A Federal Appeals Count has cleared IBM of discriminating against older employees when it overhauled its pension scheme in the late 1990s.
The ruling reversed an earlier verdict by a lower court. From IBM’s point of view, the appeal court ruled that the pension scheme IBM put in place in 1999 was both “lawful and age-neutral”.
The case kicked off in 1999, when the company shifted US employees from a traditional defined benefits plan, where retirees were guaranteed a set proportion of their final salary, to a cash balance plan, where a set portion of salary was set aside each pay period to build a pension pot.
Older staffers claimed the shift discriminated against them as they would not have as long to build up their nest eggs. They also questioned the whole concept of cash balance plans.
The judges disagreed, saying any benefit for younger workers did not amount to discrimination against older workers.
As it happens, IBM changed its mind again earlier this year, and is now shifting US workers to a 401K plan, where employees and (potentially) employers both make contributions to a retirement account, but there is no guarantee how much the pot will be worth at retirement. ®