<nobr>Aug 7, 2006</nobr>

Seventh Circuit Reverses District Court in Cooper

A unanimous three-judge panel of the United States Court of Appeals for the Seventh Circuit today reversed a lower court decision that found cash balance plans were inherently age discriminatory in violation of ERISA. ERIC filed an amicus curiae brief with the Seventh Circuit urging reversal.

Judge Frank Easterbrook, writing for the panel, rejected plaintiffs’ arguments that such plan designs violate ERISA’s prohibition on age discrimination because younger employees accrue interest credits over longer periods relative to older workers. “Treating the time value of money as a form of discrimination is not sensible,” he wrote, “[u]nder the district court’s analysis, compound interest becomes a scourge . . . .”

The court rejected the lower court’s finding that the language “benefit accrual” in the age discrimination statute was equivalent to the phrase “accrued benefit” as defined elsewhere saying that “all sorts of things go wrong” if the trial court’s analysis were to be accepted. The court reasoned that Cooper was a case about inputs into a retirement plan, not outputs, and that the lower court conflated the two.

The court questioned the wisdom of the suit noting that “Litigation cannot compel an employer to make plans more attractive . . . It is possible, though, for litigation about pension plans to make everyone worse off. After the district court’s decision IBM eliminated the cash-balance option for new workers and confined them to pure defined-contribution plans.”

The decision leaves only a preliminary decision in Richards v. FleetBoston Financial Corp. from the United States District Court for the District of Connecticut finding cash balance plans inherently age discriminatory. ERIC filed an amicus curiae brief in Register v. PNC Financial Services Group, Inc. with the United States Court of Appeals for the Third Circuit urging the court to affirm a lower court decision dismissing an action challenging the legality of cash balance pension plans in April. On July 11, a federal district judge for the District of Delaware stayed an age discrimination claim in Charles v. PEPCO pending a decision from the Third Circuit in Register.

In the Ninth Circuit, the district court, without issuing a written opinion, found in favor of the defendant company which plaintiffs are appealing (Hurlic v. Southern California Gas Company). Should the any of the circuit courts find in favor of respective plaintiffs on the age discrimination issue, the conflict among jurisdictions could lead the U. S. Supreme Court to take up the issue. ERIC filed an amicus brief in Register and is considering a brief in Hurlic.

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Cooper v. IBM Decision

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