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Judge Changes Pension Plans of Older Retirees So They Get Less

By       Message Sherwood Ross     Permalink
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Conservative judges seem not to object when companies “dishonestly screw millions of older workers” out of pension monies, a prominent legal reformer says.

The conservative Judge Frank Easterbrook of the Seventh Circuit did just that in the IBM pension case by “changing the nature of (employees’) pension plans” from “traditional types” to “cash balance” plans, writes Lawrence Velvel, dean of the Massachusetts School of Law at Andover in his latest book, “An Enemy of the People(Doukathsan Press).”

“The switch in plans approved by Easterbrook can cost older workers, who may have been at a company for decades, 20 to 50 percent of the pension they expected to receive and had sometimes worked for decades to get,” Velvel writes. Even the conservative Wall Street Journal confirmed older workers “can end up with pensions that are 20% to 50% lower.”

Velvel said Easterbrook’s opinion “allows huge companies all over the country---hundreds of them---and smaller ones too, to dishonestly screw millions of older workers out of major portions of the pensions they expected to have when they retired.”

“It is not enough, you see, that people who worked for a company for 20 or 30 years suddenly found themselves out of a job,” Velvel commented. “Nor is it enough that companies’ pension plans for workers weren’t funded, or were funded with company stock that declined terribly in value, so that, while top executives escaped with tens of millions in golden parachutes or funded pensions, or stock options worth millions for bringing companies out of bankruptcy, ordinary workers found themselves with little or nothing by way of pensions when companies fell on hard times or went bust.”

Basically, Velvel says, Easterbrook wrote a complex opinion “purporting to prove that the change from a traditional to a form of cash balance plan did not constitute age discrimination against older workers,” but instead “is age-neutral” even through older workers were getting screwed in ways that would never occur to younger workers who are far closer to their starting dates than their ending dates.”

“To ostensibly prove age-neutrality,” Velvel goes on to say, Easterbrok “sought to display intellectual pyrotechnics through complicated, often mathematical, discussions of the time value of money, imputed credits, interest rates, defined-benefit plans versus defined-contribution plans, benefit accruals, and other true arcana.”

 Easterbrook dismissed the arguments against his switch made by the older workers, stating, “(all) of these propositions (may be) correct, and (all) of them are irrelevant.”

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Velvel writes, The only relevant points are two that Easterbrook (and two concurring judges) chose to ignore, chose not even to mention or discuss: (1), the change in pension plans by IBM and hundreds of other companies was grossly unfair to older workers, who had no option to stay with the old plan and consequently lost a major share of pensions they had worked for for years” and (2), it was sheer dishonesty to promise people certain pension benefits, to use the promise to obtain their work for decades, and to then welsh on the promise and cheat people.”

 Velvel also raises the issue of whether it is not age discrimination to allow younger workers to retain their benefits while stripping older workers of those benefits. The law school dean recalled in his essay, “The Seventh Circuit’s Abominable Decision In The IBM Pension Plan Case,” that former Chief Justice Earl Warren frequently asked the question of his decisions, “Is it fair?”

 By contrast, he writes, “You don’t think Easterbrook asked whether it was fair, do you? One would never expect a life tenured, amply pensioned, deeply-conservative, elitist federal judge to ask that question, would one?”

 “You don’t think he even asked if it was honest for companies to promise workers a given level of pension, for which the workers then worked for years, for decades, and to then withdraw the promise when the workers got older and could not start over again, do you? Of course not.”

Dean Velvel is a cofounder of the Massachusetts School of Law at Andover, a law school that provides a quality, affordable education for minorities, students from low- and middle-income backgrounds, and immigrants. He has been honored for his work by The National Law Journal and described by The National Jurist as a leading reformer in the field of legal education.  #

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Sherwood Ross worked as a reporter for the Chicago Daily News and contributed a regular "Workplace" column for Reuters. He has contributed to national magazines and hosted a talk show on WOL, Washington, D.C. In the Sixties he was active as public (more...)

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