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5500 Preparer's Manual for 2012 Plan Years

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

CCH® PENSION — 05/18/10

Plan's differential treatment of older employees based on pension status, not age

A pension plan amendment that provided accelerated pension benefits to younger workers, but had no impact on the pension received by certain older workers, did not violate the Age Discrimination in Employment Act (ADEA), the U.S. Court of Appeals in St. Louis (CA-8) has ruled in Schultz v. Windstream Communications, Inc.. The variation in the benefits received stemmed from differences in pension status, not from differential treatment based on age.

Laid off employees

An employer decided to lay off several employees with at least 25 years of service. Under existing pension plan provisions, employees who were at least 50 years old, with 25 years of service, were entitled to a reduced pension, while employees with 30 years of service (regardless of age at retirement) were entitled to a full pension. The employer elected to amend the plan so that eight laid-off employees who just missed the eligibility cut-offs under the plan would be eligible for the first early-retirement benefit each would have qualified for if they had been allowed to work for another 18 months.

As a result, seven of the eight employees, who were somewhat younger than other laid-off employees, received unreduced pensions under the 30 years of service rule (all started work with the company before age 20). Other, older employees received reduced pensions under the pre-amendment terms of the plan.

No disparate treatment

The plan amendment did not violate the ADEA, the court explained. Under the Supreme Court's analysis in Kentucky Retirement Systems v. Equal Employment Opportunity Commission (128 S. Ct. 2361), an employee must show that differential treatment was actually motivated by age, and not pension status, in order to state a disparate treatment claim under the ADEA. In this case, just as in Kentucky Retirement Systems, the employer imputed years of service to the specified employees to make them eligible for benefits. Because the older workers were already eligible for early retirement when they were laid off, no such calculation was made for them.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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