X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Federal appellate courts are grappling with whether corporations discriminate against older workers by switching from traditional pensions promising a fixed benefit for retirees to riskier cash-balance plans that may be a boon to younger workers but squeeze those closest to retirement. The decisions seem to be tilting against older pensioners so far with the 2d, 6th and 9th U.S. circuit courts of appeals likely to weigh in soon in what may be decisive votes. The 3d and 7th circuits have found that companies that moved to the cash-balance style of pensions did not engage in age discrimination in, respectively, Register v. PNC Financial Services, No. 05-5445 (3d Cir.), and Cooper v. IBM Personal Pension Plan, No . 06-760 (7th Cir.). The U.S. Supreme Court denied certiorari in Cooper in January. But now the focus has shifted to the 2d Circuit, where Hirt v. Equitable Retirement Plan, 441 F. Supp. 2d 516 (2006), is awaiting a hearing. District judges within the circuit have split over the discriminatory effect of the plans. “The essence of cash-balance plans is shifting the market risks from employer to the employee’s shoulders to ride out uncertain markets,” said Jay Sushelsky, attorney for the AARP Foundation Litigation in Washington. Under the Employee Retirement Income Security Act’s anti-age discrimination provision, a plan illegally discriminates if employee benefits accrual ceases or the rate of benefits accrual is reduced because of age. The once widely used defined-benefits plans promise a specific pension when a participant reaches retirement age, calculated according to a specific formula. By contrast, cash-balance plans, growing in popularity among employers, guarantee each employee a benefit based on a hypothetical account in the worker’s name, with contributions based on salary and interest credits. Each employee gets annual individual balance statements and takes on the risk of fluctuating investment values. When PNC switched to the cash-balance plan, a group a employees sued in 2004, arguing that it illegally froze their early retirement benefits. They got no new annual accruals until the cash-balance plan benefits “caught up” to their frozen defined-benefits plan. In cash plans, younger workers build up credits for longer periods and thus can accrue more benefits than older workers. Two other circuits have appeals challenging cash-balance plans on their dockets: the 6th Circuit with Drutis v. Rand McNally, No. 06-6380, and the 9th Circuit, with Hurlic v. Southern California Gas. Co., No. 06-55599. Neither case has completed briefing.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.