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Plaintiff's Complaint


United State District Court
for the District of Connecticut

Janice C. Amara, 39 Town Beach Rd., Old Saybrook, CT 06475, individually and on behalf of all others similarly situated,
Cigna Corp. and Cigna Pension Plan,


Civil No. 3:01-CV-2361 (MRK)


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Nature of the Complaint

This Complaint is about the retirement benefits that Ms. Amara and similarly situated Cigna employees are required to receive under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. §1001, et seq. Defendants have conditioned retirement benefit accruals after January 1, 1998 so that actual benefit receipt may be illusory for as many as 10 years. This violates ERISA’s requirement that the payment of vested retirement benefits must be unconditional. Defendants’ failure to disclose the conditions on actual benefit receipt also violates ERISA’s disclosure rules.

Jurisdiction, Venue, and Service of Process

Plaintiff invokes the jurisdiction of this Court pursuant to the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §1001, et seq.
Venue in this Court is proper under ERISA Section 502(e)(2), 29 U.S.C. §1132(e)(2), in that Defendants Cigna Corp. and Cigna Pension Plan may be found in this District and the breach took place in this District.
Service of process is authorized in any other district where a defendant resides or may be found. ERISA Section 502(e)(2), 29 U.S.C. §1132(e)(2).

The Parties

Plaintiff Janice C. Amara resides at 39 Town Beach Rd., Old Saybrook, CT 06475.
Ms. Amara has worked for Cigna for 26 years.
Ms. Amara is a participant in the Cigna Pension Plan as the term participant is defined in ERISA Section 3(7), 29 U.S.C. §1002(7).

Defendant Cigna Pension Plan is an employee benefit plan as defined in Section 3(3) of ERISA, 29 U.S.C. §1002(3), and an “employee pension benefit plan” as defined in Section 3(2)(A), 29 U.S.C. §1002(2)(A). The Cigna Pension Plan may be found in Connecticut because Cigna employees earn and receive benefits in Connecticut.
Defendant Cigna Corp. is a business corporation organized and existing under the laws of the State of Delaware, and operating in all 50 states, including Connecticut. Cigna is qualified to do business and does business in Connecticut.
Defendant Cigna Corp. functions as the “plan sponsor” and “plan administrator” for the Cigna Pension Plan within the meaning of ERISA. Through a Corporate Benefit Plan Committee, Defendant Cigna Corp. also functions as a “named fiduciary” for the Cigna Pension Plan within the meaning of ERISA.

Class Action Allegations

Plaintiff brings this action as a class action in accordance with Federal Rule of Civil Procedure 23 to resolve disputes under the Employee Retirement Income Security Act of 1974. Judicial economy dictates that the issues be resolved in a single action.

The proposed class is defined as any and all persons who:
(a) Are former or current Cigna employees,
(b) Participated in the Cigna Pension Plan before January 1, 1998, and
(c) Have participated in the “Part B” Cigna Pension Plan at any time since January 1, 1998.

The proposed class covers all participants in the Cigna Pension Plan whose receipt of benefit accruals under the Part B plan has been unlawfully conditioned in violation of ERISA Section 203(a), 29 U.S.C. §1053(a).

On information and belief the proposed class covers well over 10,000 individuals. The class is so numerous that joinder of all members is impracticable.

There are common questions of law and fact affecting the rights of the members of the class. The claims of the named class representative are typical of the claims of the class. The named representative will fairly and adequately protect the interests of the class.

This action is maintainable as a class action under Rule 23(b)(2) because Defendant has acted and/or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive and other equitable relief in favor of the class.

Statement of Facts

Janice Amara was born on April 3, 1950. She has worked for Cigna from July 17, 1972 to August 10, 1995 and from September 8, 1998 to the present.
Ms. Amara managed Cigna’s pension compliance area from 1992 to 1995. She returned to CIGNA in 1998 as a director of national accounts for Cigna’s Retirement & Investment Services division. She is currently the NASD principal for the client services organization of Cigna’s Retirement & Investment Services, as well as a client executive in charge of accounts.

Effective January 1, 1998, Cigna converted to a “cash balance” pension plan (which Cigna calls “Part B”). Cigna adopted the cash balance pension plan to replace Cigna’s traditional defined benefit pension plan.
Employees who had a specified combination of age and service were offered the right to be grandfathered under the prior, more generous pension plan formula (now called “Part A”).

Since she returned to Cigna in September 1998, Ms. Amara has participated in Cigna’s “Part B” pension plan.
Under the previous benefit formula, pension benefits were 2% of salary times years of service. Under the Part B cash balance pension formula, pension benefits accrue at a lower rate and have been subjected to additional conditions.

