Murphy Approves Partial IBM Cash Balance Proposal

August 9, 2005 ( - An Illinois federal judge has okayed a partial settlement between IBM and tens of thousands of its current and former workers over its super controversial move to a cash balance plan.

Chief District Judge G. Patrick Murphy of the US District Court for the Southern District of Illinois approved a plan under which IBM will pay in the form of enhanced benefits more than $300 million to plan participants, Business Insurance reported. That aspect of the settlement agreement primarily deals with claims surrounding IBM’s conversion of a traditional final-average-pay plan to a pension equity plan (PEP).

Under the other part of the settlement, IBM will appeal Murphy’s 2003 ruling that its cash balance plan, which IBM set up in 1999 to succeed the PEP plan, discriminated against older workers (See  Murphy’s Law: IBM Loses Cash Balance Ruling ). The appeal is set to be heard by the US 7 th Circuit Court of Appeals in Chicago (See  IBM Puts a Cap on CB Exposure – But Still Plans Cooper Appeal ). The appellate court’s decision would represent the first by an appeals court on the cash balance plan age discrimination issue. If the court rules for IBM, the computermaker will have no further liability. If IBM loses, its liability will be capped at $1.4 billion, according to the report.

Since the partial settlement was proposed, IBM has frozen its cash balance plan, with employees hired as of January 1, 2005, receiving pension coverage under an enriched 401(k) plan (See  Q/A: “Blue” Moves ).