The Eighth Circuit Court of Appeals, in MBI Energy Services v. Hoch, has held that a self-insured medical plan is entitled to reimbursement because its summary plan description (“SPD”) was also the plan document. With this ruling, the Eighth Circuit has joined the Fifth, Sixth, Ninth, and Tenth Circuit Courts in concluding that the Supreme Court’s ruling in Cigna v. Amara does not prevent an SPD from functioning as the plan document in the absence of a “formal” plan document.
Law. ERISA requires that every employee benefit plan be established and maintained pursuant to a written plan document that provides for one or more named fiduciaries who jointly or severally have authority to control and manage the operation and administration of the plan. Each plan document must also: (i) provide for a funding policy; (ii) allocate responsibilities for the operation and administration of the plan; (iii) provide a procedure for amending the plan; and (iv) specify the basis on which payments are made to and from the plan.
ERISA further requires that participants and beneficiaries be given an SPD written in a manner calculated to be understood by the average plan participant, and be sufficiently accurate and comprehensive to apprise participants and beneficiaries of their rights and obligations under the plan.
In Amara, the Supreme Court held that where there is both a plan document and an SPD, the terms of the SPD cannot be used to alter the plan’s terms.
Background. In Hoch, a self-insured medical plan provided benefits to a participant after he was injured in a car accident. Although there was no clearly identified plan document, the plan’s administrative services agreement (“ASA”) stated that plan’s benefits and terms and conditions were set forth in the SPD. The SPD contained provisions addressing the rights of subrogation, reimbursement, and assignment with respect to the plan.
After the participant received a settlement amount from a third party sufficient to cover the medical expenses paid by the plan, the plan administrator filed a lawsuit seeking reimbursement of the benefits paid to the participant from the plan.
At trial, the participant asserted that the plan’s SPD could not serve as the plan document and that its reimbursement provisions were, therefore, unenforceable. The participant’s assertion was based on the Supreme Court’s ruling in Amara that statements made in an SPD do not constitute the terms of the plan.
In turn, the plan administrator argued that despite being labeled as an SPD, the SPD served as the plan document.
Eighth Circuit. Upon reviewing the matter, the Eighth Circuit held that unlike the situation in Amara, the SPD was the plan’s written document because it was the only document providing benefits. The court noted that several other circuit courts have held that Amara does not prevent a SPD from functioning as the plan document in the absence of a formal plan document.
The court further explained that it would be inequitable to allow the participant to receive benefits in accordance with the terms of the SPD but not hold him to the benefit restrictions set forth in it. Accordingly, the Eighth Circuit concluded that the SPD was the plan’s written document and that the participant was bound by its terms, including those regarding reimbursement.
Employer Takeaway. Despite this ruling, employers should be aware that an SPD and a plan document serve different purposes. The SPD is supposed to merely be a summary of the rules written in terms that the average participant can understand. The plan document, on the other hand should have all the technical details required to describe the legal and administrative functioning of the plan. These separate requirements make it unlikely that a single document will serve both purposes. As noted by the court in this decision: “[T]o be sure, conflating a plan and a summary plan description risks undermining ERISA’s goal that the summary plan description embody ‘clear, simple communication,’… and we do not address whether this SPD meets all the requirements of [ERISA].”