Court Opinion

ID: 9429369
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:26:31.841329+00
Date Added: 2024-06-11T17:23:19.224680
License: Public Domain

Justice Marshall,
with whom Justice Brennan, Justice White, and Justice Stevens join, and with whom Justice O’Connor joins as to Parts I, II, and III, concurring in the judgment in part.
In Los Angeles Dept. of Water & Power v. Manhart, 435 U. S. 702 (1978), this Court held that Title VII of the Civil Rights Act of 1964 prohibits an employer from requiring women to make larger contributions in order to obtain the same monthly pension benefits as men. The question presented by this case is whether Title VII also prohibits an employer from offering its employees the option of receiving retirement benefits from one of several companies selected by the employer, all of which pay a woman lower monthly benefits than a man who has made the same contributions.
A
Since 1974 the State of Arizona has offered its employees the opportunity to enroll in a deferred compensation plan ad*1076ministered by the Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans (Governing Committee). Ariz. Rev. Stat. Ann. §38-871 et seq. (1974 and Supp. 1982-1983); Ariz. Regs. 2-9-01 et seq. (1975). Employees who participate in the plan may thereby postpone the receipt of a portion of their wages until retirement. By doing so, they postpone paying federal income tax on the amounts deferred until after retirement, when they receive those amounts and any earnings thereon.1
After inviting private companies to submit bids outlining the investment opportunities that they were willing to offer state employees, the State selected several companies to participate in its deferred compensation plan. Many of the companies selected offer three basic retirement options: (1) a single lump-sum payment upon retirement, (2) periodic payments of a fixed sum for a fixed period of time, and (3) monthly annuity payments for the remainder of the employee’s life. When an employee decides to take part in the deferred compensation plan, he must designate the company in which he wishes to invest his deferred wages. Employees must choose one of the companies selected by the State to participate in the plan; they are not free to invest their deferred compensation in any other way. At the time an employee enrolls in the plan, he may also select one of the pay-out options offered by the company that he has chosen, but when he reaches retirement age he is free to switch to one of the company’s other options. If at retirement the employee decides to receive a lump-sum payment, he may also purchase any of the options then being offered by the other companies participating in the plan. Many employees find an annuity contract to be the most attractive option, since receipt of a lump sum upon retirement requires payment of taxes on *1077the entire sum in one year, and the choice of a fixed sum for a fixed period requires an employee to speculate as to how long he will live.
Once an employee chooses the company in which he wishes to invest and decides the amount of compensation to be deferred each month, the State is responsible for withholding the appropriate sums from the employee’s wages and channelling those sums to the company designated by the employee. The State bears the cost of making the necessary payroll deductions and of giving employees time off to attend group meetings to learn about the plan, but it does not contribute any moneys to supplement the employees’ deferred wages.
For an employee who elects to receive a monthly annuity following retirement, the amount of the employee’s monthly benefits depends upon the amount of compensation that the employee deferred (and any earnings thereon), the employee’s age at retirement, and the employee’s sex. All of the companies selected by the State to participate in the plan use sex-based mortality tables to calculate monthly retirement benefits. App. 12. Under these tables a man receives larger monthly payments than a woman who deferred the same amount of compensation and retired at the same age, because the tables classify annuitants on the basis of sex and women on average live longer than men.2 Sex is the only factor that the tables use to classify individuals of the same age; the tables do not incorporate other factors correlating with longevity such as smoking habits, alcohol consumption, weight, medical history, or family history. Id., at 13.
*1078As of August 18, 1978, 1,675 of the State’s approximately 35,000 employees were participating in the deferred compensation plan. Of these 1,675 participating employees, 681 were women, and 572 women had elected some form of future annuity option. As of the same date, 10 women participating in the plan had retired, and 4 of those 10 had chosen a lifetime annuity. Id., at 6.
B
