IBM Strikes a Deal on Cash Balance Suit
>The next step is for letters to be mailed to about 275,000 former and current IBM workers telling them about the settlement and giving them a chance to object to the deal, the St. Louis Post-Dispatch reported.
>Plaintiffs’ attorneys will receive 29% of the first $250 million of the monetary award and 17% percent of any money awarded over $1.25 billion, according to the Post-Dispatch news report.
Murphy’s Law
>Last year, US District Judge G. Patrick Murphy ruled that IBM’s cash-balance plan does discriminate against older workers (See Murphy’s Law: IBM Loses Cash Balance Ruling ). That brought national scrutiny from Congress, advocates for older workers and business interests (See House Approves Measure Blocking Treasury Cash Balance Intervention ). The Cooper case served as something of a bellweather for other major corporations where employees have complained that pension and health care benefits were reduced in corporate cost-cutting moves (See One Bad Apple ). Companies in addition to IBM that moved to “cash-balance” pension plans in the 1990s include Eastman Kodak Co. and Electronic Data Systems Corp.
>Despite that attention, jurists in a variety of jurisdictions have drawn contrary conclusions. Last summer, in a direct refutation of the Cooper ruling, US District Judge Catherine Blake of the US District Court for the District of Maryland read ERISA’s age-discrimination provisions as being applicable only to employees who have reached normal retirement age. Thus, in Tootle v. ARINC Inc, Blake found ERISA’s age-discrimination provisions “do not bar all cash balance plans.” (see Tootle Do? )
Formula Still an Issue
>Indeed, the IBM settlement still does not resolve the crucial issue of a lawsuit that has drawn national attention – IBM’s cash balance plan formula. According to the news report, IBM has decided to appeal Murphy’s ruling on the formula issue to a federal appeals court in Chicago. Plaintiffs’ lawyers estimate that the company could ultimately be liable for up to $1.7 billion if it loses on the issue (see IBM Puts a Cap on CB Exposure – But Still Plans Cooper Appeal ).
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“IBM continues to believe its formulas are fair,” IBM spokeswoman Kendra Collins told the newspaper. Still, as of January 1, the company discontinued its pension plan for new employees, instead offering them what it calls an “enriched” retirement savings plan (See Q/A: “Blue” Moves ).