ADEA Safe Harbor Unsafe

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In 1945, an employer and unions created a pension plan that provided equal pensions to all workers retiring at age 65 but capped the employer’s contributions. The result was that workers who joined the plan later in life, e.g. at age 40, had to pay a greater percentage of their salary into the plan than those who joined early, e.g. at age 20. Over time, the employer and unions added other service-based retirement options, but never equalized the payments for older and younger beginning workers. The EEOC brought suit, claiming that the pension plan facially violated the ADEA. The defendants argued that the ADEA permitted employers to give subsidies for early retirement benefits, i.e. giving greater pension subsidies to workers who started young and retired early. The court disagreed and found a violation of the ADEA, even though both groups of workers could retire after 20 years of service.

The result is counterintuitive. The employer (and unions) will now have to (a) allow older workers to receive lower pensions at age 65, (b) subsidize older workers’ retirement at age 65, or (c) restrict all workers’ retirement options. Alternatively, workers might have to state their retirement age when they start work so the plan may determine their contribution rate. Um, thanks, EEOC. EEOC v. Baltimore County, No. 13-1106 (4th Cir. Mar. 31, 2014).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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