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Cash-balance pension plans don’t violate ERISA rules

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in Discrimination and Harassment,Employee Benefits Program,Human Resources

A cash-balance pension plan is one in which the employer contributes a set amount each month on behalf of an employee. The employee eventually collects pension benefits based on the cash balance in his or her account. Some employees have claimed that such plans favor younger employees and therefore are illegal.

Recent case: Some employees of Southern California Gas Co. alleged that their cash-balance plan violates the anti-age discrimination provisions of the Employee Retirement Income Security Act (ERISA) because a younger participant who performs the same job and earns the same salary as an older participant will always have a greater accrued benefit at retirement age.

The 9th Circuit Court of Appeals disagreed and dismissed their lawsuit. (Hurlic v. Southern California Gas Co., No. 06-55599, 9th Cir., 2008)

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