July 31, 2003 (PLANSPONSOR.com) - Big Blue got a
black eye from a federal judge today, who ruled that IBM's
pension plan conversion and operating assumptions violated
age discrimination laws.
>The ruling, by Judge G. Patrick Murphy in the US
District Court of Southern Illinois, found that the
computer giant violated age discrimination laws by amending
its pension plan in a way that would make older employees
accrue retirement benefits at a lower rate than younger
>Focusing on the rate of accrual, rather than the
benefit itself, Judge Murphy noted that IBM's argument was
based on the "actuarial premise" of the "time value of
However, Murphy dismissed that claim, noting that "From an
economist's perspective, Defendants have a good argument….
This does not mean, however, that the (IBM plan) is
>The plaintiffs had claimed that the IBM plan
violates ERISA because it is age discriminatory based on a
conversion factor that increases in direct correlation to
an employee's age - causing older workers to receive a
lower rate of benefit accrual and thus a smaller accrued
benefit at age 65 than a younger employee who had the same
service and salary as the older worker.
>In today's decision, Murphy held that IBM's formula
was set up so that older workers would receive a lower
benefit accrual rate than younger employees if they worked
the same years at the same salary and both retired at age
In further dismissing IBM's claims, Murphy went on to
categorize Congress' decision to use the different terms
"accrued benefit" and "benefit accrual" in ERISA as a
"simple" attempt to be "grammatically correct."