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Amara v. Cigna Corp.

United States District Court, D. Connecticut

January 10, 2017

Janice C. AMARA, individually and on behalf of all others similarly situated, Plaintiff,
v.
CIGNA CORPORATION and CIGNA PENSION PLAN, Defendants.

          RULING ON PLAINTIFF CLASS'S OBJECTIONS TO CIGNA'S REVISED 204(h) NOTICES

          Janet Bond Arterton, U.S.D.J.

         On January 14, 2016, this Court issued a Ruling on Proposed Methodology and Request for Order of Compliance Plan [Doc. # 459] (the "Ruling on Methodology"). That Ruling resolved, inter alia, certain disputes between the Parties concerning the proper calculation of relief for each member of the plaintiff class. By means of what Plaintiffs styled "Objections to CIGNA's Revised 204(h) Notices, " Plaintiffs brought to the Court's attention their views of several problems implicit in the Court's methodology and at least one objection to the methodology dictated by the Court's Ruling. Cigna Corporation and Cigna Pension Plan (collectively "Cigna" or "Defendant") initially objected on procedural grounds, pointing out that Plaintiffs' objection was really an untimely motion for reconsideration that raised the same arguments it had advanced in prior briefing. Defendant argued that "for Plaintiffs to seek reconsideration of this A B remedy issue in the guise of the revised 204(h) notice objections is unreasonable, untimely, and a waste of the parties' and the Court's resources." Def.'s Response to Objections [Doc. # 465] at 7-8.

         While Defendant is technically correct on the timing and purpose of Plaintiffs' objection, the Court recognized possible error in its utilization of the 2009 Plan's Section 7.1(a)(1)'s interest rate floor annuitizing lump sums received after July 1, 2009 and sought supplemental briefing on this narrow issue by email to counsel dated Julyl3, 2016. Having considered the arguments raised in that briefing, the Court orders (i) that no interest rate floors shall be used to calculate offsets, and (ii) that prejudgment interest and interest credits on lump sums already paid shall be calculated annually using the 30-year Treasury rate for each successive year and revises its Ruling on Methodology accordingly.

         I. Background

         The parties' familiarity with the background of this case is presumed. In brief, this case began in 2001 when Plaintiff Janet C. Amara, for herself and on behalf of those similarly situated, brought suit against Defendants Cigna Corporation and the Cigna Pension Plan alleging that they had violated the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1022(a), 1024(b), and 1054(h) when switching from a defined benefit pension plan ("Part A") to a cash balance plan ("Part B").

         In 2008, after a bench trial, the late Judge Mark R. Kravitz found in Plaintiffs' favor, see Amara v. Cigna Corp. ("Amara I"), 534 F.Supp.2d 288 (D. Conn. 2008), and ordered damages in the amount of the sum of benefits each employee accrued under Part A and under Part B ("A B relief), see Amara v. Cigna Corp. ("Amara II"), 559 F.Supp.2d 192 (D. Conn. 2008). Judge Kravitz ruled that appropriate relief entailed providing each eligible employee the benefits he or she had earned under Part A in the form available under Part A (usually, an annuity that commenced at the age of retirement) as well as all the benefits he or she had accrued under Part B, available however Part B made them available.

         In crafting this form of relief, Judge Kravitz carefully devised a resolution equitable to both parties. He noted that it is appropriate for Cigna to receive "full credit for the lump sums already paid and for a reasonable amount of interest on those sums since the date of payment." Amara II at 216. While the goal of this was to "minimize any overpayment on the Cigna plan's part, " id. at 217, where there was a risk of overpayment, that risk was to be borne by Cigna as the liable party. In its Ruling on Methodology, this Court applied that principle, resolving several difficulties in the calculation of A B against Cigna. The Ruling countenanced the possibility that the method could result in double-counting Part A in certain instances and required that result in order to avoid frustrating the reasonable expectations of plan beneficiaries who intended to take their benefits as a lump sum.[1]

         II. Discussion

         A. Interest Rate Floor and Offset Calculation

         Of the issues raised by the Parties after the Court issued its Ruling on Methodology and the time for reconsideration had passed, the Court requested briefing on the use of so-called "floor rates" to annuitize lump sums for purposes of calculating the offset to be subtracted from the annuity due under Part A in the remedy.

         This question arose because this Court held in the Ruling on Methodology that "the plan provisions in place at the time the lump sum was received should control, " which in turn led to use of the Plan-defined Applicable Interest Rate. Ruling on Methodology at 17. Using this defined term led to a distinction between beneficiaries who commenced receiving benefits prior to July 1, 2009 and those who commenced receipt after July 1, 2009 because a 2009 amendment introduced these floor rates into the Plan, dictating that "in no event" should benefits commencing after July 1, 2009 for plan participants who elected to receive their benefits as an annuity, "be less than the amount using the Applicable Interest Rate in effect as of July 1, 2009." 2009 Plan, Section 7.1(a).

         The Court incorporated this provision by establishing an interest rate floor to determine how much credit Cigna should receive for benefits it had already paid to plan participants:

For each retiree who received a lump sum prior to July 1, 2009, Cigna will receive credit for yearly interest in the amount of the annual rate of interest on 30-year Treasury securities for November of the year before the Plan year. For each retiree who received a lump sum after July 1, 2009, Cigna will receive credit for the same yearly interest, but the interest rate ...

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