Monday, February 05, 2007

Pension "discrimation." I'm blogging on a Third Circuit case, which deals with an issue that even the Third Circuit acknowledges will be addressed by the Second Circuit soon. The case, Register v. PNC Financial Services, deals with a claim that PNC's cash balance plan, a form of defined benefit claim, violates the anti-discriminatory provision of ERISA. The plaintiffs assert that the plan is discriminatory because benefits accrue at a slower rate as the worker gets older. The Third Circuit notes that this is because benefits accrued at an earlier age have a longer time to accrue interest between the time that they are earned and retirement than those accrued later. For example, if a worker worked for PNC between ages 25 and 45, the output of his benefit plan would be greater than that of a worker who worked between ages 45 and 65, with retirement age at 65.

Lots of companies now have cash balance plan for their employees' retirements, so this is an issue of great importance. If such plans are found to violate the anti-discrimination provision of ERISA, all such plans would be invalid.

The Seventh Circuit has previously rejected a claim similar to that of the plaintiffs, and their is a split among the district courts, with the majority of the district courts from the Second Circuit taking a view opposite to that of the Seventh Circuit. (One Southern District of New York case, however, is in accord with the Seventh Circuit.)

The Third Circuit agreed with the Seventh Circuit in what I consider to be a well-reasoned opinion. You can read the decision here. In footnote 10 of the opinion, the Courts states: "It seems to us to be inevitable that the Court of Appeals for the Second Circuit ultimately will decide the discrimination issue for that circuit." And indeed, the district court cases decided in the Second Circuit were all decided in 2006. So when the Second Circuit does come down with a decision in one of them, I will let you know.

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