced its decision to issue a stay.

Consequently, the Court ordered a stay of all remedies pending Second Circuit review and required CIGNA to post a bond by July 11, 2008, to ensure payment of any affirmed award. The parties must negotiate the bond amount, or submit the issue to the Court if they cannot agree. Additionally, Plaintiffs were directed to file a brief regarding attorneys' fees by the same date, with responses to follow according to Local Rules. The Clerk was instructed to enter final judgment. The Court noted that CIGNA's argument, which diverged from established Second Circuit precedent regarding the necessity for detrimental reliance to claim benefits based on a flawed Summary Plan Description (SPD), was problematic. CIGNA also misapplied relevant case law, as the harmless error cases it cited dealt with eligibility for benefits rather than misrepresentations in company communications.

CIGNA has not clarified how Moriarity's detrimental reliance standard operates in light of the Second Circuit's ruling in Burke, which rejected this standard, as noted in Manginaro. The Court confirmed in its Liability Decision that CIGNA had properly appointed a plan administrator. However, it also indicated that, barring Crocco's prohibition on de facto co-administrators, relief would be sought against CIGNA due to its role in issuing defective notices and disclosures. The Court challenges CIGNA's argument that holding it liable contradicts the Second Circuit's ruling in Lee v. Burkhart, emphasizing that while ERISA allows for personal liability against administrators for non-compliance with information requests, this issue is not currently before the Court.

The Pension Protection Act mandates an A/B approach for cash-balance transitions post-June 29, 2005, alleviating concerns over severe consequences of reverting to Part A in this case, where CIGNA's misleading communications resulted in missing the transition deadline. The Court referenced Frommert, stating remedies for notice violations should cease once proper disclosures are made, and while CIGNA disclosed certain restrictions in its July 2006 SPD, it failed to address "wear away" implications. Therefore, an A/B remedy remains warranted until full disclosure is made.

Most retirees are expected to prefer additional Part B benefits as lump sums, minimizing payback concerns. Payback issues arise only if retirees attempt to convert lump sums into annuities. The CIGNA Plan employs actuarial assumptions to determine lump sums equivalent to annuities, defining "Equivalent Actuarial Value" based on mortality tables and a 7% interest rate. Plaintiffs support their argument with reference to Treasury Regulation 1.411(a)-11(c)(2)(i).

Consent is invalid if a significant detriment is imposed on any participant who does not consent to a lump sum distribution, as outlined in 26 C.F.R. 1.411(a)-11(c)(2)(i). Plaintiffs argue that any repayment to CIGNA would result in such a significant detriment, affecting their full-value Part A annuities. However, the Court is uncertain if requiring a payback to remedy a prior notice violation constitutes a significant detriment regarding the initial choice between an annuity and a lump sum. The regulation states that the determination of significant detriment is to be made by the Commissioner based on specific facts and circumstances. Due to these ambiguities, the Court decides not to rely on this regulation for determining the appropriate remedy.

Regarding prejudgment interest on past-due payments, the Court will address this later. CIGNA contends that posthumous benefits are inappropriate because the lump sum option was more valuable for deceased participants, arguing that any failure to disclose benefit option values is a harmless error. The Court rejects CIGNA's attempt to apply a detrimental reliance standard. 

In their Reply, Plaintiffs claim CIGNA did not provide relative value disclosures before May 2006 and seek to extend the cutoff date from September 30, 2004. However, the Court previously ruled that CIGNA had rectified any non-compliance with the regulations before its decision, reaffirming the September 30, 2004 cutoff date. Plaintiffs also cite examples of mismanagement, including CIGNA's omission of the Free 30% Survivor's Benefit data in the Part B database and inaccuracies regarding Patricia Flannery and Janice Amara's information.