Does this pension plan sound like age descrimination

No, I’m not going to sue my employer, but their pension plan sounds a little weird to me.

Each year, they contribute a precentage of my salary to a pension plan. The percentage varies with the employees age.

AGE %
21 1.0%
30 1.5%
35 2.%
40 3%
45 4%
50 6%
55 8.5%
60 12.5%

There is no change in contribution rate based on years with the company or with job title/level. Just age.

If a 21 year old and a 60year old are being paid the same salary, the 60year old is gettin an extra 11.5% of that salary, paid into the pension plan.

Source: http://www.eeoc.gov/types/age.html

Are you being discriminated against? Yes.

Is it unlawful under the law? No.

Why? The law applies to individuals 40 years of age and older.
The plan is probably skewed towards older workers because they have a shorter time until retirement to build up a nest egg. OTOH, as a 21-year-old, if you stayed with the company (and the company paid into the plan according to your figures), until you retired, your nest egg would be quite substantial.

Is it discrimination? Yes, insomuch as people who are otherwise similarly situated are receiving different compensation on the basis of age.

Is it illegal age discrimination? No. Federal law addresses discrimination based on age if people 40 or older are being discriminated against. Since people over 40 here are reaping additional rewards, no illegal age discrimination. Even if the scheme were suspect under federal law, the company could very easily defend it by saying that it’s designed to reward worker loyalty, since people who’ve been with the company longer are likely going to be older.

It is odd that it’s based on age rather than years of service directly.

I consult for a company that handles benefits for many a large companies. There are lots of benefits with age ladders. It never seems to be a problem. On the other side, younger employees have lower rates for life insurance, accidental death and disability, and other disability plans.

Couldn’t the 40 year old employees argue that they’re being (illegally) discriminated against, since they’re only receiving 3% instead of the 60 year olds’ 12.5%?

They can claim it, but again, the company can easily claim under that giving older workers as a way to compensate loyalty is a rational basis for the differential.

I don’t think that would hold up if a 60 year old worker on his first day is still receiving more than a 40 year old who’s been there for five years.

WAG here, but is there any chance that your contribution now entitles you to equivelent benifits in the future? That is, your 1000 dollars now gets 30 years to accure interest, while hers will be paid out in a few years. The outlay for the company might be the same for both employees.

I worked for a company whose pension plan started at age 30. On my 30th birthday, the HR person called me to say I needed to come to her office to sign the authorization to withhold 10% of my gross income. :eek: I said I didn’t want to authorize that.
At the time, you couldn’t have a separate IRA if your company had a retirement plan. I had had an IRA for several years, and didn’t want to lose it, or pay a penalty for early withdrawal.
The plan required 100% participation of employees over age 30. I had no choice. I had to let them fire me. My head nurse offered to raise my pay to compensate, so I’d stay. It was the principle of being forced to pay for something I didn’t want, just so I would not become a burden on my betters.
Two months later The director, himself called to ask me to come back. They had made the retirement plan optional. By then, I had another job.

That would be up to the jury to decide. Since in general it’s difficult to prove age discrimination, my WAG is that a defense along the lines of the one I suggested would be legally sufficient to sustaing the plan. Of course I could be totally wrong and there’s probably a mound of case law saying so…

Wouldn’t it or couldn’t it be considered just a part of the compensation package? You have the right to negotiate a higher base salary to make up for the higher effective salary of the older workers. And when you’re an older worker, the newlings will have the same right. Or you could form a union, equalize everything, and find everyone equitably downsized for being fat and expensive within 10 years.

Thanks for the info folks. I didn’t realize that the age discrimination laws were written to be one sided (ie, you can’t call it discrimination if it’s because you are under 40).

treis asked:

The pension fund is fully vested in 5 years, and portable. No attachment at all to years with the company. So if a 21yr old gets hired at $30k, and quits after 5 years, they walk away with a $1500 (plus a little interest) dispersal. 60yr old in the same place walks out with $18,750 (plus interest). Either employee can choose to take a lump sum payment when they leave.

That has never been the Law. It is true that at times no part of your IRA contributions were deductable (if covered at any time during that year by a Qualified Plan), but it has never been that case where entering into a Pension plan retroactively make you ineligable for keeping an IRA. Your IRA at that point in time was safe- although it could have been that if you had made your contribution early it might have lost it’s deductability.
Back to the OP- if your pension plan said (as is common) you had to be 60 years old to get a pension, would that also be age discriminatory? :rolleyes: :dubious: The government- nasty discriminator there- makes you wait until 62 or so to collect Social Security- that’s blatant age discrimation. If you’re over age 50 your allowed a larger deduction to your 401k- more discrimination? If you pass a certain age, you have to take some money out- discrimination? If you try and take cash out of yoru IRS before age 59, there usually are penalties- discrination? :dubious: :rolleyes:

Pensions are, and have always been based upon age- that’s why we call them pensions.

Actually, it’s not.

Source: CNN - April, 2005

Really? Thank you. The information was from the HR person trying to get me to sign the authorization. :dubious:

Discrimination against young people is, unfortunately, still in full force. If young people were allowed to sue their civilian employers for age discrimination, pretty soon the government would have to justify the requirements that Presidential candidates be 35 years old, Senators be 30, etc.

The government wouldn’t have to justify it at all. The age requirements for President (and, indirectly, VP), Senators and House members are by definition constitutional because they are written into the Constitution. Anyone who doesn’t like it is free to try to amend the Constitution to change the age requirement.

Yeah, but assuming 9% annual earnings for the investments, that $1,500 is worth $19,900 in 30 years. In terms of retirement $1,500 with 30 years to accure interest is worth the same as 18,750 when you retire.

Is this the ACTUAL rate, or just an example?

Slight hijack, buy if it’s actual, am I the only one who thinks these rates suck, except for those over 60?

I’m in law enforcement, but only part-time. I still contribute to the state retirement fund, but nowhere near as much as I did when I was full time, so I don’t think too much about what get’s matched in that fund.
But the company I work for full time contributes a rock bottom minimum of 6%, and up to 15% based on company profits. The average year is usually around 9%. Age is never a factor.
I’m 45 and I’d shit if I only got 4% match.

So, do I have it good or are other companies screwing people?

Of course. If, however, the law were changed to give young people protection against some discrimination, the logical next step would be people wondering why they shouldn’t get the same protection as other groups. The legal justification is solid–the law is what it is–but the philosophical justification, not so much.