Court Dismisses Age Bias Claims Against Hybrid
Plan
July 9, 2008 (PLANSPONSOR.com) - The U.S. District
Court for the District of Colorado has ruled the pension
equity formula and wear-away period that are part of the
Gannett Retirement Plan do not discriminate against older
workers.
Using the argument in Cooper v. IBM (See
IBM Cash Balance Discrimination Ruling
Reversed
), the court disagreed with the plaintiffs'
contention that "the rate of benefit accrual"
is the same as "accrued benefit." The court found that
the pension equity formula provided for an age-neutral
rate of benefit accrual annually.
In addition, the district court determined that a
wear-away period under the plan was also not
discriminatory even though older workers may have to wait
longer to begin accruing benefits since their calculated
opening balances under the hybrid plan were more likely
to be less than their accrued benefit under their prior
defined benefit plan. The court reiterated that this plan
feature does not lead to an age-discriminatory final
accrued benefit at retirement.
A suit was brought against the plan and Gannett Co.
claiming that the pension equity formula was age
discriminatory because the total number of points a
participant will earn under the formula if he works to
retirement (which determines his benefit) will differ
depending on what age the participant starts work.
"An employee beginning work at age 25 would have the
potential of 40 years of service, accumulating 300
potential percentage points, while an employee beginning
work at age 45 would have only 20 years of potential
service, earning 120 points," according to the court
opinion.
In addition, plaintiffs' claimed that the plan was
age discriminatory because no new credit is given to
employees whose balances under the prior defined benefit
plan were lower than the "starting percentage" calculated
with the pension equity formula, most likely older
employees.
The court dismissed all age discrimination
claims.
The case is Wells v. Gannett Retirement Plan, D.
Colo., No. 03-cv-02671-RPM, 7/1/08.
Rebecca Moore
editors@plansponsor.com