IBM Corp., Armonk, N.Y., today announced a partial settlement of a federal class-action age discrimination lawsuit filed against the firm and its pension plan for the 1995 conversion to a pension equity plan, and the subsequent conversion to a cash-balance plan nearly four years ago. The company will give former employees an additional pension benefit of $320 million, taking it as a one-time charge against its third-quarter earnings. The claims the company agreed to settle today relate to its pension equity plan formula. IBM will appeal the two remaining claims, which relate to its cash balance plan formula. The company agreed to pay a maximum of $1.4 billion to the plaintiffs, resulting in a total payout by the company of $1.7 billion to its former employees, if it does not win its appeal to the 7th U.S. Circuit Court of Appeals. The original suit was filed in U.S. District Court in southern Illinois.
In a conference call today, Jesse Green Jr., IBM vice president and treasurer, said the $42 billion pension fund is almost fully funded, and today's settlement does not require an additional cash contribution. However, IBM may need to make additional contributions to its pension plan if it loses its appeal, Mr. Green said. "The company disagrees with the court's interpretation of the age discrimination provisions of ERISA and believes that the court's interpretation is not supported by existing judicial, regulatory or legislative authority," he said.
