State Says Higher IRA Rates for Women Illegal

State Atty. Gen. John Van de Kamp said Tuesday that it is illegal to offer higher individual retirement account rates to women than to men, but a savings and loan making the offer said it was awaiting a federal agency’s legal advice.

Van de Kamp’s office did not announce any legal action against Continental Savings of America. But it urged the company to reconsider its 2-day-old offer.

The state’s civil rights law, which covers savings and loans as well as other business establishments, “forbids denying men the same treatment as women,” said a letter to Continental signed by Marian Johnston, deputy attorney general.

She said that, if Continental continues its offer, the attorney general’s office will contend that men who opened IRAs during the period of the offer are also entitled to the higher interest rates.

Continental, based in San Francisco, put its “working women’s IRA” into effect Monday, offering women 11.5% interest, compared to the standard 11% rate for men.

Ben Langella, the company’s director of branches on the San Francisco Peninsula, said Tuesday that Continental had received Van de Kamp’s letter but was continuing its program while awaiting advice from the Federal Home Loan Bank Board, which regulates federally chartered savings and loans.

“We are a law-abiding savings and loan and, if the Federal Home Loan Bank Board feels that we are doing something we should not be doing, we will immediately close it down,” Langella said. “We will do nothing (to cancel the program) until we hear from the Federal Home Loan Bank Board.”

He said that the FHLBB had sent Continental a letter from Washington but added that he did not know its contents. Board spokeswoman Ann McGlinn said Tuesday that she could not comment about the issue except to say that it had never arisen before.

Continental officials said only 60 women took out new IRAs on Monday. Langella said business picked up Tuesday morning, when 63 women opened accounts; he said 15 men also opened IRAs, “none of whom complained about women getting higher rates, because their rates were also high.”

IRAs let wage earners shield up to $2,000 a year from taxes until retirement, when they would presumably be taxed at a lower rate because their incomes had dropped.

In announcing the new accounts, Continental said it was trying to compensate women for the benefits they lose from typically entering the job market later than men. Langella has described the program as a way for women to “catch up.”

If the program is ruled illegal, Continental officials said, they will raise interest rates retroactively for men who took out IRAs during the same period.

The attorney general’s letter said Continental’s program violates a state law forbidding businesses from discriminating in offering “advantages . . . privileges or services.”

“Excluding men from receiving the higher interest rate is no different than imposing a minimum charge on purchases by one group of customers but not another . . . or refusing to negotiate a real estate contract with members of one race,” Johnston said.

She also said the program may violate the state constitutional requirement of equal protection of the laws.