A federal district court has ruled that Baltimore County violated the Age Discrimination in Employment Act (“ADEA”) when it required older employees to contribute more to their pension than younger employees. EEOC v. Baltimore County, D. Md. No. 07-2500 (10/17/12). The decision, which will most likely be appealed by the County, is the latest ruling in a multi-year lawsuit which has already been before the United States Court of Appeals for the Fourth Circuit.
Baltimore County maintains a defined benefit pension plan for county employees. Prior to 2007, the amount of money an employee contributed to the plan was based on their age when hired. The rationale for this requirement can be traced to the plan’s inception in 1945, when all employees had to work until age 65 to retire. When the plan operated under those terms, it made sense to charge employees hired when they were older more, since they did not have to work as many years to become eligible to retire.
Over time, the County plan evolved so that employees could retire with full benefits after 30 years of service, regardless of age (public safety employees were allowed to retire after 20 years of service). In 2007, the plan was amended so that all employees contribute the same rate, regardless of their age at the time of hiring.
The court ruled that, once the County changed to a plan where retirement eligibility was based on years of service, not age, the different premiums for older employees could not be justified by non-age based financial considerations. Even though there was no evidence that the County originally intended to make older employees pay simply because of their age, the fact that the pension plan facially discriminates on the basis of age violates the ADEA.
The court’s decision should be a wakeup call to any public or private sector employer with a pension plan that makes distinctions in premiums based upon age. The age-based differentials in the Baltimore County case were the result of a historical anomaly, but the lack of any evil motive did not serve to absolve the County from liability.