Fed Pension Law Suit Advances

April 4, 2001 (PLANSPONSOR.com) - A federal judge has allowed a group of past and present employees of the Federal Reserve to continue with a lawsuit against their employer.

The group filed the suit a year ago, claiming that mandatory employee contributions to the pension plan continue to shrink their salaries by 7%, despite the Fed’s internal announcement that the plan was fully funded.

The group represented includes some 1,400 workers, hired before 1984, roughly half of which still work at the Fed. Employees hired after 1984 are covered under another plan.

Defense lawyers argued that private sector pension law should apply and the group’s claims should be declared invalid.

Supreme Court decisions were cited to support the claim that employees have no right to a pension plan surplus and that employers do not benefit improperly by using surpluses to their own advantage.

Lack of Opportunity

The judge ruled that the mandatory contributions to an over-funded plan deprived the plaintiffs of the opportunity to take full advantage of a supplemental retirement plan and found the Fed?s argument for private sector pension law “flatly illogical”.

The Fed’s bid to dismiss charges of age-discrimination or an unconstitutional taking employee grounds, was successful on procedural grounds.

In addition, the defense was granted until April 19 to find other legal grounds that would support dismissal of the breach-of-fiduciary part of the case.

Requests for a preliminary injunction to stop the mandatory contributions were denied.

– Camilla Klein                    editors@plansponsor.com