Court Rules Insurer Illegally Froze Pensions

A federal appeals court ruled Tuesday that Farmers Group insurance companies illegally froze pensions and profit-sharing payments for workers over 65--restrictions imposed on 200,000 workers nationwide a decade ago, according to one study.

The 9th U.S. Circuit Court of Appeals upheld $1.76 million in damages for 30 present and past Farmers employees, finding that the company engaged in illegal age discrimination.

The U.S. Equal Employment Opportunity Commission has filed a similar suit on behalf of 100 to 125 Farmers employees, with potential damages of about $3.25 million, said Christopher Mackaronis, lawyer for the American Assn. of Retired Persons.

But aside from those workers and a limited number of others who may have been protected by separate lawsuits, the remainder of the 200,000 whose benefits were restricted in the early 1980s have no remedy as the statute of limitations has run out, Mackaronis said.

He said the study, commissioned by AARP and presented to Congress, found that older workers were losing $450 million to private employers because of practices similar to those used by Farmers. Congress changed the law, effective in 1988, to expressly prohibit those practices, Mackaronis said.

Farmers spokesman John Millen said the company had not yet seen the ruling. “We believe we were and are in compliance with the law,” he said.

The appeals court’s 3-0 ruling upheld a 1988 decision by U.S. District Judge Terry Hatter of Los Angeles, where the suit was filed.

The restrictions were imposed about the same time as a 1978 federal law that raised from 65 to 70 the age at which employers could force workers to retire or impose other discriminatory conditions. The law was changed in 1986 to forbid any absolute mandatory retirement age for most employees.

Farmers previously had required its employees to retire at 65. The company dropped that requirement in 1978 but also changed its pension policy to provide that workers who remained past 65 would not be credited for additional years of service or salary increases in determining final retirement benefits, which were normally based on length of employment and average salary.