IBM May Try to Settle Lawsuit Over Pensions

IBM Corp. said Friday that it was in talks to settle a mammoth lawsuit alleging a pension plan adopted by the company in the 1990s discriminated against 140,000 older workers.

IBM agreed this week to settle a small part of the lawsuit, involving just a few thousand workers, in a case that has been closely watched by scores of large companies with similar pension plans.

After a judge ruled in favor of the workers in February, the company said an overall judgment involving its cash-balance pension plan could cost more than $6.5 billion. That would be the largest pension judgment in history.

The Illinois judge in charge of the case had been expected to announce damages soon. But IBM on Friday asked him to postpone the decision on payments to other employees, saying the company is “in discussions regarding a possible resolution of some of the remedies, issues and/or claims in the suit.” The judge agreed to a short delay.

The class-action lawsuit challenges IBM’s cash-balance pension plan.

Traditional pension plans reward workers for sticking with a company over time, increasing their retirement benefits at a much faster rate during their last years of service. Cash-balance plans are computed using a formula that awards benefits at a steady rate through a worker’s tenure.

Opponents say cash-balance plans instituted when experienced workers are already nearing retirement age deprive employees of anticipated gains and leave them without enough working years to accrue cash-balance benefits equal to what they would have received had the company kept a traditional pension.

The partial settlement, disclosed in court filings Wednesday, involves employees who worked for the company for less than five years -- a very small portion of the 140,000 workers affected by the lawsuit filed in federal court in Illinois.

IBM argued that it shouldn’t be forced to make retroactive payments because it could not have foreseen that the judge, G. Patrick Murphy, would declare the cash-balance plan illegal.

In his Feb. 12 ruling, however, Murphy wrote that IBM wasn’t justified in claiming it was blindsided.

“The prohibition against age discrimination existed long before the appearance of cash-balance plans,” he wrote.

Since then, both sides have been waiting for him to announce the size of IBM’s payout. The company has said it planned to appeal.

An IBM spokeswoman and lawyers for both IBM and the plaintiffs did not return calls seeking comment.