<nobr>Jan 4, 2008</nobr>

District Court Dismisses Cash Balance Age Discriminatory Claim

In another victory for employers, the U.S. District Court for the Western District of Washington ruled December 18 in Buus v. WaMu Pension Plan that its cash balance pension plan does not violate the Employee Retirement Income Security Act because it does not reduce participant's rate of benefit accrual on the basis of age.

Referring to the recent string of federal appeals court decisions approving cash balance plans, Judge Marsh Pechman said "[T]he weight of circuit court authority is well-reasoned and supported. The opposing district court decisions do not overcome the unanimity with which the circuits have treated the issue."

WaMu employees had argued that under the cash balance plan established in 1987, younger employees received interest credits for more years, discriminating against older workers, while WaMu argued that the employees failed to state a claim because they confused age discrimination with the time value of money.

The court said that the case comes down to the definition of "rate of accrual" in ERISA section 204(b)(1)(H)(i), which states that a defined benefit plan violates ERISA is the rate of an employees benefit accrual is reduced because of the attainment of any age. The court agreed with the reasoning in Cooper v. IBM Personal Pension Plan, which found that benefit accrual refers to what the employer puts into a plan and that nothing under ERISA's anti-age discrimination provisions suggests that "Congress set out to legislate against the fact that younger workers have (statistically) more time left before retirement, and thus a greater opportunity to earn interest on each years retirement savings."

ERIC has filed amicus briefs in a number of cash balance cases, including Cooper v. IBM Personal Pension Plan, that are critical to upholding its contention that cash balance plans are not inherently age discriminatory. The U.S. Court of Appeals for the Third, Sixth, and Seventh Circuits have all supported ERIC's position in the earlier amicus briefs.


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Buus v. WaMu Pension Plan

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