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U.S. Supreme Court Lets IBM Cash Balance Ruling Stand


The U.S. Supreme Court has decided not to hear an appeal of a court of appeals’ ruling that IBM’s cash balance pension plan did not discriminate against older workers.  While this decision ends litigation in the IBM case, it does not end litigation brought against other companies that have converted to cash balance plans.  By letting the lower court ruling stand, the Supreme Court’s decision affects only IBM employees and employees in the Seventh Circuit, which includes Illinois, Indiana, and Wisconsin.  Cases in other parts of the country are not directly affected by this decision and are still subject to the outcome of pending litigation.  The case is Cooper v. IBM Personal Pension Plan.

Read the PRC summary of the appeals court’s ruling and its effect on Kathi Cooper, lead plaintiff in the case.

With the passage of the Pension Protection Act of 2006 (PPA), conversions to cash balance plans that took place on or after June 30, 2005 are no longer considered to be age discriminatory as long as the plan does not allow for the wearaway of benefits for older employees.  After the PPA clarified the legal status of cash balance plans, the IRS lifted its 8-year moratorium of on granting approval for conversions to cash balance plans, thus clearing the way for companies to convert their traditional defined benefit pensions to cash balance plans.  This PRC summary gives more details on the PPA provision legalizing cash balance plans.

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