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Last Updated: Friday, 1 August, 2003, 05:32 GMT 06:32 UK
IBM guilty of age discrimination
Sam Palmisano
IBM boss Sam Palmisano will contest the ruling
Hi-tech giant IBM discriminated against older employees with its pension policies, a US federal judge has ruled.

IBM revamped its company pensions in 1995-99, moving to a system of steadily-accumulating benefits, rather than one where benefits accelerate rapidly as a member of staff approaches retirement.

It justified the move at the time as better reflecting the young profile of its employees, who might want to cash in their pensions earlier in their lives than staff in more traditional industries.

IBM plans to appeal against the decision, which it says could affect some 400 other US public companies.

The judgement was in response to a class-action lawsuit on behalf of 130,000 present and past employees.

More cases to come

IBM has always denied that its pension arrangements were discriminatory.

But its case was undermined by documents that showed the firm expected to save billions of dollars through the reforms of the late 1990s.

In his decision, the judge noted that the firm's pension earnings made up 7% of its 1997 profit, and 13% in 2001.

He has yet to rule on compensation, and an immediate appeal may come preclude such a ruling.

The court case came ahead of a keenly-awaited ruling from the Internal Revenue Service (IRS), which has been studying the legality of IBM-type pension schemes.

In all, according to pension consultants Watson Wyatt, some 2 million US employees have pensions of the same type as the IBM scheme, a figure that makes further litigation highly likely.

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