Month: November 2003

This article–“Court Looks at Age Discrimination Issue“–gives an inside look at what went on today in oral arguments before the U.S. Supreme Court in the case of General Dynamics Land Systems Inc. v. Cline. The article opens with this:

Supreme Court justices with an average age of nearly 70 wrangled Wednesday over whether workers in their 40s can sue employers for offering better benefits to older colleagues, a type of reverse age discrimination.

The case involves 41- to 50-year-old workers from General Dynamics Land Systems Inc. plants in Ohio and Pennsylvania. The workers for the General Dynamics Corp. (GD) unit lost post-retirement health benefits under a new labor contract negotiated between the company and the United Auto Workers labor union. Under the contract, workers who were over 50 were allowed to keep their health benefits. The Equal Employment Opportunity Commission and the 6th U.S. Circuit Court of Appeals have said the health benefits change violates the age discrimination law.

The article indicates that the Supreme Court justices seemed “skeptical of allowing the reverse discrimination lawsuits.” According to the article, Justice Scalia warned that if the midcareer workers win in this appeal, a law that was meant to aid older workers could end up harming them in what Justice Scalia termed “a very strange consequence of this legislation.'” The article further notes:

“Mark Biggerman, the lawyer for the workers who brought the case, said companies cannot single out gray-haired workers for better treatment than those with less gray hair. That prompted the dark-haired [Justice] Scalia, 67, to joke that senior citizens do not necessarily have gray hair.”

The Wall Street Journal also reports: “High Court Doubts Younger Workers In Discrimination Suit.”

From the WSJ article:

“Congress’ intent here was to make age a neutral factor,” said Biggerman, who said the law applies “whenever one individual loses out because of age.” Justice Sandra Day O’Connor curtly replied, “Do you think Congress really intended such a result?”

You can access a previous post discussing some of the benefits ramifications of the case here.

UPDATE 11/13: More articles:

• Law.com: “High Court Hears Age Discrimination Arguments”
• LA Times: “Supreme Court Debates Age Discrimination Issue”
• Boston Globe: “Case tests the limits of age-bias law: High court weighs defense contractor’s benefits for workers”
• New York Times: “Justices Mull Twist in Law on Age Bias”

This article from the Wall Street Journal today–“Pension Agency Warns Against Corporate Relief“–states that “Congress is likely to pass a broad relief measure, in the form of a more generous interest-rate formula for figuring basic contribution requirements” in order to provide some relief for the great number of pension plans which are underfunded. However, the article goes on to state that some companies are seeking more than that–i.e. that some companies want relief from “steep catch-up contribution requirements, under a special set of rules enacted in 1987 to protect workers and the government’s pension safety-net program run by the PBGC.” The article states that airlines “are putting intense pressure on Congress to grant struggling industries temporary relief from the catch-up rules.”

The Bush administration is on record as being opposed to this. However, the article notes that “influential congressional leaders are widely believed to be pushing relief.” The worry is that not providing this relief will dump more plans into the PBGC. The PBGC has issued a report bolstering the White House position, that estimates that eliminating catch-up contributions for seriously underfunded plans would increase its overall unfunded pension liability by $40 billion over the next three years.

This article from the New York Times highlights some of the issues involved: “Failed Pensions: A Painful Lesson in Assumptions.”

At first glance, this seems like “not putting your money where your mouth is.” At second glance, you realize it is more likely that it involves ERISA plan fiduciaries of a retirement plan seeking to act solely in the interests of plan participants and beneficiaries even though such action goes against what is good for the company that sponsors the retirement plan. [ERISA section 404(a)(1)]

The American Benefits Council states on their website that “Congressional appropriations conferees are expected to meet no later than November 12 to reconcile the House and Senate versions of the Treasury/Transportation appropriations bill (H.R. 2989) containing harmful cash balance plan provisions.” They also state that “[a]s part of the Council’s continuing effort to strip these provisions from the final conference report” they have developed a draft letter for plan sponsors to complete and fax to the appropriations conferees and congressional leadership staff. You can access this information on their website.

At the ALI-ABA “Annual Fall Employee Benefits Law and Practice Update” (discussed in previous posts here and here) Bill Sweetnam, Benefits Tax Counsel for the Department of Treasury, encouraged practitioners to write their Congressmen regarding cash balance plans, since he said that there seems to have been very little support for cash balance plans expressed on the House or the Senate floor when the Sanders and the Harkin’s measures were passed.

The American Benefits Council also has a legal opinion on cash balance plans prepared by Richard Epstein which you can access here. Highlights of the opinion are as follows:

(1) “In the House floor debate, the proponents of Section 742 [Sanders Amendment] portrayed CBF pension plans as a witch’s brew of age discrimination, breach of contract, and theft of employe pension assets, which they claimed the Cooper decision remedies. Their portrayal of CBF plans and Cooper does not withstand scrutiny. . .”