On May 3, 1975, respondent Nathalie Norris, an employee in the Arizona Department of Economic Security, elected to participate in the plan. She requested that her deferred compensation be invested in the Lincoln National Life Insurance Co.’s fixed annuity contract. Shortly thereafter Arizona approved respondent’s request and began withholding $199.50 from her salary each month.
On April 25, 1978, after exhausting administrative remedies, respondent brought suit in the United States District Court for the District of Arizona against the State, the Governing Committee, and several individual members of the Committee. Respondent alleged that the defendants were violating § 703(a) of Title VII of the Civil Rights Act of 1964, 78 Stat. 255, as amended, 42 U. S. C. § 2000e-2(a), by administering an annuity plan that discriminates on the basis of sex. Respondent requested that the District Court certify a class under Federal Rule of Civil Procedure 23(b)(2) consisting of all female employees of the State of Arizona “who are enrolled or will in the future enroll in the State Deferred Compensation Plan.” Complaint HV.
On March 12, 1980, the District Court certified a class action and granted summary judgment for the plaintiff class,3 holding that the State’s plan violates Title VII.4 486 F. *1079Supp. 645. The court directed petitioners to cease using sex-based actuarial tables and to pay retired female employees benefits equal to those paid to similarly situated men.5 The United States Court of Appeals for the Ninth Circuit affirmed, with one judge dissenting. 671 F. 2d 330 (1982). We granted certiorari to decide whether the Arizona plan violates Title VII and whether, if so, the relief ordered by the District Court was proper. 459 U. S. 904 (1982).
We consider first whether petitioners would have violated Title VII if they had run the entire deferred compensation plan themselves, without the participation of any insurance companies. Title VII makes it an unlawful employment practice “to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex or national origin.” 42 U. S. C. § 2000e-2(a)(l). There is no question that the opportunity to participate in a deferred compensation plan constitutes a “conditio[n] or privileg[e] of employment,”6 and that retirement benefits constitute a form of “compensation.”7 The issue we must decide is whether it is discrimination “because of . . . sex” to pay a retired woman lower monthly benefits than a man who deferred the same amount of compensation.
*1080In Los Angeles Dept. of Water & Power v. Manhart, 435 U. S. 702 (1978), we held that an employer had violated Title VII by requiring its female employees to make larger contributions to a pension fund than male employees in order to obtain the same monthly benefits upon retirement. Noting that Title VII’s “focus on the individual is unambiguous,” id., at 708, we emphasized that the statute prohibits an employer from treating some employees less favorably than others because of their race, religion, sex, or national origin. Id., at 708-709. While women as a class live longer than men, id., at 704, we rejected the argument that the exaction of greater contributions from women was based on a “factor other than sex” — i. e., longevity — and was therefore permissible under the Equal Pay Act:8
*1081“[A]ny individual’s life expectancy is based on a number of factors, of which sex is only one. . . . [0]ne cannot ‘say that an actuarial distinction based entirely on sex is “based on any other factor than sex.” Sex is exactly what it is based on.’” Id., at 712-713, quoting Manhart v. Los Angeles Dept. of Water & Power, 553 F. 2d 581, 588 (CA9 1976), and the Equal Pay Act.
We concluded that a plan requiring women to make greater contributions than men discriminates “because of . . . sex” for the simple reason that it treats each woman “ ‘in a manner which but for [her] sex would [have been] different.’” 435 U. S., at 711, quoting Developments in the Law, Employment Discrimination and Title VII of the Civil Rights Act of 1964, 84 Harv. L. Rev. 1109, 1170 (1971).
We have no hesitation in holding, as have all but one of the lower courts that have considered the question,9 that the classification of employees on the basis of sex is no more permissible at the pay-out stage of a retirement plan than at the pay-in stage.10 We reject petitioners’ contention that the *1082Arizona plan does not discriminate on the basis of sex because a woman and a man who defer the same amount of compensation will obtain upon retirement annuity policies having approximately the same present actuarial value.11 Arizona has simply offered its employees a choice among different levels of annuity benefits, any one of which, if offered alone, would be equivalent to the plan at issue in Manhart, where the employer determined both the monthly contributions employees were required to make and the level of benefits that they were paid. If a woman participating in the Arizona plan wishes to obtain monthly benefits equal to those obtained by a man, she must make greater monthly contributions than he, just as the female employees in Manhart had to make greater contributions to obtain equal benefits. For any particular level of benefits that a woman might wish to receive, she will have to make greater monthly contributions to obtain that level of benefits than a man would have to make. The fact that Arizona has offered a range of discriminatory benefit levels, rather than only one such level, obviously provides no basis whatsoever for distinguishing Manhart.
