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Federal Appeals Court Upholds Concept of Sex-Neutral Pensions

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In a decision that could affect hundreds of thousands of college and private-school participants in one of the nation's largest private pension funds, the U.S. Court of Appeals for the Second Circuit has upheld the concept of sex-neutral pension benefits and ordered the fund to pay such benefits retroactively to all participants retiring on or after May 1, 1980.

If it is upheld, the decision will broaden the fund's current policy, which is to pay sex-neutral benefits to participants on the basis of their contributions made after August 1983. The Second Circuit panel's decision applies to money that retirees invested in the pension plan before May 1, 1980, as well as to all investments made after that date.

Pension-fund officials plan to ask the U.S. Supreme Court to review the case.

850,000 Participants

The case, Spirt v. tiaa-cref and Long Island University, involves the Teachers Insurance and Annuity Association-College Retirement Equities Fund, a retirement program that invests in publicly traded stocks and bonds for about 850,000 independent-school and higher-education faculty and staff members.

In l980, the trial court found that tiaa-cref's policy of paying women lower monthly annuity benefits than men violated Title VII of the 1964 Civil Rights Act, which bans sex discrimination in the work place.

The case was reconsidered in 1982. (See Education Week, Oct. 20, 1982.) In the latest ruling, the circuit court found no reason to overturn the earlier decisions.

The insurance industry traditionally has provided lower monthly annuity benefits to women, on the actuarial grounds that women outlive men and therefore collect benefits over a longer period of time.

'An Enormous Difference'

The latest decision, which focused on whether sex equity should apply to earlier investments retirees had made in the pension plan, "will make an enormous difference to people who are close to retirement," and have invested in the plan over many years, said Mary Gray, national president of the Women's Equity Action League.

The league filed a friend-of-the-court brief in support of Diana Spirt, a Long Island University professor scheduled to retire this year.

Under tiaa-cref's current policy, all those who retired as of Aug. 1, 1983, receive sex-neutral benefits for any investments made in the pension plan after that date, but sex-based benefits for any investments made prior to that date. In Ms. Spirt's case, this would mean a maximum 1-percent increase in her monthly retirement benefits, according to Ms. Gray.

Retroactivity Gains

In contrast, because of the court's decision to make sex-neutral benefits applicable from the time a beneficiary began making payments into the pension plan, Ms. Gray calculated that Ms. Spirt will receive around a 15-percent monthly increase in benefit payments.

The same would hold true for other women who have been contributing to the pension plan for many years and whose policies do not include benefit payments to spouses after their death, she said.

Ms. Gray also estimated that men who have set up joint-survivor programs, in which their wives continue to receive benefits after their death, will also receive a 3- or 4-percent increase in benefits.

The National Association of Independent Schools estimates that 80 to 90 percent of its member schools on the East Coast use the retirement-annuity plans offered by tiaa-cref An estimated 85 percent of all private colleges and 40 percent of all public colleges also participate.

Seen Equitable for Men

Circuit Court Judge Jon Newman, who wrote the decision in the case, has acknowledged that retirement plans based on sex-neutral mortality tables will in the aggregate provide men with less money than they receive now. But he argued that in the case of the tiaa-cref plan, in which the majority of men have chosen the joint-survivor option that will continue tode benefits for their wives after their deaths, this difference is "not inequitable in the absence of any settled expectation of the males concerning the level of their future benefits."

In 1983, in the similar case of Arizona v. Norris, the U.S. Supreme Court ruled that the state could not discriminate on the basis of sex in its pension plan for teachers. However, the court barred retroactive application of the decision because of concerns about the solvency of the third-party insurance companies with which the state of Arizona had contracted to establish its pension program. (See Education Week, Aug. 24, l983.)

Judge Newman wrote for a three-judge panel that because tiaa-cref's pension plan involved individual investments and not third-party insurance, the concerns about solvency in the Norris case did not apply and would not affect the retroactive nature of the decision.

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