(2) “The apparent aim of this provision is to block the Treasury Department from issuing further regulations on ERISA section 204(b)(1)(H) or from participating in the Cooper litigation or other litigation insofar as it wishes to register its disagreement with Cooper. Even the requirement that the Department be silent on the entire matter would be deeply troublesome. Even more troublesome is that the agency may be allowed to speak on one side of the issue but not the other (i.e. it may not assist in overturning, but could assist in upholding Cooper) . . . . It is a generally accepted principle of constitutional law that the Congress may not through its legislation trample on the prerogatives of the Executive Branch in the discharge of its duty to see that the laws are faithfully executed. . . .”

(3) “The IBM plan and all other CBF plans satisfy ERISA section 204(b)(1)(H) by using the same rate of interest throughout the plan. The district court, however, ruled that the rate of benefit accrual referred to in that provision is the same as the employee’s total benefit accrued, thereby requiring the same dollar amount of interest for the 24- and 64-year old employees in the above example. The district court, in effect, confused velocity with distance. It is as though the court decreed that two people, one 24 and the other 64, running at the same speed, will be deemed to have run at the same speed only if both cover the same distance by the time each reaches age 65, 40 years apart. That, however, is a conceptual muddle and a physical impossibility. Congress clearly did not mandate such a nonsensical result.”

(4) “The result in Cooper cannot be justified on a public policy basis to avoid discrimination against older employees. To the contrary, it effectively mandates reverse age-discrimination, on an unprecedented scale.”

(“CBF” stands for “cash balance formula.”)

The irony of all of this is that tomorrow will be a big day for deciding issues pertaining to reverse age-discrimination: Congressional appropriations conferees will be deciding the fate of the Sanders and Harkin’s measures while at the same time the U.S. Supreme Court will hear oral arguments in the General Dynamics case to decide the fate of reverse age-discrimination claims.

The following were “best” picks in the Encore edition of the Wall Street Journal today:

• Financial worksheet to plan your retirement: The T. Rowe Price Retirement Income Calculator. “The calculator helps people who are approaching retirement, or who are already retired, figure out whether their monthly income goals are realistic. To do so, it uses “Monte Carlo” simulations — a type of probability analysis that generates hundreds of computer scenarios of what might happen to your money over any given period, and then uses that information to determine your portfolio’s probability of success. You have to supply your starting retirement age, retirement length, marital status, retirement assets, monthly income goal, and investment mix of stocks, bonds and short-term securities. The calculator does the rest.”

• Information about Social Security: Ask Mary Jane. The National Committee to Preserve Social Security and Medicare, a Washington advocacy group, has this spot on its Web site where you can e-mail a question about Social Security to Mary Jane Yarrington, “a longtime congressional caseworker who joined the group in 1986 as a senior policy analyst and has written her question-and-answer column for 14 years.” There is a list of Q & A’s where she has already answered many questions that can arise.

• Information about IRAs: IRAhelp.com. Ed Slott, a certified public accountant, hosts this website.

The “Best” Advice: Free information is great, but it is always best to get the advice of a qualified professional so that he or she can address the facts and circumstances of your particular situation.

The U.S. Supreme Court is scheduled to hear oral arguments in a reverse age-discrimination case on Wednesday. The following article highlights the challenging issues which could arise in the retirement plan arena if the court rules in favor of the younger workers: “High court to hear younger employees’ bias case.” Ann Reesman, an attorney for the U.S. Chamber of Commerce who filed a friend-of-court brief supporting the employer in the case, General Dynamics, said “any decision in favor of the younger workers would threaten hundreds of retirement plans that skew benefits toward older employees.” The article notes that such a ruling could threaten corporate practices of offering early retirement, special severance packages to workers based on age, “age-weighted” retirement plans, and even “catch-up” contributions.

Law.com‘s article–“Now for Law Firms, Too: Competing for Business Online“–has some very interesting information, but the most surprising, in my opinion, is this statement:

Other GE divisions have sought to reduce legal costs by outsourcing work to lawyers in India.

I have heard of the outsourcing to India in the computer industry and even in the financial services industry, but this is the first I have heard of the outsourcing to India occurring in the legal field. If anyone else has any good information or links on this, I would love to read them and would pass them along to readers.

UPDATE: I should have known that my friend, Carolyn Elefante (solo and small firm practice guru and creator of MyShingle.com) would have the scoop on this issue. You can access previous posts from her site about legal outsourcing to India here and here.