The U.S. 7th Circuit Court of Appeals ruled that IBM’s (the world’s largest technology services company) 1999 pension plan changes, affecting the company’s roughly 140,000 employees in the United States, were “age-neutral.” The ruling reverses a lower court decision in 2003 that said the shift discriminated against older workers.
IBM in 1999 changed from a system resembling a so-called defined benefit plan, which guarantees predetermined payouts upon retirement regardless of the performance of the plan’s underlying investments, to a model akin to a defined contribution plan, which sets aside a percentage of employees’ pay during each pay period.
IBM pensioners in the class-action lawsuit had said the new plan unfairly benefited younger employees because they accrued benefits over more years than older employees. The three-member appellate panel, however, said such differences did not amount to age discrimination.
International Business Machines Corp., like other large U.S. corporations, in the late 1990s switched to a new type of pension plan. It has said it did so to reduce volatility in its pension liabilities, which could lead to fluctuations in earnings.