Supreme Court Declines to Review Cooper v. IBM and Appellate Court Rules That Cash Balance Plans Are Not Age-Discriminatory

The U.S. Supreme Court has declined to review the appellate court decision in Cooper v. IBM, thereby ending the litigation. The case — one of the most controversial pension decisions in many years — significantly influenced the Pension Protection Act of 2006, which clarified, prospectively, that hybrid defined benefit plans are not inherently age-discriminatory. At issue in Cooper v. IBM was whether cash balance plans inherently discriminate against older employees, and the Supreme Court’s decision lets stand the appellate court determination that such plans are not inherently age-discriminatory.

Echoing the Cooper v. IBM appellate ruling, on January 30, the Third Circuit Court of Appeals affirmed that PNC Financial Services’ cash balance plan is not inherently age-discriminatory under pre-PPA law.

While the Cooper case has certainly been the political touchstone for the cash balance controversy, and the outcome for PNC Financial is good news for cash balance plan sponsors, neither resolution signals the end of litigation — or controversy. So far, no appellate court has found cash balance plans to be inherently age-discriminatory, but other cases are pending in other circuits. If one of those courts finds cash balance plans guilty of age discrimination — thus creating a conflict in the federal appellate courts — the issue could work its way back to the Supreme Court.

February 2007