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Fifth Circuit Finds SPD to be Official Welfare Plan Document

On Behalf of | Aug 3, 2017 |

The Fifth Circuit Court of Appeals, in Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan, has confirmed that a welfare benefit plan’s summary plan description (“SPD”) could serve as the official plan document. In making this ruling, the Fifth Circuit expressly rejected the plaintiff’s assertion that the Supreme Court’s decision in CIGNA Corp. v. Amara requires ERISA-covered plans to maintain an official plan document and SPD as separate documents.

Background. In Rhea, a beneficiary under an ERISA-covered welfare benefit plan received a settlement in connection with injuries she incurred from medical malpractice. The plan at issue operated using a single instrument as the plan document and SPD. This document contained a provision that required reimbursement of any benefits paid by the plan to a beneficiary in the event that a third party paid a settlement to the beneficiary for causing the injuries.

In accordance with the plan’s reimbursement provision, the plan sought reimbursement from the beneficiary for the benefits paid. The beneficiary responded by refusing to reimburse the plan, claiming that the reimbursement provision was invalid because it was not contained in an enforceable plan document. Specifically, the beneficiary argued that the document was unenforceable because it referenced an official plan document, which the plan did not have.

The plan obtained a favorable judgment against the beneficiary from the district court assigned to review the matter. In turn, the beneficiary appealed the adverse decision to the Fifth Circuit.

Fifth Circuit. In reviewing the matter, the Fifth Circuit rejected the beneficiary’s contention that a single document could not serve as both the plan’s SPD and the official plan document. The court noted that the document contained all of the elements required by ERISA and, that unlike the facts in Amara, there was no conflict between the document and other written information concerning the plan. Accordingly, the Fifth Circuit affirmed the lower court’s decision in favor of the plan sponsor.

Takeaway for Plan Sponsors. Rhea confirms that courts will enforce an SPD as the official plan document if it contains all of the elements required under ERISA and does not conflict with any other plan-related documents. In view of this fact, plan sponsors must be sure that their SPDs provide accurate descriptions of the plans’ benefits and meet ERISA’s requirements so that they can limit liability where applicable.

Despite this decision, the SPD and the plan generally should be separate documents because they serve conflicting purposes. An SPD must provide information about the plan in language that can be understood by the average participant while the plan document must contain all legal detail needed to establish and maintain the employee benefit plan.