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V i v i a n W i l l i a m s 0 ver the last several years, employers have experienced increasing challenges to their early retirement benefits, primarily based on age discrimination allegations. However, under the Supreme Court's recent decision in Lockheed Corporation, et al. v. Paul L. Spink,' employers are now expressly permitted, under the Employee Retirement Income Security Act (ERISA),' to offer employees early retirement incentives in exchange for waivers of employment-related claims.
The Facts in Spink
Paul Spink had been employed by Lockheed from 1939 to 1950 and then left to work for a Lockheed competitor. Lockheed persuaded Spink to return in 1979, and Spink did so. At the time of Spink's return to Lockheed, Lockheed maintained a retirement plan that excluded from participation employees who were age 60 or older when hired, and Spink was not eligible to participate. (At the time, ERISA and the Age Discrimination in Employment Act (ADEA) did not prohibit age-based exclusions from pension plans?)
In 1986, Congress passed the Omnibus Budget Reconciliation Act of 1986 (OBRA)," which states that "no pension plan may exclude from participation employees who have attained a specified age."5 OBRA also amended ERISA and the ADEA to prohibit age-based cessations of benefit accruals and age-based reductions in benefit accrual rates.6 In response to OBRA, Lockheed changed the eligibility rules of the plan and, effective December 25, 1988, permitted all employees, including Spink, to participate in the plan, but made clear that employees previously excluded based on age would not receive credit for service prior to December 25,1988.
Lockheed then added two programs to the plan that offered increased pension benefits to employees for retiring early, payable out of the plan's surplus assets. Employees could take advantage of the increased early retirement benefits only if they executed a release of any employment-related claims.