High court rejects IBM pension case

The Supreme Court on Tuesday refused to consider an appeal brought by a group of IBM Corp. employees who accused the company of age discrimination when it altered its pension plan. The lawsuit could have cost the company $1.4 billion.

Kathi Cooper, a former IBM employee, served as the lead plaintiff in a class-action suit brought on behalf of 250,000 current and former IBM workers.

The suit argued that IBM’s “cash-balance” pension plan was discriminatory because it allowed younger workers to accrue benefits in the plan at a faster rate than older workers.

Armonk, N.Y.-based IBM switched to a cash-balance plan in 1999. Such plans provide workers with individual accounts that can be cashed out when they leave the company and are intended to appeal to younger workers who are more likely to switch jobs.

The IBM case has been closely watched, as about 1,500 companies have adopted cash-balance plans. The company earlier agreed to settle the case for $1.4 billion if it lost in the courts.

But the U.S. 7th Circuit Court of Appeals, based in Chicago, sided with IBM in August, ruling that the “terms of IBM’s plan are age-neutral.”

In addition, Congress passed legislation, also in August, that clarified that cash-balance plans complied with the age discrimination provisions of ERISA, the Employee Retirement Income Security Act.

Cooper’s lawyers argued in court papers that the legislation applied only to future cash-balance plans and did not affect existing cases such as IBM’s.

Shares of IBM rose $1.48, or 1.5%, to $100.82.