International Business Machines Corp. fended off a U.S. Supreme Court appeal by workers seeking an additional $1 billion on claims that the company's pension plan discriminates against older employees.
The justices, without comment, left intact an appeals court decision that said IBM's "cash-balance" plan did not favor younger workers in violation of a federal pension law. IBM, the world's biggest computer-services provider, previously settled other aspects of the case for $320 million and had agreed to pay a total of $1.4 billion in the event it lost on the issues that were before the Supreme Court.
Yesterday's high court action ends a legal fight that raised questions about similar plans offered by hundreds of companies, covering as many as eight million workers. The IBM workers were seeking to revive a federal trial judge's 2003 decision in their favor.
The plan "indisputably provides lower benefits to older employees than to younger employees because of their age," the workers argued in court papers, filed in Washington. The workers, led by Kathi Cooper, were pressing a class-action case on behalf of 250,000 IBM employees.
Cash-balance plans are hybrids that combine elements of traditional employer-funded defined-benefit plans with the transferable personal accounts that are common to 401(k)-style defined-contribution plans. IBM was among the early converts to the cash-balance approach, putting its plan into effect in 1999.
Legislation signed into law last year by President Bush explicitly authorizes cash-balance plans in the future.
The workers said IBM's plan was discriminatory, violating the U.S. Employee Retirement Income Security Act, because younger workers accrued benefits at a higher rate than older workers.