IBM said on Thursday it would appeal a federal court ruling that it must compensate workers and retirees who were judged to have lost out when it abandoned its traditional pension plan, a ruling that could cost IBM billions of dollars.
In the ruling released on Wednesday, U.S. District Judge G. Patrick Murphy said 140,000 IBM employees and retirees were entitled to compensation for retirement benefits they lost when IBM shifted to a cash-balance plan from its traditional pension.
International Business Machines Corp. and lawyers for the plaintiffs will meet in a hearing on Monday to begin discussions about how to determine the prospective payments to the employees and retirees who were affected by the changes in the pension funds.
The amount of that potential compensation is still undecided, IBM spokesman Kendra Collins said. But in court documents filed in December, IBM had said that based on one scenario proposed by the plaintiffs, it could be forced to pay up to $6 billion.
“We will appeal,” Collins said, declining to put a timeline on how long the discussions about determining the remedies would take.
Armonk, New York-based IBM, the world’s largest computer company, disputes the initial court ruling in July last year that it had improperly changed the terms of its pension fund in a way that discriminated against older workers and retirees.
The case is being watched because of its potential implications for other major corporations where employees have complained that pension and health care benefits were reduced in corporate cost-cutting moves.
Companies in addition to IBM that moved to “cash-balance” pension plans in the 1990s include Eastman Kodak Co. and Electronic Data Systems Corp.
“If certain of the aspects are ruled and upheld to be discriminatory in nature, or have the effect of discrimination, then obviously plans will have to be rewritten to work around that and to eliminate the problem,” said Howard Silverblatt, market equity analyst at Standard & Poor’s.
Since this is just one step in what will be a protracted legal battle, the process will continue to hold up some companies trying to decide what type of pension accounts can be offered, Silverblatt said.
The case in question was prompted when Kathi Cooper, an IBM employee, sued the company in federal court in Illinois, saying that IBM’s pension plan violated age discrimination provisions of the Employee Retirement Income Security Act.
Cooper said that when IBM appeals the case, it will move to a Chicago court, where she will continue her legal battle. “I’m prepared to go all the way to the Supreme Court,” she said.