*1083In asserting that the Arizona plan is nondiscriminatory because a man and a woman who have made equal contributions will obtain annuity policies of roughly equal present actuarial value, petitioners incorrectly assume that Title VII permits an employer to classify employees on the basis of sex in predicting their longevity. Otherwise there would be no basis for postulating that a woman’s annuity policy has the same present actuarial value as the policy of a similarly situated man even though her policy provides lower monthly benefits.12 This underlying assumption — that sex may properly be used to predict longevity — is flatly inconsistent with the basic teaching of Manhart: that Title VII requires employers to treat their employees as individuals, not “as simply components of a racial, religious, sexual, or national class.” 435 U. S., at 708. Manhart squarely rejected the notion that, because women as a class live longer than men, an employer may adopt a retirement plan that treats every individual woman less favorably than every individual man. Id., at 716-717.
As we observed in Manhart, “[actuarial studies could unquestionably identify differences in life expectancy based on race or national origin, as well as sex.” Id., at 709 (footnote omitted). If petitioners’ interpretation of the statute were correct, such studies could be used as a justification for paying employees of one race lower monthly benefits than employees of another race. We continue to believe that “a statute that was designed to make race irrelevant in the employment market,” ibid., citing Griggs v. Duke Power Co., 401 U. S. 424, 436 (1971), could not reasonably be construed to permit such a racial classification. And if it would be unlawful to use race-based actuarial tables, it must also be unlawful to use sex-based tables, for under Title VII a distinction *1084based on sex stands on the same footing as a distinction based on race unless it falls within one of a few narrow exceptions that are plainly inapplicable here.13
What we said in Manhart bears repeating: “Congress has decided that classifications based on sex, like those based on national origin or race, are unlawful.” 435 U. S., at 709. The use of sex-segregated actuarial tables to calculate retirement benefits violates Title VII whether or not the tables reflect an accurate prediction of the longevity of women as a class, for under the statute “[e]ven a true generalization about [a] class” cannot justify class-based treatment.14 Id., *1085at 708. An individual woman may not be paid lower monthly benefits simply because women as a class live longer than men.15 Cf. Connecticut v. Teal, 457 U. S. 440 (1982) (an *1086individual may object that an employment test used in making promotion decisions has a discriminatory impact even if the class of which he is a member has not been disproportionately denied promotion).
We conclude that it is just as much discrimination “because of . . . sex” to pay a woman lower benefits when she has made the same contributions as a man as it is to make her pay larger contributions to obtain the same benefits.
1 — i I 1 — 1
Since petitioners plainly would have violated Title VII if they had run the entire deferred compensation plan themselves, the only remaining question as to liability is whether their conduct is beyond the reach of the statute because it is the companies chosen by petitioners to participate in the plan that calculate and pay the retirement benefits.
Title VII “primarily governfs] relations between employees and their employer, not between employees and third parties.”16 Manhart, 435 U. S., at 718, n. 33. Recognizing this limitation on the reach of the statute, we noted in Manhart that *1087Relying on this caveat, petitioners contend that they have not violated Title VII because the life annuities offered by the companies participating in the Arizona plan reflect what is available in the open market. Petitioners cite a statement in the stipulation of facts entered into in the District Court that “[a]ll tables presently in use provide a larger sum to a male than to a female of equal age, account value and any guaranteed payment period.” App. 10.17
*1086“[n]othing in our holding implies that it would be unlawful for an employer to set aside equal retirement contributions for each employee and let each retiree purchase the largest benefit which his or her accumulated contributions could command in the open market.” Id., at 717-718 (footnote omitted).
