Farmers Group Sued Over Pension Policies
The American Assn. of Retired Persons, in a lawsuit filed Tuesday in U.S. District Court in Los Angeles, accused the Farmers Group insurance company of illegally discriminating against its older workers through unfair pension and profit-sharing policies.
The suit, brought by the 23-million-member association and five current or past Farmers employees, seeks an end to the firm’s alleged practices of freezing the pension benefits of employees who continue to work past age 65 and of prohibiting older workers from participating in its profit-sharing plan.
“To me it’s blatant discrimination on the basis of age,” said Margaret J. Jashni, 66. “When I turned 65, they took my profit-sharing away--and that amounted to $6,000 to $7,000 a year.” Jashni, who has been with the Los Angeles-based insurer for 45 years and audits computer programs, said she has remained in the work force because “I think you die if you don’t--spiritually if not physically. I’m working because I like to work.”
The yearly profit-sharing payment can amount to 20% to 25% of a worker’s pay, and the policies affect about 110 employees, Jashni said. The issue is broader than Farmers Group, however.
Study’s Cponclusions
According to a 1985 study by the Mercer-Meidinger consulting firm, only about half of employers nationally provide added retirement benefits for workers who opt to stay on the job past age 65. The consultants also concluded that 213,000 older employees were forfeiting $450 million in yearly retirement benefits because employers froze their pensions.
The Mercer-Meidinger report was paid for by the AARP and later endorsed by the Senate Special Committee on Aging. The AARP contends that Farmers Group is violating state and federal age-discrimination laws as well as federal pension-rights legislation.
“Employees over 65 suffer a substantial cut in compensation as a result of this practice,” Cyril Brickfield, AARP executive director, said in a statement. “Many employees, working because their current pensions are insufficient to support retirement, will find the same inadequate pension at age 70.”
Farmers Group spokesman Jerry Clemans said the company was not prepared to comment specifically on the lawsuit Tuesday but maintained that “in substantially similar litigation filed in federal courts, our plans have been held in compliance in material regards with the law. This is also the opinion of our independent outside counsel.”
It was not immediately clear which litigation Clemans referred to. However, the current lawsuit is not the first time the firm’s practices have been challenged. Older employees brought grievances to the Equal Employment Opportunity Commission in 1984, 1985 and earlier this year, according to Tuesday’s complaint.
Both in 1984 and 1985, EEOC officials notified Farmers Group that it was violating age-discrimination protections by excluding older employees from profit-sharing. The civil rights panel has referred the matter to its lawyers in Washington, where it is pending.
Larger Controversy
The separate question of whether companies must continue to increase pension benefits for workers who stay on past routine retirement age has been a larger controversy in the federal government. Pension plans typically are designed so that the ultimate benefits increase along with an employee’s length of service. In 1979, however, the Labor Department ruled that companies could freeze pensions at normal retirement age, commonly 65, even for those who stayed on the job.
In a preliminary vote in March, 1985, the EEOC decided to amend that policy in favor of the older employees. But when movement on the change seemed to stall, the AARP brought suit against the civil rights panel. The EEOC now intends to forward its proposed new pension policy to the Office of Management and Budget in October, Deborah Graham, its director of communications, said.
