Verizon Communications Inc.’s cash-balance pension plan does
not discriminate against older employees, a federal court has ruled in yet
another legal victory for employers on the issue.
Verizon’s plan is not only age neutral, but in fact provides
“pay credits at a rate that is more generous for older employees than for
younger employees,” ruled Judge Denny Chin of the U.S. District Court for the
Southern District of New York.
For example, while participants whose combined age and
service are less than 35 years received annual credits equal to 4 percent of
pay, participants whose combined age and service are between 50 and 64 years
received annual pay-related credits of 6 percent, and those with 65 or more
total years received annual pay credits of 7 percent.
While a pay credit provided to younger employees eventually
will be worth more than the identical credit provided to an older employee with
the same salary, that difference is not age discrimination but is the result of
the younger employee’s benefit having more time to earn interest, Chin
wrote.
Chin’s ruling is at least the seventh—six by district court
judges and one by an appeals courts—to reject age discrimination charges since
the 7th U.S. Circuit Court of Appeals in August 2006 ruled that the design of
cash-balance plans in general and IBM Corp.’s plan in particular do not
discriminate against older employees.
However, two judges—both in the U.S. District Court for the
Southern District of New York—have ruled that the plans are age
discriminatory.
Unrelated to the litigation, New York-based Verizon last year
froze its cash-balance plan, which covers non-management employees, and
significantly improved its 401(k) plan match.
Legislation passed by Congress protects new cash-balance
plans that meet certain basic standards from age discrimination suits, but
federal legislators left it to the courts to resolve the issue for
already-established plans.
Filed by Jerry Geisel of Business Insurance, a sister publication
of Workforce Management. To comment,
e-mail editors@workforce.com.
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