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Engers v. AT&T Management Pension Plan

Court Declines to Permit Age and ERISA Claims to Proceed to Trial

A court declined to consider whether pension plan changes violated federal age discrimination and pension protection laws.


In 1997, AT&T converted its traditional defined benefit pension plan to a cash balance plan. As a result of the conversion, the accounts established for older participants were significantly less than the value of the accumulated annuities they had already earned under the old plan. The workers sued, claiming that the conversion discriminated against older workers and that AT&T executives knew that employees within seven years of retirement eligibility would not earn any additional pension benefits for several years.

During 12 years of litigation, the district court issued several decisions on various legal issues, finally dismissing the last of the plaintiffs' claims in June 2011. Two of the most important issues involved whether there were violations of the federal Age Discrimination in Employment Act (ADEA) and the notice provisions of federal pension law. The court found that AT&T did not violate the ADEA's general prohibition against age discrimination because AT&T complied with a more specific provision of the ADEA that states that a defined benefit plan does not violate the ADEA so long as the plan does not reduce or cease benefit accruals because of age. The court held compliance with this provision provided a "complete defense" to claims of age discrimination related to pension plans.

The court also dismissed the employees' claim that AT&T breached its fiduciary duties by issuing a misleading summary plan description (SPD) that left out the "bad parts" of the conversion to a cash balance plan. The court held that even if the SPD was misleading there was no remedy for a defective disclosure unless a plaintiff can demonstrate the presence of "extraordinary circumstances" — which the plaintiffs did not show here. The plaintiffs appealed.
AARP Foundation Litigation attorneys filed AARP's "friend of the court" brief arguing that compliance with a specific provision of the ADEA does not constitute a complete defense to all other claims alleging age discrimination related to pension benefits. The brief argued that the provision that is intended to protect older workers against discrimination should not be used to allow employers to discriminate with impunity, and that the court should take notice of the rationale behind ERISA's notice provisions — to enable participants to make informed decisions about their benefits and their careers. AARP requested that the plaintiffs be given an opportunity to prove their case.

The U.S. Court of Appeals for the Third Circuit, with virtually no analysis, affirmed the district court's opinion that although older employees worked for years without earning any additional pension benefits while younger employees earned benefits immediately, the ADEA was not violated. The Third Circuit also held that AT&T had complied with ERISA's notice and disclosure requirements, rejecting Engers's allegations, even though the average participant was not notified of the impact of these changes.

What's at Stake

The decision enables an employer's compliance with a narrow provision of the ADEA to give the employer a free pass concerning all types of age discrimination involving pension benefits. In addition, failure to provide a remedy when an employer does not comply with ERISA's notice provisions lets employers be less than forthcoming with changes in retirement plans

Case Status

Engers v. AT&T
was decided by the U.S. Court of Appeals for the Third Circuit, which subsequently declined an invitation to rehear the case. The employees have asked the U.S. Supreme Court to hear the case.

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