*1088It is no defense that all annuities immediately available in the open market may have been based on sex-segregated actuarial tables. In context it is reasonably clear that the stipulation on which petitioners rely means only that all the tables used by the companies taking part in the Arizona plan are based on sex,18 but our conclusion does not depend upon whether petitioners’ construction of the stipulation is accepted or rejected. It is irrelevant whether any other insurers offered annuities on a sex-neutral basis, since the State did not simply set aside retirement contributions and let employees purchase annuities on the open market. On the contrary, the State provided the opportunity to obtain an annu*1089ity as part of its own deferred compensation plan. It invited insurance companies to submit bids outlining the terms on which they would supply retirement benefits19 and selected the companies that were permitted to participate in the plan. Once the State selected these companies, it entered into contracts with them governing the terms on which benefits were to be provided to employees. Employees enrolling in the plan could obtain retirement benefits only from one of those companies, and no employee could be contacted by a company except as permitted by the State. Ariz. Regs. 2-9-06.A, 2-9-20. A (1975).
Under these circumstances there can be no serious question that petitioners are legally responsible for the discriminatory terms on which annuities are offered by the companies chosen to participate in the plan. Having created a plan whereby employees can obtain the advantages of using deferred compensation to purchase an annuity only if they invest in one of the companies specifically selected by the State, the State cannot disclaim responsibility for the discriminatory features of the insurers’ options.20 Since employers are ultimately responsible for the “compensation, terms, conditions, [and] privileges of employment” provided to employees, an employer that adopts a fringe-benefit scheme that discriminates among its employees on the basis of race, religion, sex, or national origin violates Title VII regardless of whether third parties are also involved in the discrimination.21 In *1090this case the State of Arizona was itself a party to contracts concerning the annuities to be offered by the insurance companies, and it is well established that both parties to a discriminatory contract are liable for any discriminatory provisions the contract contains, regardless of which party initially suggested inclusion of the discriminatory provisions.22 It would be inconsistent with the broad remedial purposes of Title VII23 to hold that an employer who adopts a discrimina*1091tory fringe-benefit plan can avoid liability on the ground that he could not find a third party willing to treat his employees on a nondiscriminatory basis.24 An employer who confronts such a situation must either supply the fringe benefit himself, without the assistance of any third party, or not provide it at all.
IV
We turn finally to the relief awarded by the District Court. The court enjoined petitioners to assure that future annuity payments to retired female employees shall be equal to the payments received by similarly situated male employees.25
In Albemarle Paper Co. v. Moody, 422 U. S. 405 (1975), we emphasized that one of the main purposes of Title VII is “to make persons whole for injuries suffered on account of unlawful employment discrimination.” Id., at 418. We recognized that there is a strong presumption that “ ‘[t]he injured party is to be placed, as near as may be, in the situation he would have occupied if the 'wrong had not been committed.’” Id., at 418-419, quoting Wicker v. Hoppock, 6 Wall. 94, 99 (1867). Once a violation of the statute has been found, retroactive relief “should be denied only for reasons which, if applied generally, would not frustrate the central statutory purposes of eradicating discrimination throughout the economy and making persons whole for injuries suffered through *1092past discrimination.” 422 U. S., at 421 (footnote omitted). Applying this standard, we held that the mere absence of bad faith on the part of the employer is not a sufficient reason for denying such relief. Id., at 422-423.
Although this Court noted in Manhart that “[t]he Albe-marle presumption in favor of retroactive liability can seldom be overcome,” 435 U. S., at 719, the Court concluded that under the circumstances the District Court had abused its discretion in requiring the employer to refund to female employees all contributions they were required to make in excess of the contributions demanded of men. The Court explained that “conscientious and intelligent administrators of pension funds, who did not have the benefit of the extensive briefs and arguments presented to us, may well have assumed that a program like the Department’s was entirely lawful,” since “[t]he courts had been silent on the question, and the administrative agencies had conflicting views.” Id., at 720 (footnote omitted). The Court also noted that retroactive relief based on “[d]rastic changes in the legal rules governing pension and insurance funds” can “jeopardiz[e] the insurer’s solvency and, ultimately, the insureds’ benefits,” id., at 721, and that the burden of such relief can fall on innocent third parties. Id., at 722-723.
