AT&T Cleared in Cash Balance Suit

A federal judge in New Jersey has ruled that AT&T did not violate the Employee Retirement Income Security Act (ERISA) and the Age Discrimination in Employment Act (ADEA) with its cash balance plan.

The decision by U.S. District Judge Stanley R. Chesler of the U.S. District Court for the District of New Jersey ends a 12-year court fight over allegations the company’s operation of the pension program discriminated against older workers and violated ERISA’s anti-backloading rule. Chesler also cleared the communications company of violating U.S. Treasury Department regulations that require “subsidized early retirement benefits” to be the actuarial equivalent of the subsidized benefit.

Regarding the ADEA claims, Chesler held that AT&T did not violate ADEA Sections 623(a) and 626(b). The suit alleged the plan used a “greater of” transition that “discriminates on the basis of age by providing that older workers who are eligible for early retirement earn no additional benefits under the cash balance plan in the current year, the near-term and the long-term.”

The court found that AT&T complied with ADEA Section 4(i) that a defined benefit plan will comply with the ADEA as long as the plan does not reduce or cease benefit accruals because of age.

On the charge that the plan violated ERISA Section 204(b)(1)(B)‘s anti-backloading rule, Chesler ruled that the plaintiffs would needed to demonstrate that the annual rate at which a participant can accrue benefits in a particular year is more than 133 1/3% of any prior year’s annual rate. The court said the employees could not make this showing.

A number of the age-discrimination claims in the suit were dismissed in earlier rulings.

The case is Engers v. AT&T Inc., D.N.J., No. 98-3660 (SRC).