NRLN Hails Judges Ruling
In IBM Cash-Balance Case
Implications of Courts Pension Ruling Are Enormous
Says National Retiree Legislative Network President
(WASHINGTON, Feb. 20, 2004) An official of the National Retiree Legislative Network (NRLN) applauded a federal court ruling in favor of IBM employees and retirees who were unfairly penalized after the technology giant converted to a new pension plan in 1999. The NRLN is a non-partisan, grassroots coalition of retiree organizations dedicated to protecting the pension and health benefits of their members.
In its decision, the court ruled that 140,000 current and former IBM employees are entitled retroactive payments for retirement benefits they lost when IBM converted to a cash-balance plan. This finding echoes the NRLNs position that cash-balance retirement plans are inherently discriminatory against older workers under pension law, said NRLN president A.J. Jim Norby.
Unlike traditional pension plans that guarantee a set monthly payment to retirees, cash-balance accounts are similar to 401 (k) plans. When IBM converted from its traditional pension plan to a cash-balance plan, experienced employees who were near retirement age saw their benefits drop as much as 50 percent.
Last year, Norby testified against Internal Revenue Service (IRS) regulations that would unreasonably legitimize cash-balance plans that fail to provide older workers with the opportunity to continue to accrue benefits under their prior traditional defined benefit plans.
The federal courts decision sends a clear message to IRS administrators that cash-balance retirement plans discriminate against older, long-serving employees. It also could have enormous implications for other cash-balance plans that were forced on employees by major employers over the past decade, Norby said.
In a recent letter to members of Congress, Norby addressed the erosion of retiree benefits, citing reports carried by The New York Times and ABC Evening News. These reports focused on the ruthlessness that corporations are exhibiting in breaking their promises to retirees. Today, employers are unleashing a new wave of cutbacks in company-paid health benefits for retirees, with a growing number of companies allowing retirees to retain coverage only if they are willing to bear the cost themselves.
The current situation underscores the need to pass the Retiree Health Benefits Protection Act (HR 1322) endorsed by NRLN, and for changes in the Medicare Prescription Drug Plan to prevent employers from eliminating currently provided benefits, Norby added.
Based in Washington, D.C., NRLN represents nearly two million retirees from Association of US WEST Retirees, Association of BellTel Retirees, Prudential Retirees, Monsanto Retirees, Raytheon Retirees, along with groups from Boeing, GE, GM, IBM, Johns Manville, Lucent Retirees, Portland Electric (Enron), SNET, Western Union and others. .