But will it stick??? I sure hope so - I didn't work for them but goddamn it, I'm 47 and I know how that would have felt when they switched plans in mid-stream - still cannot understand why they didn't allow the existing employees to stay with the old plan and make the new hires get into the new one - does anyone??
Friday, August 01, 2003
NEW YORK — IBM Corp. (IBM) committed age discrimination when it converted to a new kind of pension plan that gained popularity in the 1990s, a federal judge ruled in a closely watched case that affects 140,000 older employees at Big Blue and could ripple across American industry.
Judge G. Patrick Murphy of U.S. District Court in East St. Louis, Ill., ruled Thursday that IBM unfairly penalized older workers when it adopted a pension program known as a cash balance plan, in which workers can get a lump sum when they leave the company.
IBM and other companies believe cash balance plans are more attractive to a younger generation of workers who are more likely to change jobs during their careers. But older workers contend that the plans cut their expected benefits by as much as half.
"It's awesome — I knew we had a case," said the lead plaintiff, Kathi Cooper, 53, of Bethalto, Ill., a 24-year IBM veteran who filed the lawsuit in 1999.
"When IBM converted to a cash balance plan, it hurt almost every single employee over the age of 40, 45, because it reduced our accrued benefits," she said. "That formula was part of the greed from the 1990s — it's all about greed."
Possible damages for the 140,000 IBM employees covered by the lawsuit have yet to be determined.
IBM spokesman Bill Hughes said the Armonk, N.Y.-based technology company would appeal.
"IBM's pension plan does not discriminate on the basis of age," he said. "To call such a plan discriminatory makes no sense and ignores the fundamental principle of the time value of money. Under the court's interpretation of the law, every cash balance plan in the country is illegal."
Cash balance plans mushroomed in popularity during the 1990s. About 19 percent of the largest 1,000 U.S. companies had such plans in 1999, according to a government report. A report last year by consultant Watson Wyatt Worldwide found 33 of the largest 100 firms have the plans.
Similar to a 401(k), cash balance plans let workers track the growth of their money in a hypothetical, individual "account," although they can't allot any of their own pay to the plan or decide how it is invested. Workers are allowed to take the money with them if they leave for another job.
By comparison, traditional pension plans reward workers for sticking with a company over time, increasing their retirement benefits at a much faster rate during their last years of service.
Critics of cash balance plans say that if they are instituted before experienced workers are near retirement age, that essentially changes the rules late in the game, depriving such employees of anticipated gains and leaving them without enough working years to accrue equivalent cash balance benefits.
"IBM's plan became ... the poster child for cash balance abuse," said Norman Stein, a pension expert at the University of Alabama. "This was the very kind of employer that you wouldn't expect this kind of action from, and I think the employees regarded this literally as an act of betrayal."
Stein said Thursday's ruling appears to reject arguments that numerous other companies have made in defending their shift to cash balance plans. In doing so, it could force lawmakers to tackle an issue they have been so far reluctant to touch, he and other experts said.
The Internal Revenue Service (search) imposed a moratorium on new cash balance plans in 1999. Since then, Congress has largely ignored the issue, though a bill that would require companies to give workers a choice of plans has been pending since December.
Thursday's ruling was jeered by the American Benefits Council (search), a Washington-based group that lobbies on corporate pension plan issues. The council's president, James Klein, said cash balance plans are "currently the one good thing going" in an environment where many companies are dropping pension plans altogether and requiring employees to save for retirement on their own.
Cooper, the plaintiff, who performs internal reviews for IBM's Global Services division, acknowledged that working for the company has been strained since she sued, but she said she was happy she put up the fight.
"I love that company. It's like having an errant teenager on drugs, and you'll do anything to make it right," she said. "This is bad behavior. It's got to be stopped."
Friday, August 01, 2003
NEW YORK — IBM Corp. (IBM) committed age discrimination when it converted to a new kind of pension plan that gained popularity in the 1990s, a federal judge ruled in a closely watched case that affects 140,000 older employees at Big Blue and could ripple across American industry.
Judge G. Patrick Murphy of U.S. District Court in East St. Louis, Ill., ruled Thursday that IBM unfairly penalized older workers when it adopted a pension program known as a cash balance plan, in which workers can get a lump sum when they leave the company.
IBM and other companies believe cash balance plans are more attractive to a younger generation of workers who are more likely to change jobs during their careers. But older workers contend that the plans cut their expected benefits by as much as half.
"It's awesome — I knew we had a case," said the lead plaintiff, Kathi Cooper, 53, of Bethalto, Ill., a 24-year IBM veteran who filed the lawsuit in 1999.
"When IBM converted to a cash balance plan, it hurt almost every single employee over the age of 40, 45, because it reduced our accrued benefits," she said. "That formula was part of the greed from the 1990s — it's all about greed."
Possible damages for the 140,000 IBM employees covered by the lawsuit have yet to be determined.
IBM spokesman Bill Hughes said the Armonk, N.Y.-based technology company would appeal.
"IBM's pension plan does not discriminate on the basis of age," he said. "To call such a plan discriminatory makes no sense and ignores the fundamental principle of the time value of money. Under the court's interpretation of the law, every cash balance plan in the country is illegal."
Cash balance plans mushroomed in popularity during the 1990s. About 19 percent of the largest 1,000 U.S. companies had such plans in 1999, according to a government report. A report last year by consultant Watson Wyatt Worldwide found 33 of the largest 100 firms have the plans.
Similar to a 401(k), cash balance plans let workers track the growth of their money in a hypothetical, individual "account," although they can't allot any of their own pay to the plan or decide how it is invested. Workers are allowed to take the money with them if they leave for another job.
By comparison, traditional pension plans reward workers for sticking with a company over time, increasing their retirement benefits at a much faster rate during their last years of service.
Critics of cash balance plans say that if they are instituted before experienced workers are near retirement age, that essentially changes the rules late in the game, depriving such employees of anticipated gains and leaving them without enough working years to accrue equivalent cash balance benefits.
"IBM's plan became ... the poster child for cash balance abuse," said Norman Stein, a pension expert at the University of Alabama. "This was the very kind of employer that you wouldn't expect this kind of action from, and I think the employees regarded this literally as an act of betrayal."
Stein said Thursday's ruling appears to reject arguments that numerous other companies have made in defending their shift to cash balance plans. In doing so, it could force lawmakers to tackle an issue they have been so far reluctant to touch, he and other experts said.
The Internal Revenue Service (search) imposed a moratorium on new cash balance plans in 1999. Since then, Congress has largely ignored the issue, though a bill that would require companies to give workers a choice of plans has been pending since December.
Thursday's ruling was jeered by the American Benefits Council (search), a Washington-based group that lobbies on corporate pension plan issues. The council's president, James Klein, said cash balance plans are "currently the one good thing going" in an environment where many companies are dropping pension plans altogether and requiring employees to save for retirement on their own.
Cooper, the plaintiff, who performs internal reviews for IBM's Global Services division, acknowledged that working for the company has been strained since she sued, but she said she was happy she put up the fight.
"I love that company. It's like having an errant teenager on drugs, and you'll do anything to make it right," she said. "This is bad behavior. It's got to be stopped."
