The United States Supreme Court held yesterday that pension status can turn, in part, on an employee's age without violating the Age Discrimination in Employment Act ("ADEA"). At issue in Kentucky Retirement Systems v. EEOC was a Kentucky state pension plan that provides disability benefits to state and county employees who hold hazardous positions. The Court found the plan does not discriminate against older workers even though it treats some employees (those who become disabled but are not otherwise eligible for retirement) more generously than others (those who become disabled only after becoming eligible for retirement on the basis of age). Under the plan, employees who become disabled before standard retirement receive credit for "imputed" years of employment not actually worked; employees disabled after standard retirement age do not receive such credit.

The Court explained that a plaintiff claiming age-related "disparate treatment" with respect to pension plans must prove that age "actually motivated the employer's decision." The Court found that the EEOC did not prove that the differences in treatment were actually motivated by age. Several factors contributed to the Court's conclusion: "age and pension status remain 'analytically distinct' concepts;" there was no evidence that pension status served as a proxy for age; there was a clear non-age basis for the disparity in awarding "imputed" years credits; and the disability plan did not rely on any of the stereotypical assumptions about "older" workers that the ADEA sought to eradicate.

When a pension plan includes age as a factor for eligibility and determining status, and the plan subsequently treats employees differently based on pension status, "a plaintiff, to state a disparate treatment claim under the ADEA, must come forward with sufficient evidence to show that the differential treatment was 'actually motivated' by age, not pension status." The Court found that the differences under the Kentucky plan were motivated by differences in pension status, not age.

Please contact any member of Schiff Hardin's Labor and Employment Group if you would like further information regarding how the Court's decision in Kentucky Retirement Systems impacts your company's retirement plans.