While the relief ordered here affects only benefit payments made after the date of the District Court’s judgment, it does not follow that the relief is wholly prospective in nature, as an injunction concerning future conduct ordinarily is, and should therefore be routinely awarded once liability is established. When a court directs a change in benefits based on contributions made before the court’s order, the court is awarding relief that is fundamentally retroactive in nature. This is true because retirement benefits under a plan such as that at issue here represent a return on contributions which were made during the employee’s working years and which were intended to fund the benefits without any additional contributions from any source after retirement.
*1093A recognition that the relief awarded by the District Court is partly retroactive is only the beginning of the inquiry. Absent special circumstances a victim of a Title VII violation is entitled to whatever retroactive relief is necessary to undo any damage resulting from the violation. See Albemarle Paper Co. v. Moody, supra, at 418-419, 421. As to any disparity in benefits that is attributable to contributions made after our decision in Manhart, there are no special circumstances justifying the denial of retroactive relief. Our ruling today was clearly foreshadowed by Manhart. That decision should have put petitioners on notice that a man and a woman who make the same contributions to a retirement plan must be paid the same monthly benefits.26 To the extent that any disparity in benefits coming due after the date of the District Court’s judgment is attributable to contributions made after Manhart, there is therefore no unfairness in requiring petitioners to pay retired female employees whatever sum is necessary each month to bring them up to the benefit level that they would have enjoyed had their post -Manhart contributions been treated in the same way as those of similarly situated male employees.
To the extent, however, that the disparity in benefits that the District Court required petitioners to eliminate is attrib*1094utable to contributions made before Manhart, the court gave insufficient attention to this Court’s recognition in Manhart that until that decision the use of sex-based tables might reasonably have been assumed to be lawful. Insofar as this portion of the disparity is concerned, the District Court should have inquired into the circumstances in which petitioners, after Manhart, could have applied sex-neutral tables to the pr e-Manhart contributions of a female employee and a similarly situated male employee without violating any contractual rights that the latter might have had on the basis of his pr e-Manhart contributions. If, in the case of a particular female employee and a similarly situated male employee, petitioners could have applied sex-neutral tables to pr e-Manhart contributions without violating any contractual right of the male employee, they should have done so in order to prevent further discrimination in the payment of retirement benefits in the wake of this Court’s ruling in Manhart.27 Since a female employee in this situation should have had sex-neutral tables applied to her pr e-Manhart contributions, it is only fair that petitioners be required to supplement any benefits coming due after the District Court’s judgment by whatever sum is necessary to compensate her for their failure to adopt sex-neutral tables.
If, on the other hand, sex-neutral tables could not have been applied to the pr e-Manhart contributions of a particular female employee and any similarly situated male employee without violating the male employee’s contractual rights, it would be inequitable to award such relief. To do so would be *1095to require petitioners to compensate the female employee for a disparity attributable to pre-Manhart conduct even though such conduct might reasonably have been assumed to be lawful and petitioners could not have done anything after Manhart to eliminate that disparity short of expending state funds. With respect to any female employee determined to fall in this category, petitioners need only ensure that her monthly benefits are no lower than they would have been had her post -Manhart contributions been treated in the same way as those of a similarly situated male employee.
The record does not indicate whether some or all of the male participants in the plan who had not retired at the time Manhart was decided28 had any contractual right to a particular level of benefits that would have been impaired by the application of sex-neutral tables to their pre-Manhart contributions. The District Court should address this question on remand.

