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!!

April 7, 2006

House Instructs Its Conferees on Cash Balance Plans

Filed under: Cash Balance, Legislation — Fuguerre @ 9:54 am

The 7th Circuit’s decision on the Cooper v. IBM cash balance plan age discrimination case is expected soon, sooner than we now expect to see final┬álegislative action on pending pension reform that includes provisions addressing cash balance plans. Whether or not the appellate court’s word on the issue will influence the legislation remains to be seen. Meanwhile, by a vote of 248-178, the House has instructed its conferees on the pension bill to accept the Senate’s version of the cash balance plan provisions, which reflect Administration positions on safeguards needed against benefit wearaway in the conversion of a traditional defined benefit plan to a cash balance plan.

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