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Computer industry

IBM Ordered to Pay $314.3 Million to Settle Pension Equity Claims

Strategic Insights

— 2 min read

U.S. Judge G. Patrick Murphy of the Southern District of Illinois approved a settlement agreement on August 8, 2005, which requires IBM to provide additional pension benefits to current and former employees and their beneficiaries who alleged that IBM's Personal Pension Plan violated ERISA's anti-backloading and age discrimination provisions. The settlement comes after a lengthy court battle, with the class contending that the pension credit formula and cash balance formula violated ERISA's anti-backloading and age discrimination provisions. IBM will provide $314.3 million in settlement benefits, attorney fees, and costs to the class members, while the cash balance and always cash balance claims remain pending.

Key Takeaways:

  • The settlement requires IBM to pay $314.3 million to settle pension equity claims.
  • The settlement benefits will be distributed to current and former employees and their beneficiaries who were affected by IBM's Personal Pension Plan.
  • The pension credit formula and cash balance formula were found to have violated ERISA's anti-backloading and age discrimination provisions.
  • IBM will amend the plan to provide the settlement benefits, which include attorney fees and costs.
  • The cash balance and always cash balance claims remain pending, with IBM planning to appeal the final decision.
  • The settlement came four months after Judge Murphy gave final approval to a separate settlement in the case involving another subset of plan participants.
  • The plaintiffs were represented by Douglas R. Sprong and Steven A. Katz of Korein Tillery in St. Louis, Robert E Hill and John H. Evans of Hill & Robbins in Denver, and William K. Carr of Denver.
  • IBM was represented by Jeffrey Huvelle, Robert D. Wick, David H. Remes, and Eric R. Sonnenschein of Covington & Burling in Washington, D.C., and Frederick J. Hess of Lewis, Rice & Fingersh in Belleville, Ill.

Statistics:

  • $314.3 million: The amount of settlement benefits that IBM will provide to the class members.
  • $250 million: The amount of recovery required to trigger a 29% fee to the plaintiffs' attorneys.
  • 21%: The fee percentage for recovery exceeding $750 million up to $1.25 million.
  • 17%: The fee percentage for recovery exceeding $1.25 million.
  • 29%: The fee percentage for recovery not exceeding $250 million.
  • $0.5 billion: The total settlement amounts if the plaintiffs prevail on the cash balance and always cash balance claims.
  • $780 million: The proposed settlement amount on the cash balance claims if the plaintiffs prevail on appeal.
  • $620 million: The proposed settlement amount on the always cash balance claims if the plaintiffs prevail on appeal.

Sources:

  • Kathi Cooper, et al. v. IBM Personal Pension Plan et al., No. 99-829-GMPM, S.D. Ill.
  • Opinion available. * Document #54-050913-028Z. Motion for award of attorney fees available. Document #54-050913-029M.

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