Charge of Age Bias in Boeing Cash-Balance Plan Dismissed

A U.S. district court judge, following an earlier appeals court ruling in the same circuit, has dismissed charges that Boeing Co.’s cash-balance pension plan discriminates against older employees.

Judge David Herndon of the U.S. District Court for the Southern District of Illinois ruled this week that it was the duty of the court “to follow the law of this circuit as expressed in Cooper [v. IBM],” referring to an August 2006 ruling by the 7th U.S. Circuit Court of Appeals in Chicago that said the design of cash-balance plans in general and IBM Corp.’s plan in particular do not violate age discrimination law.

In that ruling, the appeals court said the terms of the IBM plan were age-neutral and the credits allocated to employees’ accounts were not reduced on account of age.

In the case of the Boeing plan, “there is no dispute that the plan is age-neutral” or that credits to participants are reduced on account of age, Herndon wrote.

In addition to the 7th Circuit Court ruling, a second appellate court—the 3rd U.S. Circuit Court of Appeals in Philadelphia—ruled recently that the plans are not age discriminatory. At least two other appeals courts are expected to rule on the issue within the next year or so.

New cash-balance plans that follow certain basic standards under a 2006 federal pension funding law, however, are shielded from such suits. Since that legislation was passed, two major employers—MeadWestvaco Corp. of Richmond, Virginia, and SunTrust Banks Inc. of Atlanta—said they were adopting cash-balance plans. A third employer, package delivery giant FedEx Corp. of Memphis, Tennessee, said it was expanding an existing cash-balance plan to cover all eligible U.S. employees.

The plans are so-named because accrued benefits are expressed as a cash lump sum.

Filed by Jerry Geisel of BuNew Linksiness Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.