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Supreme Court Pensions AT&T PDA Congress Trusts Investment Fiduciary Trust Regulatory News Pension Calculation Can Be Discriminatory, In Part

(May 18, 2009--Chicago, IL) -- An employer does not violate federal law when it pays pension benefits calculated in part on a rule that was found discriminatory, according to the U.S. Supreme Court in AT&T v Hulteen.

AT&T based its pension calculations on a seniority system that relied on years of service minus uncredited leave time, giving less retirement credit for pregnancy absences than for medical leave generally. In 1976, the high court ruled (in General Elec. Co. v. Gilbert, 429 U. S. 125), that such differential treatment of pregnancy leave was not sex-based discrimination. In response, Congress passed the Pregnancy Discrimination Act (PDA) making it "clear that it is discriminatory to treat pregnancy-related conditions less favorably than other medical conditions."

On the PDA's effective date, AT&T replaced its old plan with the Anticipated Disability Plan, which provided the same service credit for pregnancy leave as for other disabilities prospectively -- with no retroactive adjustments.

AT&T employees and their unions sued arguing that they were receiving less service credit for their pre-PDA pregnancy leave than they would have for general disability leave, resulting in a reduction in their total employment term and, consequently, smaller AT&T pensions.

The Ninth Circuit affirmed a lower court ruling that where post-PDA retirement eligibility calculations incorporated discriminatory pre-PDA rules, federal law was violated. The California appeals court decision directly conflicted with holdings by the Sixth and Seventh Circuits that such calculations do not constitute a violation.

In a 7- 2 decision, the Supreme court ruled that the AT&T’s calculations do not violate federal law, because the company’s pension payments “accord with a bona fide seniority system's terms.”

AT&T Corp. v. Hulteen, No. 07-543,

No statement in this issue is offered as or should
construed as legal opinion or advice

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