Pension Action E-Newsletter

January 24, 2007

U.S. Supreme Court Decides to Hear One Case, Declines to Hear Another
Last week, the Supreme Court decided to hear one pension case, and let the ruling in a second case stand. Both cases are summarized below.

U.S. Supreme Court Will Hear Appeal of Pension Termination Case
The Supreme Court has agreed to review a ruling by the U.S. Court of Appeals for the Ninth Circuit that a plan administrator acted unlawfully when it decided to terminate pension plans and buy annuities for employees, rather than fully reviewing an alternative option of merging the plans with a larger plan. The appeals court ruled that the plan administrator, the company’s board of directors, was a “fiduciary” obligated to act solely in the interests of the employees. The company has appealed saying that decisions about how to end a plan are not a “fiduciary” decisions, and that the board could properly act in the interests of the company, which stood to recover $5 million if annuities were bought. We will keep you informed about the status of this case, Beck v. PACE International Union.

U.S. Supreme Court Lets IBM Cash Balance Ruling Stand
The U.S. Supreme Court has decided not to hear an appeal of a court of appeals’ ruling that IBM’s cash balance pension plan did not discriminate against older workers. While this decision ends litigation in the IBM case, it does not end litigation brought against other companies that have converted to cash balance plans. By letting the lower court ruling stand, the Supreme Court’s decision affects only IBM employees and employees in the Seventh Circuit, which includes Illinois, Indiana, and Wisconsin. Cases in other parts of the country are not directly affected by this decision and are still subject to the outcome of pending litigation. The case is Cooper v. IBM Personal Pension Plan.

Read the PRC summary of the appeals court’s ruling and its effect on Kathi Cooper, lead plaintiff in the case.

With the passage of the Pension Protection Act of 2006 (PPA), conversions to cash balance plans that took place on or after June 30, 2005 are no longer considered to be age discriminatory as long as the plan does not allow for the wearaway of benefits for older employees. After the PPA clarified the legal status of cash balance plans, the IRS lifted its 8-year moratorium of on granting approval for conversions to cash balance plans, thus clearing the way for companies to convert their traditional defined benefit pensions to cash balance plans. This PRC summary gives more details on the PPA provision legalizing cash balance plans.

HBO Program Highlights Problems with NFL Pensions
This week’s episode of HBO’s Real Sports with Bryant Gumbel includes a segment on the pension and disability benefits for players who retired from the league before the high salaries common among today’s NFL players. Check this schedule for dates and times the show will air.  This article provides more detail into the show’s topic: NFL’s Secret Shame.

Fact Sheet Dispels Common Misperceptions About Public Pension Plans
A fact sheet published by the National Association of State Retirement Administrators and the National Council on Teacher Retirement seeks to dispel common misperceptions about the costs and financial status of state and local government pension plans. Public plans have recently come into the spotlight as their funding status has been called into question by lawmakers. Read the fact sheet.

Articles of Interest
Please note that some news web sites require free registration to read an entire article, and some links may expire within several days after the article's publication date. You can find other recent articles in the Pension in the News and PRC in the News sections of our web site.