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Overturning a 2003 federal district court ruling, the U.S Court of Appeals for the Seventh Circuit found that IBM did not discriminate against older employees when it adopted its cash balance plan.
The case was brought by 140,000 IBM employees who saw their promised pension benefits cut by more than half when IBM converted to a cash balance plan. Traditional defined benefit plans typically provide employees benefits based on their pay when they leave the company, plus special early retirement benefits. Under cash balance plans, employees receive benefits based on a percentage of their current pay plus interest. This difference in plan design typically results in employees receiving benefits that are much lower than anticipated.
Lead plaintiff and long-time IBM employee, Kathi Cooper, had been counting on receiving the benefits promised to her under IBM’s traditional defined benefit plan before the company converted to the cash balance plan. The court’s ruling affects IBM employees, and other employees involved in lawsuits in courts in the Seventh Circuit, which includes Wisconsin, Illinois and Indiana. Cases in other parts of the country, including cases involving AT&T salaried employees, Citibank, and Duke Energy, are not directly affected by the decision.
The case is Cooper v. IBM Personal Pension Plan.
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