<nobr>Sep 30, 2004</nobr>

ERIC Statement Regarding IBM and Plaintiffs Agreement
to Resolve Certain Claims in Cash Balance Case

Washington, D.C. - The ERISA Industry Committee issued the following statement by its President, Mark J. Ugoretz, in response to the announcement that IBM and plaintiffs in Cooper v. IBM have agreed in principle to resolve certain claims:

“We are gratified that IBM will continue its appeal to the Seventh Circuit. The court’s decision in Cooper is at odds with several other court decisions both before and after the Cooper decision. Cash balance and similar plans represent the future of defined benefit plans. If cash balance and defined benefit plans are to continue to provide sound retirement benefits, it is important that this case be reversed.”

“The importance of this case to the retirement security of millions of pension plan participants cannot be overstated. The Cooper court’s holding that providing interest credits to all participants at the same rate of interest is unlawful age discrimination is not supported either by law or logic.

“If the Cooper case were to be upheld, which we strongly believe it will not, it would jeopardize over a thousand pension plans and the benefits of millions of current and future plan participants. The plan sponsors of all of those plans relied on sound legal authority, the statutes, and guidance from regulators in establishing their plans. This case pulls the rug out from under sound legal authority and needs to be reversed.”

Ugoretz said that “cash balance plans have existed for many years during which time the Government has repeatedly confirmed the legality of these plans by creating safe harbors for cash balance plans and issuing favorable rulings to thousands of employers who have relied in good faith on government guidance. The Cooper decision calls into question plan features that have for decades been well accepted as lawful. The case will encourage costly and unpredictable litigation between employers and their employees as well as subvert the retirement security of millions of workers.”

Several courts have come to conclusions directly contrary to the district court’s conclusion in Cooper and no other court has reached the same conclusion as Cooper. Most recently, the U.S. District Court in Maryland held in Tootle v. ARINC that an employer did not violate the age discrimination rules governing pension plans when it converted its traditional defined benefit plan to a cash balance plan, and explicitly declined to follow the decision in Cooper. In Tootle, U.S. District Court Judge Catherine Blake found that the cash balance plan involved in that case actually appeared to favor older workers.

“The Tootle decision further validates rulings by other courts that cash balance plans do not inherently discriminate on the basis of age and further weakens the decision in Cooper,” said Ugoretz. “The decision in Tootle demonstrates that the Illinois court misapplied the age discrimination laws, and is out of step with the decisions of other federal courts that found that cash balance plans are not age discriminatory.”

To date, four courts have reviewed the age discrimination issue and only the Illinois district court has found cash balance plans to be age discriminatory. Federal courts in Indiana, New Jersey, and most recently, in Maryland (in Tootle v. ARINC) came to opposite conclusions.

ERIC has urged Congress to enact legislation that would eliminate the regulatory and legal chaos created by the misguided decision in Cooper.

Back to Previous Page