Federal Appeals Court Rules for IBM in Major Pension Plan Case

The United States Court of Appeals for the Seventh Circuit ruled today that IBM's pension plan formula is both lawful and age-neutral. This closely-watched case, which challenged the legality of cash balance pension plans, is the first of its kind to reach the federal appeals courts. The decision reversed a prior trial court ruling that cash balance plans are inherently unlawful. The Seventh Circuit noted that the decision whether to offer employees a cash balance pension plan "may again be made freely, governed by private choice rather than legal constraint."

Cash balance plans cover 25% of all participants in defined benefit plans and account for more than 40% of the assets of defined benefits plans. More than 1,000 U.S. companies have cash balance plans, including many of the nation's largest employers.

Jeffrey Huvelle, a partner of Covington & Burling LLP, argued the appeal on behalf of IBM; Robert Wick, Robert Long, John Vine, Richard Shea, and Robert Newman of Covington and Glen Nager of Jones Day LLP worked with Mr. Huvelle on the case.

Covington & Burling LLP, an international law firm, provides corporate, litigation, and regulatory expertise to help clients achieve their goals. Founded in 1919, the firm has more than 550 lawyers and offices in Washington, New York, San Francisco, London, and Brussels.