A U.S. District Court in Indianapolis has found that the cash balance plan of Onan Corp., a subsidiary of the Cummins Engine Co. Inc., does not violate age discrimination laws. In its Sept. 29 ruling, the U.S. District Court for the Southern District of Indiana dismissed charges by Steve Seidlitz and other Onan participants in a class-action lawsuit that the companys cash balance plan violated the Age Discrimination in Employment Act and federal pension law. The plaintiffs had charged that the companys cash balance plan violates both laws because it reduces the rate at which participants accrue benefits as they get older, and because some benefits are payable only as annuities and not lump sums. They also charged that the plan breaches federal pension law because the accrual of benefits is excessively backloaded.
The court ruled that the specific prohibitions on accruals declining with age "do not apply to all employees who have not yet reached normal retirement age. Moreover, the court ruled that even if the pension age discrimination provisions do apply to all participants, "the undisputed facts show that the rate of benefit accrual does not depend on age. Further, the court ruled that the Onan pension plan does not discriminate even if it fails to pay some benefits as lump sums.
William K. Carr, a lawyer representing the plaintiffs, did not return calls by press time on whether he plans to appeal the decision.