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Judge rules Balto. Co. pension system discriminates based on age

Laws and LegislationU.S. Equal Employment Opportunity CommissionPension and WelfareJustice System

In a decision that could affect thousands of active and retired Baltimore County employees, a federal judge ruled that the county's pension system discriminates against beneficiaries because older workers were required to pay more toward their retirement than younger workers.

U.S. District Judge Benson Everett Legg sided with the U.S. Equal Employment Opportunity Commission, finding that the county system violates the Age Discrimination in Employment Act. It is unclear what the financial impact on the county could be because the court has not determined damages in the case.

The EEOC, which announced the decision Monday, sued the county in 2007 on behalf of two retired corrections officers. At the time, the plan covered 9,500 active employees and 6,600 retirees.

The county changed its pension system in 2007 so that workers hired after July 1 of that year contributed to the retirement system at a flat rate not based on their age at hiring. The lawsuit was filed on behalf of employees hired before that date.

"Older employees felt the impact of this discrimination in every paycheck," said EEOC regional attorney Debra Lawrence in a statement. "Because more money is taken out of older employees' paychecks to fund their retirement benefits, they receive less pay than younger employees doing the same job. With the court's decision, we are putting an end to this unlawful practice."

The decision is the latest legal setback for the county involving its retirement system and other workplace issues.

Don Mohler, chief of staff to County Executive Kevin Kamenetz, said the county attorney is reviewing Legg's opinion. Officials don't know yet how much the case could cost the county, Mohler said.

Pension contribution rates varied depending on job classification, said Maria Salacuse, supervisory trial attorney with the EEOC's Baltimore office. In one example, a 20-year-old paid 4.42 percent of his or her salary toward retirement, a 40-year-old paid 5.57 percent and a 58-year-old paid 7.65 percent.

The 20-year-old and 40-year-old could be hired at the same time and retire with equal years of service, but the older worker would have paid more for the same benefits, she said.

The lawsuit sought to change the county's system and to recover the portion of the contributions that the EEOC alleged the retirement system illegally collected from the two corrections officers and others in similar situations.

In 2009, the same federal court ruled in favor of the county in the case, but the EEOC appealed and the case was returned.

The EEOC also named as defendants the six unions representing county workers because the labor groups must negotiate with the county to make the changes the federal government is seeking.

Participation in the county's retirement system, a traditional pension plan that pays a set amount to retired workers based on final pay and years of service, is mandatory for full-time workers younger than age 59.

A key part of the case involves the county's early-retirement option, which it began offering in 1973. The option allows employees to retire with full benefits after 30 years of county service, regardless of their age.

Since launching the pension system in the 1940s, the county had based contributions on age, using rates set by its actuary, Buck Consultants. Older workers paid more because their contributions would have less time to accrue earnings. All employees were eligible to retire at age 65, so "age served as a proxy for years until retirement," the judge wrote in the opinion, filed last week.

Now, "age of retirement is no longer yoked to chronological age because some employees take early retirement while others do not," Legg wrote.

"At no time were the contribution rates adjusted to take account of the early-retirement option," the opinion states. "The County has never submitted calculations that attempt to demonstrate that requiring higher contributions from older workers could be financially justified after the early retirement option was added."

Employers inside and outside Maryland likely will be interested in the opinion, said Joyce E. Smithey, an Annapolis lawyer who leads the labor and employment practice at the firm Rifkin, Livingston, Levitan & Silver.

"To the extent that employers are going to be creating early-retirement plans, they're going to be looking very closely at this opinion to make sure they do it correctly," Smithey said.

The next phase of litigation will involve identifying affected people and working out a remedy, said the EEOC's Lawrence.

"I am hopeful we can work with the county to creatively redress this matter," she added.

James E. Rubin, of the Rubin Employment Law Firm in Rockville, said it is "impossible to tell right now" how much the case could cost the county in damages. Typically, both sides hire their own economic analysts to calculate what people are owed.

"There will probably be dueling calculations on what the damages are," Rubin said.

Potential compensation likely will be based on how much people overpaid for their benefits, Smithey said.

EEOC officials said the case is one in a series of lawsuits it has filed against public employers alleging age discrimination involving retirement benefits, including cases concerning Minnesota state agencies and an Arizona school district.

This month, the Maryland Court of Special Appeals turned down an appeal by Baltimore County in a case involving the pension benefits of a former county auditor. This summer, the county agreed to pay about $500,000 to settle a lawsuit filed by the Justice Department accusing the county of a pattern of discrimination, mostly based on medical conditions. County officials said the settlement was not an admission of any wrongdoing.

alisonk@baltsun.com

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Copyright © 2014, The Baltimore Sun
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Laws and LegislationU.S. Equal Employment Opportunity CommissionPension and WelfareJustice System
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