In separate cases involving Verizon Communications Inc. and Equitable Life Assurance Society—now known as AXA Equitable Life Insurance Co.—the 2nd U.S. Circuit Court of Appeals asserted that the companies’ cash balance plans did not discriminate against older workers.
Writing for the court, Circuit Judge Robert A. Katzmann said even before the June 29, 2005, effective date of a Pension Protection Act (PPA) provision blessing cash balance plans, they were still permissible under the Employee Retirement Income Security Act (ERISA). Katzmann, noting his court becomes the fourth federal appellate circuit to rule against the challenges, upheld lower court rulings in favor of the employers.
“We write today to clarify that we share the view of cash balance plans put forth by the Third, Sixth, and Seventh Circuits: Even prior to the PPA, cash balance plans could survive scrutiny under ERISA,” Katzmann said.
As have other courts issuing cash balance rulings, the 2nd Circuit said the reason benefits provided to younger employees are worth more than the same benefits provided to older employees is the passage of time and compound interest, and such a difference does not constitute age discrimination.