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Discretion Permitted in Applying For Retirement

February 19, 1999
Related Topics: Retirement/Pensions, Featured Article
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Flexible application of an early retirement plan does not violate the Employment Retirement Income Security Act (ERISA).

General Motors’ (GM’s) early retirement plan allowed management to determine whether each candidate’s retirement was in GM’s best interest.

Ten managers at the Indianapolis Allison Gas Turbine Division were denied early retirement because they were determined to be too valuable to the company in light of the division’s imminent sale. When the division was sold, these managers lost their GM employee status. They sued, alleging unfair application of the plan and violations of ERISA.

The U.S. District Court for Southern Indiana granted GM summary judgment. The U.S. Court of Appeals for the 7th Circuit affirmed, holding that ERISA does not prohibit plans that give administrators the discretion to apply the plan flexibly with the company’s best interest in mind. McNab vs. General Motors Corp., 7th Cir., 98-1041, 12/11/98.

Impact:
Employers, who are without intention to discriminate against a protected class, may apply early retirement programs flexibly using managerial discretion.

Source: D. Diane Hatch, Ph. D., a human resources consultant based in San Francisco, and James E. Hall, an attorney with the law firm of Barlow, Kobata & Denis, with offices in Los Angeles and Chicago.

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