United States: Pension Schemes and Disability Discrimination

From 1 October 2004 changes in the law have been introduced which impose controls on the way occupational pension schemes can operate in relation to disabled people. The Disability Discrimination Act 1995 (Pensions) Regulations 2003 amend the Disability Discrimination Act 1995 ("the Act"), extending its application to specifically include occupational pension schemes for the first time. The Act applies to all occupational pension schemes, regardless of size.

Under the Act, every occupational pension scheme is deemed to include an overriding "non-discrimination rule" such that the trustees or managers of the scheme must not discriminate against a disabled person who is either a current or prospective member. The statutory non-discrimination rule does not, however, apply to rights accrued and benefits payable in respect of periods of service prior to 1 October 2004.

According to the Act, where a provision, criterion or practice of an occupational pension scheme places a disabled person at a substantial disadvantage, it is the duty of trustees or managers to make "reasonable adjustments" to any such provision, criterion or practice, including amending the rules of the scheme or policies relating to the provision of benefits.

Disability is defined under the Act as a physical or mental impairment which has a substantial and long-term adverse effect on a person’s ability to carry out normal day-to-day activities. An impairment will, according to the Act, have a long-term effect where it has lasted, or is likely to last, for a period of at least 12 months, or the rest of the life of the person affected if less. A temporary disability, such as a broken limb, or a long-term condition which does not affect day-to-day activities may not be covered by the Act.

In practice, pension scheme related disability discrimination claims are most likely to arise from the provision of death benefits to members. It is common for a scheme not to provide death or other insured benefits where the insurance terms are onerous. Such a scheme now runs the risk of a disability discrimination claim. If providing insurance is impossible or prohibitively expensive, the scheme may be able to argue that the provision for a disabled member is not a "reasonable adjustment", but it is not clear whether this would be acceptable to an employment tribunal should a claim be brought. Trustees should consider now whether or not to provide such insurance if they do not already do so.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.