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Northwest OH Legal Blog

Tuesday, August 8, 2017

Fifth Circuit Affirms Use of Single Document as SPD and Plan

A federal appellate court in the fifth circuit has affirmed a trial court’s holding that a single document can serve as both the formal plan document and the summary plan description (SPD) for an ERISA plan. The case is Rhea v. Alan Ritchey, Inc., 858 F.3d 340 (5th Cir. 2017). The Fifth Circuit covers Texas, Louisiana and Mississippi.

An individual covered under her husband’s employer-sponsored health plan settled a medical malpractice claim relating to services paid for by the plan. The SPD included a reimbursement provision, but the individual refused to repay the covered expenses, claiming that the plan was not entitled to reimbursement because there was no ERISA-compliant written instrument in place when it paid the expenses. Although the SPD referenced an “official plan document” and indicated that the terms of the official plan document would control in the event of any conflict with the SPD, the SPD was the only document describing plan benefits, rights, and obligations, and was treated as the official plan document.

The individual asserted that the U.S. Supreme Court’s Cigna v. Amara decision requires that plan documents and SPDs be separate documents, but the court noted that other courts have “consistently” rejected that reading of Amara. It distinguished Amara, which held that SPD terms are not enforceable over conflicting terms in a plan document, from this situation, where the issue was whether the SPD could function as the plan document in the absence of a separate written instrument.

The court rejected the argument that the SPD lacked sufficient detail to comply with ERISA’s written instrument requirement, concluding that the SPD adequately described required elements such as plan funding and amendment procedures. Nor was the court persuaded that the SPD was unenforceable because the employer “lied” about the existence of a formal document. There was no evidence that the employer misrepresented material facts or that any misrepresentation was detrimental to the covered individual.

According to the court, the SPD’s erroneous reference to a formal plan document may have been sloppy, but it was not a breach of fiduciary duty and did not render the SPD unenforceable. The court ruled that the plan was entitled to reimbursement for the covered medical expenses, and to attorney’s fees and court costs.


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