In Kentucky Retirement Income Systems v. Equal Employment Opportunity Commission, No. 06-1037 (June 19, 2008), the United States Supreme Court interpreted the Age
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
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.


Application of the OWBPA and ADEA to Pension Plan

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
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
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
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).
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.
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.



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