JP Morgan Cash Balance Case Gets Class Action Status

June 1, 2007 ( - Former and current employees of J.P. Morgan Chase & Co. who claim the bank's cash balance plan is age discriminatory were awarded class-action status by the U.S. District Court for the Southern District of New York.

Judge Harold Baer Jr. said that the discrimination charge affects all of the 100,000 current and former employees of JP Morgan who filed the suit in the same manner, “regardless of their age, employment status (current or former employee), or employer (JPMC or one of [its predecessors]).

Baer, however, stopped short of saying that J.P. Morgan’s predecessors violated the Employee Retirement Income Security Act’s (ERISA) notice requirement by failing to tell plan participants that the cash balance formula would reduce their benefit accruals.

Instead, the court gave class certification for claims involving notice violations occurring post-2002, after the predecessors plans were all merged with J.P. Morgan’s plan. He noted that while many of the class members were employees of other companies that merged with J.P. Morgan, the plaintiffs had adequately alleged that J.P. Morgan’s conduct caused all class members to suffer identical harm.

Six former employees of the bank first brought the lawsuit charging that the cash balance plan violated ERISA by discriminating against older workers, and that J.P. Morgan violated notice requirements under ERISA by failing to tell workers when it converted to the cash balance plan that their future rate of benefit accrual would decrease under the plan.

Using similar arguments put forth in other cash balance discrimination suits around the country, the J.P. Morgan plaintiffs contend that the plan allocates less money to an employee’s retirement account as they age.

“This claim is common and typical to the class, and named Plaintiffs are adequate representatives of all class members in their goal to reform a plan that allocates less money to retirement accounts as employees get older,” Baer said in the court’s opinion.

Last year, Baer rejected J.P. Morgan’s plea to dismiss the lawsuit on the grounds that his opinion – the first to go against a landmark ruling by the 7th   US Circuit Court of Appeals that said a cash balance plan offered by IBM Corp. was not age discriminatory –differed from two other New York judges who said the plans are not age discriminatory.

In his ruling, Baer reasoned that   when cash balance plan benefits are expressed as a retirement-age annuity, an older employee who started working at the same time as a younger employee will receive a smaller benefit – which he said constitutes age discrimination (See  District Court Disagrees with Logic in Landmark Cash Balance Ruling ).

Baer wrote: “It is immaterial that the terms of the plan appear age neutral. Despite the fact that every employee receives pay credits based on their completed years of service and the same interest rate is applied to each employee’s account balance, that is not the yardstick by which to test, not the means to avoid, age discrimination results.”

The ruling is In re J.P. Morgan Chase Cash Balance Litigation, S.D.N.Y., No. 06 Civ. 732 (HB), 5/30/07