Opinion ID: 174853
Heading Depth: 3
Heading Rank: 2

Heading: Summary of Material Modification

Text: ERISA entitles plan participants to receive [a] summary of any material modification in the terms of the plan and any change in the information required [to be in a summary plan description], and the summary must be written in a manner calculated to be understood by the average plan participant. 29 U.S.C. § 1022(a); see 29 C.F.R. § 2520.104b-3(a) (implementing § 1022(a)). The information required to be in a summary plan description is set forth in 29 U.S.C. § 1022(b). See 29 C.F.R. § 2520.102-3( l ) (implementing § 1022(b)). Solvay's summary, its SMM, consists of the § 204(h) notice and the FutureChoice brochure. Plaintiffs contend that the SMM did not adequately disclose (1) the changes in reduction factors for early retirement, Aplt. Br. at 57; (2) the legally-required protection of early retirement benefits offered under the prior plan or the loss or forfeiture of the value of those features if employees accept lump sum distributions before 55, id. at 57-58; or (3) the general classes of employees subject to wear-away or the approximate range of such wear-aways, id. at 57. We are not convinced that the SMM was defective. With respect to Plaintiffs' first contention, aside from the failure to disclose how early-retirement benefits were calculated under the old plan, the SMM adequately described how the new plan differed from the old. And we need not decide whether that failure constituted an independent violation of § 1022(a), because we have already held that the failure violated 26 C.F.R. § 54.4980F-1, A-11(a)(3)(ii); and Plaintiffs have not suggested that any additional remedy would be available for a violation of § 1022(a). As for any other possible defects in the SMM, we would assume that a notice that complies with the disclosure requirements of § 204(h) would satisfy in that respect the requirements for an SMM. We apparently are not alone in that regard. When the § 204(h) regulation was published in 2003, the introduction to the regulation stated: The Department of Labor has advised the IRS that a plan administrator who provides a section 204(h) notice to applicable individuals in accordance with this final rule will be treated as having furnished those individuals with an SMM regarding the section 204(h) amendment. 68 Fed.Reg. at 17278. In any event, we will briefly address Plaintiffs' other two contentions. They rely on the requirement that a summary plan description must describe the plan's provisions relating to eligibility,  29 C.F.R. § 2520.102-3(j) (emphasis added), and clearly identify[ ] circumstances which may result in ... denial, loss, forfeiture, suspension, offset, reduction, or recovery ... of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits, id. § 2520.102-3( l ) (emphases added). First, Plaintiffs complain that the SMM did not disclose the loss or forfeiture of the value of [early-retirement benefits] if employees accept lump sum distributions before age 55. Aplt. Br. at 57-58. The contention is obscure. But to the extent that we understand it, we reject it. Even were we to agree that one change in the Solvay plan was the introduction of the possibility that an employee could lose early-retirement benefits by taking a lump-sum distribution before age 55, no employee who chooses a lump-sum benefit reasonably expects to retain any annuity benefit. Solvay's documents clearly state that an employee must make an election between alternative benefits. The loss of the annuity is not an unexpected forfeiture, and therefore need not be disclosed in a summary plan description or an SMM. As for disclosures regarding wear-aways, the authorities cited by Plaintiffs are either not persuasive or readily distinguishable. We disagree with the suggestion in Humphrey v. United Way of Tex. Gulf Coast, 590 F.Supp.2d 837, 847 n. 6 (S.D.Tex.2008), that a wear-away provision is an eligibility requirement in that Participants [must] wear away their prior pension before they will receive benefits under their current one. Wear-away under Solvay's plan is a consequence of a change in plan terms, not a fact that an administrator must determine to assess eligibility for a benefit. Therefore, wear-away need not be disclosed as a new eligibility requirement after conversion. And the other decisions cited by Plaintiffs as requiring disclosure of wear-aways involved significant failures to disclose that are not present, or even approximated, here. In Richards v. FleetBoston Fin. Corp., No. 3:04-cv-1638 (JCH), 2006 WL 2092086, at  (D.Conn. July 24, 2006), the notice did not properly explain how the opening cash-balance account was calculated. In Amara v. CIGNA Corp., 534 F.Supp.2d 288, 340, 346 (D.Conn.2008), the employer admitted that it had never informed employees that they may not accrue benefits under the new cash-balance plan, and the court found that the employer had made material misrepresentations suggesting benefit increases, id. at 339, and offered statements that misled plan participants into believing that significant reductions in the rate of future benefit accrual were not a component or a possible result of the conversion to the new plan, id. at 340. The employer had provided no before-and-after examples of changes in the plan. See id. at 343. In sum, we hold that Solvay's SMM was not deficient, except for the possibility that § 1022(a) required disclosure of the old plan's method of calculating early-retirement benefits. We need not address that possible violation, however, because we have held that the failure to disclose violates 26 C.F.R. § 54.4980F-1, A-11(a)(3)(ii), so remand is required in any event.