A key chapter in the cash balance pension plan litigation saga has been completed this year, but the final chapter has yet to be written.

The saga began years ago when the trial bar launched a litigation offensive against cash balance plans, which have both defined benefit and defined contribution features but legally are defined benefit plans.

The central feature of those suits was that the plans discriminate against older employees. At its most basic level, the plaintiffs' bar argument was this: The account balance of a younger employee would be worth more, when expressed as a retirement age annuity, than that of an older employee. That is the result of the younger employee's account balance having more time to earn interest than the balance of the older employee.

A federal judge in Southern Illinois accepted that argument in a widely publicized 2003 ruling against IBM Corp. and its then 4-year-old cash balance plan.

Judge G. Patrick Murphy rocked employers with his decision that, if upheld, would have meant all cash balance plans were age discriminatory, exposing plan sponsors to billions of dollars in damages.

This year, some of that fear instilled in roughly 1,000 U.S. employers that sponsor cash balance plans lifted. In August, the 7th U.S. Circuit Court of Appeals in Chicago reversed Judge Murphy's ruling.

In the decision—the first on the age discrimination issue by an appeals court—Judge Frank Easterbrook, writing for a three-judge panel, said the terms of IBM's plan were "age-neutral" and noted that the size of the benefit credits provided to plan participants did not vary by age.

While account balances—when expressed as a retirement age annuity—would be greater for younger employees than similarly situated older employees, that was the result of the "time value" of the money, which is not age discrimination, Judge Easterbrook wrote.

The appeals court ruling was a huge relief not just to IBM, but to all employers with cash balance plans. Many believed that the appeals court decision would serve as precedent, with other courts following it and bringing an end to the age discrimination litigation.

That optimism, at first, seemed justified. Shortly after the appeals court handed down its decision, two district court judges cited that ruling in dismissing age discrimination charges in two other cash balance suits.

But the optimism was short-lived. Two decisions made more recently—one involving JPMorgan Chase & Co. and the other targeting Citigroup Inc.—have gone the other way with the judges in those suits ruling that cash balance plans are age discriminatory.

Many now believe the age discrimination issue will not be resolved until several more appeals courts hand down their rulings in cases before them.

For employers starting new cash balance plans, though, there is legal certainty. As part of a broad pension funding reform measure it passed this summer, Congress made clear that plans started on or after June 29, 2005, are protected from age discrimination so long as they provide at least the same benefit and interest credits to older employees as they do to younger employees.