On December 14, 1995, Cigna notified Ms. Amara that her accrued benefits were $2,010.41 per month in the form of an annuity lasting from age 55 to 65, with payments reduced to $1,565.48 per month after age 65. Exhibit 1.
Over 5 years later, on February 23, 2001, Cigna notified Ms. Amara that her accrued benefits under Part B were $1,340.28 per month in the form of an age 55 annuity. Exhibit 2. Instead of increasing the retirement benefits, Cigna had decreased her benefits by $670.13 per month between age 55 and 65 and by $225.20 per month after age 65.
Ms. Amara complained that a decrease in her retirement benefits did not comply with ERISA. ERISA Section 204(g), 29.U.S.C. §1054(g), which prohibits decreases in accrued benefits as a result of plan amendments. See also 26 C.F.R. 1.411(d)-4. In an e-mail dated April 20, 2001, Andrew Hodges, a consulting actuary for Cigna, stated that there had been a “flaw” in the “conversion record.” Exhibit 3.

On July 6, 2001, a benefits specialist for Cigna mailed Ms. Amara another Benefit Summary Sheet, this time showing a benefit at age 55 of $1,833.65 per month. Exhibit 4. It is Ms. Amara’s understanding that this monthly amount is to represent the actuarial equivalent of the benefit which Ms. Amara was already entitled to receive in December 1995 of $2,010 per month from age 55 to 65 and $1,565 per month thereafter.

If this were to constitute her total current benefits, Ms. Amara’s employment with Cigna from September 1998 to date would not have added even $1.00 to the retirement benefits she already possessed at the end of 1995.
Cigna’s “Part B” Plan document provides annual pay credits and interest that should be adding to Ms. Amara’s current benefit total. Beginning at the end of 1998, Ms. Amara was credited with annual pay credits of 7% of her salary up to one-half of the social security wage base plus 8.5% of her salary above that level. Interest is to accumulate on these annual pay credits at rates of 4.5% and above.

Cigna should have allocated over $7,500 annually in pay credits to Ms. Amara’s account from 1998 to the end of 2001. After the termination of her employment, Ms. Amara should receive the annual pay credits, with interest, in annuity or lump sum form.

Claim One: Offering benefit accruals that are conditional does not satisfy ERISA’s nonforfeitability standard.

Cigna’s CEO, Wilson H. Taylor, approved the text of the Part B Plan document with detailed rules on cash balance benefit accruals and payment of accrued benefits on December 21, 1998.

Cigna’s Part B Plan document offers the annual pay credits and interest described above, but it conditions actual receipt of those amounts. Article VII of the Part B Plan document provides that Ms. Amara can receive the annual accrued benefits she has earned since 1998 if and only if she does not receive the $1,833 per month in early retirement benefits that she previously earned under the Part A Plan.

Section 7.3 of the Cigna Plan document makes it impossible for Ms. Amara to receive her protected early retirement benefits under Part A plus her annual accruals since 1998 under Part B. To receive her annual accruals since 1998, she must accept a valuation of her Part A benefits specified in Section 1.28 of the Plan document (“Initial Retirement Account”). See Exhibit 5. The valuation specified in Section 1.28 excludes the value of her “protected” early retirement rights under Part A.

The annual benefit accruals since 1998 are required for Cigna to satisfy the “anti-backloading” rules in ERISA Section 204(b)(1)(B), 29 U.S.C. §1054(b)(1)(B). See also 26 C.F.R. 1.411(b)-2(i)(B); Esden v. Bank of Boston, 229 F.3d 154, 167 (2d Cir. 2000) (the “only test that the [Bank of Boston’s cash balance] plan might satisfy is the so-called 133 1/3 percent test under ERISA section 204(b)(1)(B)”; “that test requires that the value of the benefit accrued in any year . . . not exceed the value of a benefit accrued in any previous year by more than 33%”).

If the accrued benefits for 1998, 1999, etc. are to count for compliance with ERISA Section 204(b)(1)(B), they must be benefits that will become nonforfeitable under ERISA’s vesting rules. ERISA Section 203(a), 29 U.S.C. §1053(a), provides that benefit accruals must be “nonforfeitable” once a participant has the years of service required to be vested. A nonforfeitable right is a right that is “unconditional.” ERISA Section 3(19), 29 U.S.C. §1002(19).

However, Sections 1.28 and 7.3 of Cigna’s plan document place conditions on actual receipt of annual benefit accruals. A nonforfeitable right to a benefit cannot be one that has a value of $7,500 under one condition and $0 under other conditions.

“ A right which, at a particular time, is conditioned under the plan upon a subsequent event, subsequent performance, or subsequent forbearance which will cause loss of such right is a forfeitable right at that time.” 26 C.F.R. 1.411(a)-4.

