Judge Says I.B.M. Owes Older Workers
February 19, 2004
The New York Times
Business/Financial Desk; SECTC
I.B.M. owes back payments to 140,000 older employees who were harmed when the technology giant converted to a new kind of pension plan in the 1990's, a federal judge has reaffirmed in a ruling. The company said it would seek to reverse the decision on appeal. The plaintiffs in the case want I.B.M. to make up for what they lost after the company adopted a ''cash balance'' pension plan, which pays workers a lump sum when they leave the company. A federal judge had ruled last July that the plan amounted to age discrimination because it unfairly penalized older employees.
I.B.M. argued that it should not be forced to make retroactive payments because it could not have foreseen that the judge, G. Patrick Murphy of United States District Court in East St. Louis, Ill., would declare the cash balance plan illegal.
But in a ruling dated Feb. 12, Judge Murphy wrote that I.B.M. had no justification for claiming that it had been blindsided by his decision.
Judge Murphy has yet to decide the damages that I.B.M. should pay. A spokeswoman, Kendra Collins, said yesterday that the company did not believe it should pay anything.
IBM owes workers hurt by pension shift
Thursday, February 19, 2004
BY BRIAN BERGSTEIN
Associated Press
NJ Star Ledger
IBM owes back payments -- possibly worth billions of dollars -- to 140,000 older employees who were harmed when the technology giant converted to a new kind of pension plan in the 1990s, a federal judge has ruled.
The plaintiffs in the case want IBM to make up for what they lost after the company adopted a "cash-balance" pension plan, which pays workers a lump sum when they leave the company. A federal judge had ruled last July the plan amounted to age discrimination because it unfairly penalized older employees.
IBM argued it shouldn't be forced to make retroactive payments because it could not have foreseen that the judge, G. Patrick Murphy of U.S. District Court in East St. Louis, Ill., would declare the cash-balance plan illegal.
But in a ruling dated Feb. 12, Murphy wrote that IBM had no justification for claiming it was blindsided by his decision.
"The prohibition against age discrimination existed long before the appearance of cash balance plans," Murphy wrote. "All that has changed is IBM's clever, but ineffectual, response to law that it finds too restrictive for its business model."
Murphy has yet to decide the damages IBM should pay or how the figure will be calculated. Under one formula suggested by the plaintiffs, IBM has estimated the payments would total $6 billion.
IBM spokeswoman Kendra Collins said yesterday the company doesn't believe it should pay anything. She said IBM expects to win the case on appeal.
"We continue to believe that our plan is legal," Collins said.
The case is being closely watched because IBM was one of several companies that adopted cash-balance plans in the'90s.
Traditional pension plans reward workers for sticking with a company, awarding them more retirement benefits during their last years of service.
In contrast, cash-balance plans give workers individual "accounts" workers can track over time, although they can't allot any of their own pay to the plan or decide how it is invested. The advantage is workers can take the money with them if they leave for another job, which can make cash-balance plans more appealing to younger workers.
Opponents of the cash-balance plans say that if they are instituted when experienced workers are near retirement age, that essentially changes the rules late in the game, depriving the employees of anticipated gains and leaving them without enough working years to accrue equivalent cash balance benefits.
Lead plaintiff Kathi Cooper, 53, a 24-year IBM veteran from Bethalto, Ill., who filed the lawsuit in 1999, said she was "extremely gratified" by the judge's ruling on retroactive benefits.
"It would have been a travesty of justice if IBM had gotten away with only paying damages to 140,000 injured employees from today forward. That is not the American way of doing things," she said.
"I want to stay with IBM for a long, long time. It is one of the magnificent corporations of the world. But they just can't do what they've done with their pension benefits and think they are above the law."
IBM Loses Pension Ruling; A judge says 140,000 employees and retirees are entitled to back pay in a 'cash-balance' case.
Kathy Kristof
781 words
February 19, 2004
Los Angeles Times
Business; Business Desk
In a decision that could cost IBM Corp. billions of dollars, a federal judge has ruled that the company must make retroactive payments to employees and retirees who were hurt when IBM abandoned its traditional pension plan. The Feb. 12 ruling, released Wednesday, is the latest development in a case that could ultimately affect hundreds of big companies that have swapped traditional pensions for so-called cash-balance plans over the last decade.
