Even solid companies may legally change the terms of their pension plans so that retirees get less than originally agreed to -- and they aren't always straightforward about it, Smart Money reports.
In 2001, after Cigna converted its defined-benefit plan (specifying a monthly payment in retirement) into a cash-balance plan (which uses a less reliable benefits-accrual formula), 25,000 employees sued the company over the change, claiming it offered less generous benefits but that "misleading" plan summaries made the terms sound better than they actually were.
The case reached the Supreme Court, which ruled in May that the district court -- which initially found Cigna in violation of the Employee Retirement Income Security Act -- "revisit its determination of an appropriate remedy for the violations." While both sides declared victory, the decision "opens up a world of remedies that were previously thought to be unavailable," says Rebecca Davis, a lawyer for the Pension Rights Center, which counsels people on claiming pensions. Cigna says it's "pleased" the district court will have to "reconsider its initial decision" ruling in favor of plan participants.I'm not sure who won. I am sure we all need to think about it. The Wall Street Journal advises:
To be sure, most employees can rely on what their employers tell them about their benefits. But regardless of how the Cigna case plays out, you need to be aware that if your employer gives you wrong information—even if it is in writing—and you act on it, you may be out of luck.
It is especially critical to keep this in mind when making life-changing and often irrevocable decisions—such as whether to switch jobs, retire, take a payout or modify a life-insurance policy. Usually, the only thing that determines the benefit in the event of a dispute is the formal plan document.A good rule of thumb: big corporations won't think twice about screwing you over if they can get away with it.
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