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Supreme Court won't take IBM cash balance case


WASHINGTON--The U.S. Supreme Court on Tuesday declined to review a federal appeals court ruling that IBM Corp.'s cash balance pension plan does not discriminate against older employees.

Without comment, the justices let stand an August 2006 ruling by the 7th U.S. Circuit Court of Appeals in Chicago. The appeals court overturned a lower court ruling that had said IBM's plan created in 1999 discriminated against older employees because, when expressed as a retirement annuity, the benefit earned by younger employees are more valuable than the same benefit earned by older employees.

But the appeals court--the first time a court of that level ruled on the issue--rejected that analysis, saying that the benefit value disparity was the result of the time value of money--not age discrimination.

The Supreme Court's refusal to review the appeals court ruling is not surprising. Certain factors, such as a split between appeals courts or the involvement of the U.S. government, that increase the likelihood of high court review were not present in the IBM cash balance plan litigation.

In 2004, a year after U.S. District Court Judge G. Patrick Murphy found the IBM plan age discriminatory, IBM and the plaintiffs agreed to a partial settlement. As part of that settlement, IBM agreed to pay $1.4 billion--in the form of enhanced benefits--if it lost its appeal of Judge Murphy's ruling.

While IBM has prevailed in the litigation, the cash balance plan age discrimination issue remains unsettled, with numerous district courts handing down conflicting rulings. More certainty isn't likely until several more appeals courts rule on the issue or the Supreme Court, in another case, decides to take up the issue.

A 2006 federal law does protect cash balance plans that meet certain basic standards from age discrimination suits. But that law--the Pension Protection Act--applies only to cash balance plans established after June 29, 2005.

Roughly 1,200 to 1,500 employers now sponsor cash balance plans, which are so named because benefits are expressed as a cash lump sum.

Not directly related to the litigation, IBM, like several other major U.S. employers, is phasing out its cash balance plan in favor of an enhanced 401(k) plan.