Supreme Court Declines to Hear Baltimore County Pension Case

On November 3, 2014, the United States Supreme Court denied Baltimore County’s petition for review of the Fourth Circuit’s decision which held Baltimore County’s retirement plan violated the ADEA. Balt. Cnty. v. EEOC, No. 14-7, cert. denied 11/3/14.

In 1945, Baltimore County established a retirement plan for its employees. The plan provided that employees could retire and receive pension benefits at age 65, regardless of their length of employment with the County. The plan was funded, in part, by employee contributions based on the employee’s age at the time the employee joined the plan. Older employees were required to make higher contributions. While reaching retirement age was initially the only possible basis for retirement, the plan was later amended to permit employees to retire based solely on years of service.

In 1999 and 2000, two County correctional officers, aged 51 and 64, filed charges of discrimination with the Equal Employment Opportunity Commission (EEOC) alleging that the County’s plan discriminated based on age. After failing to reach an agreement with the County, the EEOC sued on behalf of the two officers and additional County employees.

Initially, the lower court found that the plan was lawful under the ADEA because the contribution rates were not motivated by age, but by the number of years remaining until an employee reached retirement. The decision was vacated on appeal because the Fourth Circuit found that the lower court focused solely on age-based retirement eligibility and failed to consider the plan’s provision regarding service-based eligibility. Under the service-based provision, two employees who enrolled in the plan at the same time could become eligible for retirement at the same time based on service, but the older employee would have contributed more towards the plan because of his age. The case was remanded to the lower court which held that the plan was a violation of the ADEA because age was the “but-for” cause of the disparate treatment. The County appealed.

On appeal, the County first argued the plan was lawful because the service-based benefits were funded solely by the County and the employee contributions subsidized only the age-based benefits. The Fourth Circuit rejected this argument because employers were required to contribute based on age regardless of whether they chose to retire based on retirement age or service length. The County argued additionally that the ADEA’s “safe harbor provision” shielded it from liability. The safe harbor provision permits an employer to subsidize early retirement benefits without violating the ADEA. The Fourth Circuit rejected this argument as well, finding that even assuming the service-based pension benefits were qualifying “early retirement benefits” under the safe harbor provision, the safe harbor provision was not a defense to the challenged disparate treatment.

In seeking review, Baltimore County asked the Supreme Court to decide whether an employer who sponsors a pension plan and uses one safe harbor is categorically prohibited from using another safe harbor. The County argued that its plan is protected by both the ADEA’s cost-justification and early-retirement safe harbors.

The EEOC countered that review was not warranted because the County, under the ADEA, could not require an older employee hired on the same date as a younger employee to pay a higher amount towards retirement than the younger employee. The early retirement safe harbor was not a shield from liability either, it argued, because the EEOC wasn’t challenging the County’s subsidized early retirement options. According to the EEOC, because neither safe harbor provision justified the County’s actions, the question on review– whether both apply– was not at issue in the case.

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