"Technically this ruling only applies to these IBM employees, but the implications are tremendous," said Karen Ferguson, director of the Pension Rights Center in Washington. "IBM has been the precedent setter in this area all along. If the courts uphold this, this could be dynamite."
The case, filed in 1999, claimed that IBM discriminated against older, long-serving employees when it replaced its pension program with a cash-balance plan.
Cash-balance accounts are similar to 401(k) plans. Employers contribute money into individual employee accounts that can be tapped at retirement; traditional pensions guarantee a set monthly payment.
Older workers have complained that cash-balance plans don't give them enough time to build solid nest eggs for retirement, and that thousands of dollars in promised benefits are ripped away from them at a time when they are least able to make up for the loss.
U.S. District Judge G. Patrick Murphy ruled last summer that IBM's cash-balance plan was inherently discriminatory against older workers under pension law. In his follow-up ruling last week, Murphy said 140,000 current and former IBM employees were entitled to retroactive payments for retirement benefits they lost when the company converted to the new plan in 1999.
Murphy did not rule on what that amount should be or how it would be calculated. IBM has estimated that the ruling could cost the company $6 billion under one formula.
After the ruling was released, Armonk, N.Y.-based IBM saw its shares fall 95 cents to $98.42 on the New York Stock Exchange.
IBM argued in court that it should not be liable for back payments, saying that it could not have foreseen that its cash-balance plan would be declared illegal.
"Our view is that retroactive remedies are not appropriate in this case," said IBM spokeswoman Kendra Collins.
Murphy, based in East St. Louis, Ill., rejected that argument. "The prohibition against age discrimination existed long before the appearance of cash-balance plans. All that has changed is IBM's clever, but ineffectual, response to law that it finds too restrictive for its business model," Murphy wrote.
The lead plaintiff in the class-action case was Kathi Cooper, a 24-year IBM veteran from Bethalto, Ill.
"What IBM has done is wrong," Cooper said by phone Wednesday. "I hope and pray for a successful outcome for the entire class, and there are about 140,000 of us now."
IBM has appealed Murphy's ruling that its retirement plan is discriminatory, and plans to fight this one as well.
"We stand by our defense and continue to believe that our pension is legal and sound and that we will prevail on appeal," Collins said.
Collins could not say Wednesday whether the company had set aside reserves to pay damages in the case, or whether any final judgment would come out of the company's earnings.
The ruling is "potentially devastating" to IBM, said Paul Gewirtz, a Cleveland-based pension consultant.
"The wider question," he added, "is whether it is devastating to all cash-balance plans, which hundreds of companies have adopted across the country."
Gewirtz believes that some cash-balance plans -- most notably those that provided all workers with the option of sticking with the traditional pension or opting into the cash-balance system -- will emerge unscathed. But, companies that forced their workers to join the plan, as IBM did, may not. There are probably millions of employees in this situation, he added.
Companies such as IBM have shifted to cash-balance plans to save money in retirement costs. Advantages include the ability of workers to take their cash-balance account to another company when they change jobs.
But the conversions have come under criticism from employee advocates, who say companies typically play up the advantages of these plans, while downplaying the disadvantages.
Dozens of employee lawsuits are pending, pension experts note.
Meanwhile, the Bush administration has proposed legislation that would provide a new legal formula to allow cash-balance conversions while providing some safeguards for older employees.
IBM Loses Another Round in Pension Case
Wednesday February 18, 4:24 pm ET
By BRIAN BERGSTEIN, AP Technology Writer
NEW YORK - IBM Corp. owes back payments - possibly worth billions of dollars - to 140,000 older employees who were harmed when the technology giant converted to a new kind of pension plan in the 1990s, a federal judge has ruled.
The plaintiffs in the case want IBM to make up for what they lost after the company adopted a "cash balance" pension plan, which pays workers a lump sum when they leave the company. A federal judge had ruled last July that the plan amounted to age discrimination because it unfairly penalized older employees.
IBM argued that it shouldn't be forced to make retroactive payments because it could not have foreseen that the judge, G. Patrick Murphy of U.S. District Court in East St. Louis, Ill., would declare the cash balance plan illegal.
But in a ruling dated Feb. 12, Murphy wrote that IBM had no justification for claiming it was blindsided by his decision.
"The prohibition against age discrimination existed long before the appearance of cash balance plans," Murphy wrote. "All that has changed is IBM's clever, but ineffectual