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Cash balance plans not age discriminatory: Judge

Posted On: Feb. 26, 2007 12:00 AM CST

ST. LOUIS--Cash balance pension plans do not discriminate against older employees, a federal judge has ruled.

Judge E. Richard Webber of the U. S. District Court of the Eastern District of Missouri last week dismissed age discrimination charges against U.S. Bancorp of Minneapolis, noting that the benefit and interest credits provided to plan participants did not discriminate on the basis of age.

Judge Webber rejected plaintiffs' argument that the plans are age discriminatory because the same benefit provided to an older employee as a younger employee will result in a smaller retirement annuity to an older employee.

That result, Judge Webber ruled, is not because of age discrimination, but occurs because of the "time value of money, a characteristic correlated with age, but not age itself."

The cash balance plan involved in the litigation was set up in 1998 by Mercantile Bank of St. Louis, which was later acquired by Firstar Corp. Firstar later bought the majority of stock of U.S. Bancorp, with U.S. Bancorp being the surviving entity of the merger.

The ruling is the first since a second circuit court--the 3rd U.S. Circuit Court of Appeals--ruled last month that the plans are not age discriminatory. The 7th U.S. Circuit Court of Appeals, in a widely publicized decision, ruled last year that cash balance plans in general and IBM Corp.'s in particular, are not age discriminatory.

Of the seven lower court rulings since the IBM decision, five have rejected age discrimination charges, while two courts have said the plans violate age discrimination law.