Teaching Profession

Justices Examine Age Disparity in Retirement Systems

By Mark Walsh — January 11, 2008 4 min read
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In a case being watched by education groups, the U.S. Supreme Court is considering whether certain disparities in a state’s public-employee retirement system violate the main federal law against age discrimination.

By the end of an hourlong argument Jan. 9 in Kentucky Retirement Systems v. Equal Employment Opportunity Commission (Case No. 06-1037), it appeared that a majority of the justices disagreed with the Bush administration’s position that Kentucky’s retirement system runs afoul of the Age Discrimination in Employment Act of 1967.

“We’re talking about age, which is not an immutable characteristic,” said Justice Stephen G. Breyer. “Everybody goes through it.”

The case arose over differences in the way the Kentucky system compensates workers who retire for reasons of disability and those who retire because they have served the requisite length of time. In that state, public-sector workers can retire after 20 years of service or at age 55 with five years of employment.

Charles Lickteig, an employee of the Jefferson County sheriff’s department who was 61 when he sought disability retirement, was told he could only retire under the state’s regular retirement plan, which the employee contends resulted in a lesser benefit level. The EEOC sued the state on behalf of Mr. Lickteig, arguing that Kentucky’s plan provides lesser benefits to certain older workers who must stop working because of disability, and thus discriminates against them based on age.

The issue arises because for workers below retirement age who retire on disability, the system adds a certain number of years of service to their benefits formula. It does not do the same thing for employees past retirement age who then must stop working because of a disability. The state considers them eligible to join the regular retirement plan.

Younger Retirees Benefit

The EEOC argued in its high court brief that because of the way Kentucky’s system operates, some workers who retire past age 55 receive half as much in monthly retirement benefits as younger workers with the same final annual salaries who retire on disability.

“In calculating benefits owed to disabled workers, Kentucky uses age as an explicit decisionmaking factor in a way that disadvantages older employees,” Malcolm L. Stewart, an assistant to the U.S. solicitor general, told the justices during the arguments. “With respect to disabled employees, two employees who have the same total years of actual service but who are of different ages may receive dramatically different benefits.”

The justices and the advocates on both sides acknowledged that it would be hard to have a retirement plan that wasn’t conscious of age, and that this alone does not put such plans in violation of the age-discrimination act.

“Age is not a bad word,” said Robert D. Klausner, a lawyer representing the state. “All retirement plans necessarily make distinctions based on age.”

The justices appeared hesitant to accept Mr. Stewart’s arguments on behalf of the EEOC that the disparate treatment of certain workers amounted to illegal age discrimination.

Justice Breyer said he saw no evidence that Kentucky had based its retirement systems on invidious, age-based stereotypes.

“What you are looking at is to see whether the purpose of Congress is somehow implicated, a purpose designed to prevent stereotypical thinking from being used to put older people at a disadvantage,” he told Mr. Stewart. “And there is no indication that this is so in this case.”

Incentive Plans

Groups such as the National School Boards Association and the National Council on Teacher Retirement filed briefs expressing concern about the possible effects of the case on public-employee retirement plans, which cover teachers and other school workers.

The teacher-retirement council, a Sacramento, Calif.-based group representing 77 state and local teacher-pension plans, joined a friend-of-the-court brief on Kentucky’s side that the EEOC’s position will lead to instability for public-retirement funds and will require changes to plans in “virtually every state.”

The NSBA, based in Alexandria, Va., expresses worries in its brief about the effect of the case on school districts’ early-retirement-incentive plans for teachers.

“Typically, employees near the top of the pay scale are the intended” beneficiaries of such plans, the brief says. “As a practical matter, these employees tend to be older employees for no other reason than it takes years to reach the top tiers of public wage tables.”

The school boards’ group points out that those and other variations on early-retirement incentive plans have run into objections from the EEOC and in the courts on age-discrimination grounds. Such plans are often sought in collective bargaining by teachers’ unions, but it is the school district that faces liability if a plan is found to be in violation of the age-discrimination act, the brief says.

A decision in the case is expected by June.

A version of this article appeared in the January 16, 2008 edition of Education Week as Justices Examine Age Disparity in Retirement Systems

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