Judge Patrick Murphy has issued a Memorandum and Order in the case of Cooper v. IBM Personal Pension Plan and IBM Corporation. The Memorandum and Order grants plaintiffs' motion to strike defendants' attempt to assert "an affirmative defense out of time, or, in the alternative, to compel discovery and for extension of time." IBM was arguing against the retroactive relief requested by plaintiffs based upon an argument that IBM was "blind-sided by what is characterized as a drastic change in the law." IBM argued that the Court's declaration that IBM's 1995 PCF and 1999 cash balance plan violated the age discrimination prohibitions of ERISA section 204(b)91)(H) was a "startling new development in pension law" so that the "Court should exercise its discretion and grant only prospective relief."
The Court says the following, in granting plaintiffs' motion to strike:
. . . IBM is by no means in the sympathetic position of the employer in Manhart. Defined benefit plans are highly regulated and strictly scrutinized relative to defined contribution plans. The prohibition against age discrimination existed long before the appearance of cash balance plans. Indeed, the voluminous record in this case unequivocally shows that cash balance plans were a "response" to the long standing restrictive proscriptions that are the woof [warp?] and weave of a defined benefit plan. If this Court is correct, then the class is entitled to retroactive relief. There has not been a change in the law. All that has changed is IBM's clever, but ineffectual, response to law that it finds too restrictive for its business model. . .
Today's Wall Street Journal reports: "IBM Workers Seek Payments In Cash-Balance Pension Suit." According to the article, the employees are asking that the company recalculate participants' benefits and make additional payments for accrued benefit increases going back to 1995. Back in July, Judge Murphy ruled in favor of employees in this case, Cooper et al. v. IBM et al., holding that the IBM cash balance plan violated ERISA, but "left unresolved the question of what the workers should receive in damages, and directed parties in the case to propose what relief the court should order to address the violations." The article notes that if "the court approves the payment request, retired workers would get remedial payments if earlier benefits amounted to less than they would have been under the new formula, and some current employees would see benefits bumped up, according to Doug Sprong, a benefits lawyer at Korein Tillery in Belleville, Ill., who represented the plaintiffs." IBM has yet to file its response to the proposed damages.
In a previous post here this week, I discussed the Sanders amendment which was passed by the House on Tuesday and added to the Fiscal 2004 Transportation-Treasury Appropriations Bill. The Amendment would prohibit any funds in the bill from being used to assist in overturning the IBM cash balance plan ruling handed down by the federal district court of Southern Illinois last summer. One comment made on the House floor in support of the amendment: " . . we should not mess with this. . . I do not think the Congress should be messing with this. I do not think the administration should be messing with this. I think this should be left to the courts." (The House member quoted also called the cash balance plan controversy an "explosive political issue.")
Ironically, in a CNBC interview with Seventh Circuit Judge Richard Posner entitled "Richard Posner discusses his position on law, pragmatism and democracy" on Monday, July 28th (prior to the issuance of the opinion in the Xerox case, Berger et al. v. Xerox, which was written by Judge Posner) Mario Bartiromo for CNBC asked Judge Posner about his views regarding employees suing pension funds over reduced payments. His response was that with all of the litigation and all of the "detailed regulations of pension funds," Congress might have to "step in at some point and change the rules." Interestingly enough, as mentioned here before, Judge Posner may end up being one of the judges who will decide the appeal in Cooper et al. v. IBM Personal Pension Plan et al. since the case will go to the Seventh Circuit on appeal.
Well, it seems that Congress would like the courts to unravel the mess, and perhaps the feeling of some judges is that Congress should unravel the mess . . .
Towers Perrin has called on Congress to unravel it in this press release: "Towers Perrin Calls for Legislative Clarity for Cash Balance Plans." Quote of Note:"It is in everyone's interest for there to be clarity with respect to the rules governing cash balance plans. For years, the private pension system in the U.S. has been a key pillar of retirement security for millions of Americans. Confusion around the appropriate guidelines for the design of cash balance plans can only undermine private pensions and threaten this security . . .We believe that Congress should act immediately to clarify the past and future status of these plans."
Today's edition of the Wall Street Journal contains this op-ed: "Not Your Father's Pension." The article discusses the recent cash balance plan decisions and expresses the concern that has been stated by so many that, with all of the litigation over cash balance plans, employers may decide to terminate these plans for less costly plans which will be a loss to those who want them.
Proskauer Rose has posted on their website a very useful review and analysis of the IBM and Xerox cash balance plan cases handed down last week: "Cash Balance Plans: The Debate Continues."
Seyfarth Shaw has posted these helpful items as well:
You can access this transcript of a CNBC interview with Seventh Circuit Judge Richard Posner entitled "Richard Posner discusses his position on law, pragmatism and democracy" at this link. (Thanks to Howard and JD2B for the link.) The interview occured Monday, July 28th, prior to the issuance of the opinion in the Xerox case, Berger et al. v. Xerox, which was written by Judge Posner. Mario Bartiromo for CNBC asked Judge Posner about how he views cases involving employees who are suing pension funds over reduced payments. You can read his response at the link above. Interestingly enough, as mentioned here before, Judge Posner may also be one of the judges who will decide the appeal in Cooper et al. v. IBM Personal Pension Plan et al. since that case will go to the Seventh Circuit as well.
