Big Firms Hit on Pension Changes

By Robert A. Rosenblatt

Older workers at Bell Atlantic, AT&T, Duke Energy and other big companies have followed angry IBM personnel, who took action against the company last spring, in flooding the Equal Employment Opportunity Commission (eeoc) with complaints charging their employers engaged in age discrimination by switching to a new form of pension plan that favors younger workers and penalizes older ones.

The eeoc has received "slightly over 100" charges of discrimination, chairwoman Ida Castro said in an interview. The federal agency, showing a sympathetic view toward the workers' grievances, has waived its strict enforcement of a policy rule that individuals must file a discrimination complaint with the agency within six months of the event.

These are not the "who-punched-who kind of questions," Castro said. "We don't know when people were told or when they found out" about the changes in the pensions, she said. Castro would not discuss charges against individual companies, citing the eeoc confidentiality rules.

eeoc has accepted complaints filed by workers at Duke Energy, where a new pension plan was put in place in 1997 by the Charlotte, N.C.­based electric power company. In Philadelphia, some of the Bell Atlantic workers who were placed in a new pension plan as far back as 1996 have recently filed charges with the eeoc, which enforces federal laws against discrimination on the basis of age. Workers 40 or older are protected.

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ANGER ON THE WEB

In addition to employees who have filed with the eeoc, many others are voicing their anger on the Internet, often using websites or chat rooms organized with the help of computer experts from the ranks of the IBM protestors. The sites, all launched since last fall, have recorded thousands of visitors with messages from people with such screen names as "Angry Spouse," "Pension Victim," "Ripped Off," and "I've Been Mugged." Internet forums have been established to discuss pension issues at SmithKline Beecham, SBC Communications (parent of Pacific Bell, Southwestern Bell and Ameritech), and other large companies, in addition to those for Duke, IBM and Bell Atlantic. (For links to these sites, visit www.cash pensions.org.)

The common element in the wave of protests is an anguished sense of betrayal from veteran workers who feel their companies have been disloyal by changing the pension expectations late in the workers' careers. They feel they can't go anywhere else to work. "We are what you would call career-locked people," said Janice Winston, a 26-year Bell Atlantic veteran, who calculates that she will lose $169,000 in lifetime benefits under her firm's revised pension plan. "I have been loyal to the company. If it fails, I fail. I don't want to bad-mouth the company, but wrong is wrong," she said, adding that she reluctantly went to the eeoc.

Workers might not realize they could be suffering discrimination "until they actually retire or when they hear about the IBM workers making a fuss," said Laurie McCain, a staff attorney for the litigation unit of aarp (formerly the American Association of Retired Persons), Washington, D.C. She noted that many companies have not explained what is happening. "We believe companies should operate in complete honesty, and tell workers there may be a period when they make no progress at all in building up their pensions," she said. Firms are required to notify workers when they change a pension plan, but the complex technical nature of pension calculations often makes the explanations incomprehensible to most people.

In recent years, more than 300 companies have switched to cash-balance pensions, in which the firm makes annual contributions and the money builds up at a specified interest rate. Companies argue that cash-balance plans are needed to attract young workers in an era of mobility. They can leave the company and take the cash out of the account, rather than have it remain untouched until they turn 65.

Older workers, by contrast, enjoy the benefits of the traditional pension, which has its rapid build-up in the last 10 years of a career. Many of the affected workers had expected to retire in their 50s with full pension benefits after a 30-year career. Instead, the switch to a cash-balance program often freezes the build-up of benefits for these older workers. They may never catch up to what they would have gotten under the old plan.

IBM first imposed its new cash balance plan in May, declaring that workers 50 and older, those within five years of retirement, could stay in the old plan. After a round of protests, the company offered a choice between the new and the old plan to employees ages 40­49 with at least 10 years at the company.

IBM workers created a website and developed ways to calculate the impact of changes on an employee after the corporation stopped providing individual estimates. They held press conferences, lobbied in Washington and prompted Congressional hearings. The publicity generated by the IBM controversy caused an upsurge of interest among workers who had paid little attention when their own employers changed plans.

Meanwhile, the controversy prompted the Internal Revenue Service (IRS) to freeze any new approvals of cash-balance plans. The IRS has jurisdiction over the finances of such plans because company contributions are tax deductible.

The eeoc, in addition to handling individual complaints, also is studying whether to issue a general policy statement giving guidance to employers on the issue, Castro said.

Robert A. Rosenblatt, who co-chairs the Aging Today Editorial Board, is a Washington correspondent for the Los Angeles Times.

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