Blogging Employee Benefits

August 7, 2006

No ADEA Violation in IBM Cash Balance Plan!

Filed under: ADEA, Cash Balance, Litigation — Fuguerre @ 1:30 pm

As long as we think of “benefit accrual” as referring to what the employer imputes to the account–an understanding reinforced by the use of the word “allocation” in the subsection addressing defined-contribution plans–there is no statutory difference between the treatment of economically equivalent defined-benefit and defined-contribution plans.

In the central case at the heart of the most hotly debated controversy surrounding cash balance plans, the 7th Circuit Court of Appeals has ruled that the IBM cash balance plan did not violate age discrimination law, overturning a key district court ruling. [Cooper v. IBM, 05-3588]

The Pension Protection Act of 2006, passed by Congress last week and expected to be signed into law soon, provides prospective protection against age discrimination claims for cash balance plans and other hybrid pension plans. Although stipulating that there is to be no inference drawn from the new law with respect to prior law, PPA left earlier years up to further litigation. But with several other recent district courts also rejecting the IBM district court reasoning, this appellate court ruling will no doubt clear a fair bit of smoke from the hybrid plan room!!

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1 Comment »

  1. […] This week has taken on age discrimination bookends. We started out on Monday with the 7th Circuit’s reversal of the district court, with the appellate court finding no age discrimination in cash balance plan accruals. We close the week out with the EEOC publishing brief proposed regulations reflecting the Supreme Court’s 2004 Cline ruling that ADEA does not ban discrimination against younger protected workers. [FR Doc E6-13138] See Benefitsblog for background on Cline, where the Supreme Court disagreed with the EEOC and claimants that the company had violated EEOC’s prohibition against discrimination on the basis of age when it eliminated retiree health benefits except for those over age 50. […]

    Pingback by Pensions & Benefits Weblog » Blog Archive » EEOC Catches Up on Reverse Age Discrimination — August 11, 2006 @ 8:28 am


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