Deloitte & Touche has published this detailed analysis of the IBM cash balance plan case, Cooper, et. v. The IBM Personal Pension Plan, et al.: IBM's Cash Balance and Pension Equity Formulas Violate ERISA, District Court Rules .
Also, Brian Tumulty for the Journal Washington bureau via the Poughkeepsie Journal reports on the IBM and Xerox cash balance plan cases: "Pension rulings put pressure on fed officials: IBM says it will appeal decision." The article provides an interesting view of how some plaintiffs' lawyers are viewing the decision and quotes Eva Cantarella, a Michigan-based lawyer who represents Georgia Pacific employees in a pension case pending before the 11th U.S. Circuit Court of Appeals in Atlanta, as saying:
[M]any employers have amended their plans to avoid the deficiencies that occurred in the IBM and Xerox plans. A lot of them have done a pretty good job or come so close that we wouldn't even bother bringing a suit. . .We have looked at over 40 plans and only felt compelled to file lawsuits in two.Apparently, Cantarella also represents employees challenging the legality of pension plan changes at another paper company, Bowater.
"Pension Rulings Roil Hundreds of Businesses: Companies Seek U.S. Role In Cash-Balance Plans.": Ellen E. Schultz for the Wall Street Journal reports today. The article discusses both the IBM and Xerox cash balance plan decisions handed down late last week. (You can access previous discussions about the IBM case here and a previous discussion about the Xerox case here. Also Benefitsblog has additional background information on the case as well.) With respect to IBM's plans to appeal, the article makes the point that employers will have reason to worry since the IBM appeal "will be heard in the Seventh Circuit, where it may be decided by one or more of the judges who just ruled against Xerox on appeal. These include Judge Posner, a highly regarded judge whose opinions have been cited by the Supreme Court, and a prolific writer of Erisa decisions that have had substantial impact."
Deepa Babington for Reuters has this: "IBM ruling turns promising pension move into headache."
Milliman USA has issued this Client Action Bulletin: Emerging Developments for Cash Balance Plans.
You can now access the IBM cash balance plan decision, Cooper et al. v. the IBM Personal Pension Plan and IBM Corporation online here at the website for the United States District Court for the Southern District of Illinois.
PR Newswire has this regarding the case: "Cash Balance Court Ruling Could Harm U.S. Pension System, According to Watson Wyattt." From the news release:
"This ruling has the potential to cause great harm to the U.S. private pension system," said Eric Lofgren, Global Director of the Benefit Consulting Group of Watson Wyatt Worldwide. "Moreover, two other district courts and the U.S. Treasury Department have previously reached the opposite conclusion concerning the validity of cash balance plans."
SmartMoney.com reports in an article by Arden Dale for the Dow Jones Newswires: "IBM Pension Ruling Stirs Debate." The article quotes J. Mark Iwry, a senior fellow at the Brookings Institution and the former benefits tax counsel at the Treasury Department as saying that it "is likely that the issue will ultimately be resolved neither by the appellate courts nor by the executive branch but by the Congress." The article also quotes William Sweetnam, benefits tax counsel at Treasury as saying that Judge Murphy's decision does not refer to the Treasury initiative. Mr. Sweetnam also commented that the agency would continue to go "forward with our reg writing process."
More on the IBM Cash Balance Plan decision handed down yesterday and reported on here yesterday:
Albert B. Crenshaw for the WashingtonPost.com reports: "Judge Finds Age Bias in IBM Pensions: Experts Say Ruling Could End Other Employers' 'Cash Balance' Plans."
The American Benefits Council has issued a statement on the case. James Klein, ABC's President, states:
"Conversions to cash balance plans are currently the one good thing going on in the defined benefit pension plan system because they demonstrate a commitment by employers to remain within the defined benefit world. Other companies are exiting the system altogether. A decision like this sends one more negative signal to employers that 'no good deed goes unpunished' since it penalizes employers trying to provide their workers with a pension that is funded by the employer and guaranteed by the government, as opposed to requiring workers to rely solely on employee-funded retirement alternatives."You can also access a copy of the case on their website as well.
PlanSponsor.com reports: "Murphy’s Law: IBM Loses Cash Balance Ruling." (One time registration required.)
The Associated Press in this article--"IBM loses lawsuit over pensions: Federal judge rules firm discriminated against older workers at MSNBC.com quotes Mr. Klein as saying that "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."
Chief United States District Judge G. Patrick Murphy for the Southern District of Illinois rendered an opinion in the IBM cash balance plan case, Cooper et al. vs. the IBM Personal Pension Plan and IBM Corporation. The following news sources are reporting on the case:
More to come on this . . . In the meantime, you can read previous posts about the case here.