Joining three other federal appellate courts, the 2nd U.S. Circuit Court of
Appeals ruled Wednesday, July 9, that cash-balance pension plans do not violate
federal age discrimination law.
In a unanimous decision, the appeals court affirmed two separate lower court
rulings finding that cash-balance plans sponsored by Verizon Communications and
Equitable Life Assurance Society—now known as AXA Equitable Life Insurance
Co.—do not discriminate against older workers.
Closely following other court rulings on the issue, the 2nd Circuit said that
while the benefits provided to younger employees are worth more than the same
benefits provided to older employees, in terms of a retirement age annuity that
could be purchased, that difference is the result of time and compound interest
and does not constitute age discrimination.
The 2nd Circuit is the fourth appeals court to rule that cash-balance plans
are not age discriminatory. In an August 2006 landmark ruling, the 7th U.S.
Circuit Court of Appeals overturned a 2003 decision by a federal judge in
Southern Illinois that IBM’s cash-balance plan discriminated against the
company’s older workers.
Last year, two courts—the 3rd U.S. Circuit Court of Appeals in a case
involving Pittsburgh-based PNC Financial Services and the 6th U.S. Circuit Court
of Appeals in a case involving World Color Press—also rejected age
discrimination charges.
All the courts have rejected the argument made in numerous suits that the
plans are age discriminatory because the same earned benefit will produce a
smaller retirement-age annuity for older employees than younger employees.
The appeals courts’ rulings, coupled with a 2006 federal law that protects
new cash-balance plans from age discrimination suits, “should be the death knell
of cash-balance plan litigation,” said Nancy Ross, partner with McDermott, Will
& Emery in Chicago. Ross represents AXA Equitable.
The decisions “will quash participants’ desires to challenge these plans. We
haven’t seen new litigation in this area for some time,” Ross said.
Still, there is at least one more appeals court to be heard from on the
issue. The 9th U.S. Circuit Court of Appeals is expected to rule soon on a lower
court ruling dismissing age discrimination charges against Southern California
Gas Co.
Filed by Jerry Geisel of Business Insurance, a sister publication of
Workforce Management. To comment, e-mail editors@workforce.com.
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