Early retirement can be a mixed blessing


NEW YORK -- When the Thomas J. Lipton Co. in Englewood Cliffs, N.J., opened an early-retirement window last month, more than 60 percent of those eligible jumped, many more than the company expected. Several departments lost key employees; some replacements will have to be hired.

That's not unusual, says Henry Saveth of the consulting firm A. Foster Higgins in New York City. The best employees often feel the most confident about leaving because they're sure they can find other work.

With pensions in their pockets, they may also feel free to take lower-paying jobs in another field.

An early-retirement window is a one-shot opportunity to take a bonus for quitting work. Not only is your pension enhanced, the pot also may include a group-health plan and a monthly benefit to tide you over to age 62, when Social Security can begin.

But for every employee who cheerfully takes the money and runs, another one feels that he's being forced out the door.

Under the law, all early retirements must be voluntary. The question is, what's "voluntary"?

Do you leave of your own free will if your boss keeps asking you whether you'll accept the bonus offer? Or if you're told that your division is being shrunk and your job may be organized out of existence?

There's no obvious answer. The Senate, in its report on new additions to the age-discrimination law, defined a forced retirement as "whether, under the circumstances, a reasonable person would have concluded there was no choice but to accept the offer." If you feel that your choice is to leave now or be fired later, you may have an age-discrimination case.

Before paying you an early retirement bonus, however, the company may require you to sign a waiver agreeing not to sue.

If you don't sign and charge your company with unlawfully forcing you to leave, the burden of proof is on you to show that you were discriminated against -- not an easy task.

The new federal legislation expands your eligibility for benefits under early-retirement incentive plans. But, as usual, there's no free lunch. If a company has to pay off more people with a limited number of dollars, it might reduce the size of the bonuses offered, says Mark Arian of the consulting firm, Hewitt Associates. Among the recent changes in the law:

* A company offering severance pay to younger workers to induce them to leave will have to give it to older workers, too. That's in addition to the older workers' early retirement benefits. Possible result: less severance pay for younger and older workers alike. (Note, however, that in a corporate size reduction or plant closing, an older worker's severance pay can be reduced.)

* Companies will have to pay equal benefits to their oldest workers. In the past, they sometimes refused early retirement bonuses to workers age 60 and up, on grounds that those people would soon be retiring anyway.

* Companies can't cut off your eligibility for long-term disability plans at a certain age (say, 60). In fact, disability pay can be reduced by your pension benefits only if (1) you retire voluntarily or (2) you've reached 62 or the company's normal retirement age, whichever is later.

Cathy Ventrell-Monsees of the American Association of Retired Persons worries that the latter provision might still force people out of their jobs. "If your pension is higher than your disability pay, your disability check could be reduced to zero at age 62," she says. So you might be forced to take the pension and give up any hope of returning to work.

But Hewitt's Frank McArdle thinks that unlikely. "Under the law, involuntary retirement is illegal," he says. Forcing you to choose a pension would make the choice involuntary.

Most corporations will have to change any age-discriminatory disability rules in April.

State and local governments don't have to make changes for two more years. Age-discriminatory plans are on the way out. But they're not dead yet.

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