IRS Notice 96-8, 1996-1 C.B. 359, explains:

If benefits . . . have accrued [but] those benefits are disregarded when benefits commence before normal retirement age, the plan has effectively conditioned entitlement to the benefits . . . on the employee not taking a distribution prior to retirement age.

Accord Esden v. Bank of Boston, 229 F.3d 154, 168 (2d Cir. 2000) (“by making part of [Lynn Esden’s] benefit conditional on the form of payment chosen, the Plan made that benefit forfeitable, in violation of ERISA”).

Cigna has made receipt of Ms. Amara’s annual pension accruals conditional on foregoing part of her previously earned benefits or taking a retirement distribution only at the plan’s normal retirement age. This violates the nonforfeitability rules in ERISA Section 203(a), 29 U.S.C. §1053(a).

Claim Two: Failure to Disclose Conditions on New Accruals in the Statutorily-Required Summary Plan Description

Under ERISA, Summary Plan Descriptions (SPDs) must be distributed to participants which disclose the circumstances that may result in disqualification, denial, loss, or forfeiture of any benefits that a participant might otherwise reasonable expect to receive on the basis of the description of the benefits offered by the plan. 29 C.F.R. 2520.102-3(l). The disclosure must written in a manner calculated to be understood by the average plan participant. 29 C.F.R. 2520.102-2(a).

The SPD that Cigna distributed to participants in October 1998 does not describe any conditions on receipt of the new cash balance pension accruals. The SPD’s description of the annual pay credits does not describe any conditions on their receipt. It states:

Each dollar’s worth of credit is a dollar of retirement benefits payable to you after you are vested. Under the plan, your benefit will grow steadily throughout your career as credits are added to your account.

Exhibit 6. The same description was offered in a revised SPD dated September 1999. Exhibit 7. The conditional payment rule which Cigna’s CEO approved on December 21, 1998 was not disclosed to participants in the SPD dated October 1998, the revised SPD dated September 1999, or any SPD distributed after that date.

In the absence of the statutorily-required disclosure, a rule that causes benefits to be lost or forfeited may not be enforced. Heidgerd v. Olin Corp., 906 F.2d 903 (2d Cir. 1990).

Claim Three: Reductions in the Rate of Benefit Accruals Because of Age

ERISA Section 204(b)(1)(H)(i), 29 U.S.C. §1054(b)(1)(H)(i), prohibits an employer from establishing or maintaining plan rules that reduce “the rate of an employee’s benefit accrual . . . because of the attainment of any age.” Under a defined benefit plan, an employee’s benefit accrual is expressed in the form of an annuity at retirement.
Benefit accruals under a cash balance pension plan are a function of two components: Pay credits and interest credits. Due to the effect of compound interest until retirement, interest credits under a cash balance plan are more substantial for younger participants. Unless pay credits progressively counter-balance the interest credits, the rate of an employee’s benefit accrual will be reduced because of age.

Cigna’s cash balance formula increases its pay credits by 1% at 10-point age and service intervals until the participant accumulates 65 points, e.g., age 45 with 20 years of service or age 50 with 15 years of service. After that point, the pay credit is fixed at a flat percentage of pay.

As a result, once a participant has more than 65 points, the rate of benefit accrual drops based on age. In addition to suffering from the conditions on actual receipt described in the First Claim, Janice Amara’s rate of cash balance benefit accrual decreases from almost 1.9% of pay at age 48 to 1.55% at age 52. The rate decreases further to 1.36% at age 55 and 1.1% if she remains employed at age 60.

Before a participant has 65 age and service points, the rate of benefit accrual declines because of age, as well; the reductions are simply not quite as smooth (because of the 1% “bump ups” in the pay credits described above). For example, an employee with the same salary as Ms. Amara who is age 35 with 10 years of service will have an accrual rate of 3.3%. By age 48, this rate of accrual will decline to 1.9%.

ERISA’s policy as codified by Section 204(b)(1)(H)(i) is that an employee’s rate of benefit accrual should not be reduced because of age but should remain as great as the rate for a younger employee with the same salary.

Prayer for Relief

WHEREAS, the Plaintiff prays that this Court:

Declare that Janice Amara’s benefit accruals under the “Part B” formula of the Cigna Pension Plan must be unconditional and not reduced because of age; enjoin the application of Cigna’s conditions on receipt of benefit accruals earned under the Part B formula and its reductions in the rate of benefit accruals because of age, order appropriate equitable and remedial relief to ensure that this relief is implemented on a class-wide basis, order such other equitable and remedial relief as the Court deems appropriate, and award attorneys’ fees and expenses.

Respectfully submitted,
Thomas Moukawsher Ct 08940
Moukawsher & Walsh, LLC
328 Mitchell St.
Groton, CT 06430
(860) 445-1809

Stephen R. Bruce Ct 23534
1667 K St. NW, Suite 410
Washington, DC 20006
(202) 289-1117


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