Historical ERISA view on sex discrimination in pensions

P/OPINION 74-03


                                                               202

                        October 21, 1974

Dear              :

This is in response to your memorandum of August 26, 1974,
requesting our comments on a letter from
of                   . requesting information concerning
the Employee Retirement Income Security Act of 1974 (ERISA).
In specific,         asked whether the new law will in
any way discriminate against women as a class.

Her letter alleges that the plan under which she is covered
discriminates against women in two ways: (1) women must be
employed for a longer period of time than men before they
are eligible to participate in the plan and (2) women with
comparable periods of service take a smaller pension if they
retire early than do men who retire early.

The basic purpose of the new law is to ensure that employees
who are covered by private pension plans receive benefits
from those plans in accordance with their credited years
of service with the employer. The law prescribes minimum
standards for private pension plans, including standards
regarding eligibility to participate in a plan, rates of
accrual of benefits, and vesting but does not specifically
address the issue of sex discrimination under these plans.
With respect to participation (eligibility) requirements,
section 202 of Title I and section 1011 of Title II of the
new plan prescribe a minimum standard which must be met by
plans for all covered employees, whether male or female.
Generally, this new minimum participation standard provides
that a plan may not exclude an employee who has reached age
25 and has one year of service with the employer, whichever
occurs later. It should be noted, however, that the law
provides only a minimum participation standard. Therefore,
an employer might adopt a more liberal participation standard
than that prescribed by the law which established different
participation requirements for men and women. For example,
there is no provision in the new law that explicitly prohibits
a plan from adopting a participation rule under which men would
be eligible to participate in the plan after the later of age 22
and one year of service and women would be eligible to participate
in the plan at the later of age 22 and two years of service
with the employer, since both standards exceed the minimum
requirement of the law explained above.
P/OPINION 74-03


Although such a sex discriminatory participation standard
would not be prohibited per se under the ERISA, a discrimi-
nation in favor of the male employees over female employees
might possibly in fact result in discrimination in favor
of “employees who are officers, shareholders, persons
whose principal duties consist in supervising the work of other
employees, or highly compensated employees” and could jeopardize
the qualified status of the plan under section 401 of the Internal
Revenue Code. This Department cannot interpret the Internal
Revenue Code, and        question in this regard should be
directed to the Internal Revenue Service.

Moreover, such a practice would, if men and women perform
equal work, constitute a violation of the equal pay provisions
of the Fair Labor Standards Act (29 U.S.C. sec. 201 et seq.).
Inquiries regarding a possible violation of this Act should
be referred to the Local Wage-Hour Office of the Employment
Standards Administration of this Department.

A discriminatory participation schedule such as described
above which provides eligibility for men to participate in
a plan at a date earlier than women would also violate Title VII
of the Civil Rights Act of 1964 (42 U.S.C. sec. 2000(e)).
Inquiries concerning a violation of Title VII should be referred
to the nearest regional office of the Equal Employment Opportunity
Commission.

[Her] second question relates to women receiving smaller
pension benefits than men if they retire before the plan’s
normal retirement age. Generally speaking, any plan participant
who takes early retirement receives a pension benefit which is
less than the benefit to which that participant would be entitled
if he or she continued to work until the normal retirement age.
Such reductions are based on standard actuarial calculations.
In addition, if benefits take the form of an annuity, women
generally receive smaller monthly payments than men because
actuarial tables upon which such monthly payments are determined
are based on the statistically proven assumption that women
live longer on the average than do men. When an equal pension
benefit amount is spread over an assumed longer lifetime
of female participants, each monthly distribution made to a
woman will be smaller than that made to a man.
P/OPINION 74-03


At the present time the issue of sex discrimination as
reflected in unequal benefit payments between the sexes
is being considered by the Office of Federal Contract Compliance
of the Labor Department’s Employment Standards Administration
in order to develop regulations on this issue. Although these
regulations will not be enforced under the new pension reform
law, but rather the equal pay provisions of the Fair Labor
Standards Act and Executive Order 11246 (which prohibits sex
discrimination in employment practices by government contractors
and subcontractors), they could have a major effect on the
payment of benefits under a great number of private pension
plans.

[Her] second question is related to several complex and as
yet unresolved issues involving unequal treatment of the sexes
in pension plans. The sex discrimination regulations referred
to above will help to clarify some of these issues and will
be furnished to your office when promulgated. In the meantime,
I hope this information will be helpful in responding to your
constituent.

I apologize for the delay in responding to your request.
The Department has been flooded with Congressional and other
inquiries relating to the new law and although we are
responding as rapidly as possible, some delays are occurring.
We are endeavoring to keep these to a minimum.

Sincerely,