IBM loses court case

SAN FRANCISCO: IBM's pension plan, which it revamped in the 1990s, is unfair to older employees, a federal judge in Illinois ruled.

Judge G. Patrick Murphy of the U.S. District Court for the Southern District of Illinois held that IBM's pension plan violated age discrimination provisions of the Employee Retirement Income Security Act.

IBM, based in Armonk, New York, first moved in 1995 to a system of pension benefits that would accumulate steadily each year, rather than growing slowly early in employees' careers and accelerating rapidly in their final years of employment.

IBM said it would appeal the ruling.

"This ruling affects not just IBM's pension plan, but the pension plans of more than 400 major U.S. companies," said J. Randall MacDonald, senior vice president, human resources, in a statement.

"What IBM did with us with the pension plan hurt older people," said Kathi Cooper, who continues to work for IBM from home in Illinois, and who was one of the lead plaintiffs in the lawsuit.

Asked if she would press on in light of IBM's intent to appeal, Cooper said: "Absolutely, what IBM did was unconscionable."

Among other changes, the newer, "cash balance" defined contribution plan allowed for employees who left IBM for other companies the option of receiving accumulated benefits as a lump sump, instead of waiting to retire to realize benefits.

IBM first amended its plan in 1995 and, then, again in 1999 after employee protest, Murphy wrote, this time permitting employees to choose between different formulas for determining how their benefits would accrue.

IBM had said it was aiming to keep pace with the shifting career patterns of the technology industry's younger and more mobile work force, saying that its moves brought its practices more in line with other tech companies, such as Cisco Systems Inc., Microsoft Corp., and others.

IBM's move to the cash-balance plan echoed those by many other large technology companies in the 1990s, such as AT&T Corp., Eastman Kodak Co., and Electronic Data Systems Corp.

Bill Hughes, an IBM spokesman, said the company's plan does not unfairly hit older employees.

"IBM's pension plan does not discriminate on the basis of age," Hughes said. "To call such a plan discriminatory makes no sense and ignores the fundamental principle of the time value of money."

© Reuters