Opinion ID: 581400
Heading Depth: 2
Heading Rank: 2

Heading: the appropriate test

Text: 16 There are three widely-cited cases that consider whether a document constitutes an SPD: Kochendorfer v. Rockdale Sash & Trim Co. Inc., 12 Alday v. Container Corp. of America, 13 and Gridley v. Cleveland Pneumatic Co. 14 In Kochendorfer, the first case to consider this issue, an Illinois district court found that a record-keeping booklet was an SPD, albeit an abridged one. The court stated: 17 We do not believe that Congress intended to exclude from the term summary plan description every document which lacks some of the information required in section 1022(b). Rather, any document a plan distributes to its participants which contains all or substantially all of the information the average participant would deem crucial to a knowledgeable understanding of his benefits under the plan shall be deemed a summary plan description. The crucial information which any document must contain before it could be deemed a summary plan description includes an explanation of the benefits and the circumstances which may disqualify a participant from securing benefits. 15 18 Kochendorfer went on to rule that the booklet in question was an SPD because it described, in a manner calculated to be understood by the average plan participant, such things as the plan's purpose, the source and amounts of money contributed, the method by which shares are determined, when and how payment is received, and how funds are invested. 16 19 In Alday, the Eleventh Circuit ruled that an individualized booklet, which was entitled Summary of Personal Benefits and which said nothing more about the company's health insurance plan than health insurance is available to you and your dependents at a modest cost, was not an SPD under ERISA. The court reasoned that the booklet did not satisfy the requirements in § 1022; specifically, the booklet neither described the plan's terms, specified the plan's benefits or coverage, defined the plan's eligibility requirements, nor otherwise gave participants the information necessary to participate in the plan's health insurance program. 20 In the most complete treatment of this issue to date, the Third Circuit, in Gridley, adopted a fact-intensive approach in determining that a brochure, entitled Employee Benefits Summary, was not an SPD for a life insurance plan, even though the booklet purported to provide an overview of the company's plan. Gridley based its decision on four factors: (1) the brochure instructed employees to refer to their SPDs, hence no reasonable reader could have thought the brochure an SPD; (2) the brochure lacked ten of twelve categories of information required under § 1022(b); (3) the brochure was a perfunctory description of subjects treated in other documents that were SPDs; and (4) the brochure was an updated version of an earlier brochure that was not an SPD. 21 In this case, Hicks asserts that Kochendorfer supplies the appropriate test for deciding whether a document is an SPD under ERISA. Hicks characterizes Kochendorfer as looking to the employee's subjective understanding of the document. Hence, he argues, the booklet is an SPD, and its terms are binding on Fleming under ERISA, because he understood the booklet to mean that he was eligible for long-term disability benefits. As the foregoing quotation shows, however, Hicks misunderstands Kochendorfer because that case quite obviously adopts an objective, reasonable participant test. 22 Fleming, on the other hand, contends that the booklet cannot be an SPD as it does not contain all twelve categories of information required by § 1022(b). Fleming asserts that the operative word in the first sentence of § 1022(b) is shall, indicating that ERISA itself requires this rule of strict compliance. Hicks counters that Fleming's approach is not strictly mandated by ERISA--s 1022(b) states that an SPD must contain twelve categories of information, not that a document that does not include all twelve categories is not an SPD. 23 We believe that Fleming urges the better rule, although we acknowledge Hicks's point that this rule is not strictly required by ERISA. We reject Kochendorfer's premise that Congress did not intend to exclude as an SPD every document that lacks § 1022(b) information because such a premise would set a trap for the unwary employer who circulates benefit information in writing and at the same time would have a chilling effect on the cautious employer who might otherwise write freely to his or her employees about their benefit plans. We believe that speculation as to congressional intent on this point would be more accurate if phrased in the converse: We do not believe Congress intended the term SPD to include every document that contains some of the information required in § 1022(b). 24 We hold, therefore, that the appropriate test for determining if a document constitutes an SPD under ERISA is to see whether it contains all or substantially all categories of information required under 29 U.S.C. § 1022(b) and the DOL's regulations at 29 C.F.R. § 2520.102-3 for the type of benefit in question. We emphasize that DOL's regulations at § 2520.102-3 are especially critical to this determination because they expand on the requirements in § 1022(b) and clarify the information required for each of type of benefit plan. 17 25 In large part, we adopt this bright-line approach because we are unwilling to declare that a document could constitute an SPD under ERISA even though it does not satisfy the information requirements in § 1022(b) and § 2520.102-3, and, thus, would not be accepted by the Secretary of Labor for filing and publication. If a document is to be afforded the legal effects of an SPD, such as conferring benefits when it is at variance with the plan itself, that document should be sufficient to constitute an SPD for filing and qualification purposes. Quite simply, there should be no accidental or inadvertent SPDs. In addition, reasonable participant or case-by-case tests--with their inevitable hair-splitting factual distinctions and litigation-encouraging ambiguities--would introduce considerable uncertainty into this area of law, to the ultimate detriment, no doubt, of all parties. 18