In Kentucky Retirement Income Systems v. Equal Employment Opportunity Commission, No. 06-1037 (June 19, 2008), the United States Supreme Court interpreted the Age<br />
Discrimination in Employment Act (ADEA) to permit Kentucky to increase disabled public safety workers' pensions to the level they would have attained at normal retirement<br />
age, even though that meant workers who became disabled after reaching retirement age would not receive any pension increase. In a 5-4 decision,1 the Court rejected the position of the EEOC that the pension design discriminated on account of age unless the state could show an equal-cost justification for the difference in benefits received by two employees with equal pay and service but different ages.<br />
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Application of the OWBPA and ADEA to Pension Plan</strong><br />
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The case presented the Court with its first opportunity to address the impact of the Older Workers Benefit Protection Act (OWBPA) amendments to the ADEA on pension plan<br />
design. The OWBPA amendments had been adopted after the Court had held that the ADEA did not prohibit discrimination in the provision of employee benefit plans so<br />
long as the plans were not a "subterfuge adopted for the purpose of evading the ADEA. The OWBPA amendments eliminated the "subterfuge test, substituting a provision<br />
that discrimination in employee benefits violates the ADEA unless the discrimination is justified by equal cost or equal benefits (language used by prior EEOC regulations).<br />
The OWBPA amendments also provided various safe harbors and alternatives (such as certain voluntary retirement incentive programs) that were not at issue in this case.<br />
But the Court sidestepped this opportunity, holding instead that the EEOC had failed to prove that the pension design produced a distinction in benefits "on account of age rather than on account of retirement eligibility, and therefore, failed a threshold test necessary before any of the specific OWBPA benefit provisions would be relevant.<br />
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