 See 26 U. S. C. §457 (1976 ed., Supp. V); Rev. Rul. 72-25, 1972-1 Cum. Bull. 127; Rev. Rul. 68-99, 1968-1 Cum. Bull 193; Rev. Rul. 60-31, 1960-1 Cum. Bull. 174. Arizona’s deferred compensation program was approved by the Internal Revenue Service in 1974.

 Different insurance companies participating in the plan use different means of classifying individuals on the basis of sex. Several companies use separate tables for men and women. Another company uses a single actuarial table based on male mortality rates, but calculates the annuities to be paid to women by using a 6-year “setback,” i. e., by treating a woman as if she were a man six years younger and had the life expectancy of a man that age. App. 12.

 The material facts concerning the State’s deferred compensation plan were set forth in a statement of facts agreed to by all parties. Id., at 4-13.

 Although the District Court concluded that the State’s plan violates Title VII, the court went on to consider and reject respondent’s separate claim that the plan violates the Equal Protection Clause of the Fourteenth *1079Amendment. 486 F. Supp. 645, 651 (1980). Because respondent did not cross-appeal from this ruling, it was not passed on by the Court of Appeals and is not before us.

 The court subsequently denied respondent’s motion to amend the judgment to include an award of retroactive benefits to retired female employees as compensation for the benefits they had lost because the annuity benefits previously paid them had been calculated on the basis of sex-segregated actuarial tables. Respondent did not appeal this ruling.

 See Peters v. Missouri-Pacific R. Co., 483 F. 2d 490, 492, n. 3 (CA5), cert. denied, 414 U. S. 1002 (1973).

 See Los Angeles Dept. of Water & Power v. Manhart, 435 U. S. 702, 712, n. 23 (1978).

 Section 703(h) of Title VII, the so-called Bennett Amendment, provides that Title VII does not prohibit an employer from “differentiat[ing] upon the basis of sex in determining the amount of the wages or compensation paid or to be paid to employees of such employer if such differentiation is authorized by [the Equal Pay Act].” 78 Stat. 257, 42 U. S. C. § 2000e-2(h).
The Equal Pay Act, 77 Stat. 56, 29 U. S. C. § 206(d), provides in pertinent part:
“(1) No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex: Provided, That an employer who is paying a wage rate differential in violation of this subsection shall not, in order to comply with the provisions of this subsection, reduce the wage rate of any employee.”
As in Manhart, supra, at 712, n. 23, we need not decide whether retirement benefits constitute “wages” under the Equal Pay Act, because the Bennett Amendment extends the four exceptions recognized in the Act to all forms of “compensation” covered by Title VII.

 See Spirt v. Teachers Ins. & Annuity Assn.; 691 F. 2d 1054 (CA2 1982), vacated and remanded, post, p. 1223; Retired Public Employees’ Assn. of California v. California, 677 F. 2d 733 (CA9 1982), vacated and remanded, post, p. 1222; Women in City Government United v. City of New York, 515 F. Supp. 295 (SDNY 1981); Hannahs v. New York State Teachers’ Retirement System, 26 FEP Cases 527 (SDNY 1981); Probe v. State Teachers’ Retirement System, 27 FEP Cases 1306 (CD Cal. 1981), appeal docketed, Nos. 81-5865, 81-5866 (CA91981); Shaw v. International Assn. of Machinists & Aerospace Workers, 24 FEP Cases 995 (CD Cal. 1980). Cf. EEOC v. Colby College, 589 F. 2d 1139 (CA1 1978). See also 29 CFR § 1604.9(f) (1982) (“It shall be an unlawful employment practice for an employer to have a pension or retirement plan . . . which differentiates in benefits on the basis of sex”).
Only the Sixth Circuit has reached the opposite conclusion. Peters v. Wayne State University, 691 F. 2d 235 (1981), vacated and remanded, post, p. 1223.

 It is irrelevant that female employees in Manhart were required to participate in the pension plan’, whereas participation in the Arizona deferred compensation plan is voluntary. Title VII forbids all discrimination concerning “compensation, terms, conditions, or privileges of employ*1082ment,” not just discrimination concerning those aspects of the employment relationship as to which the employee has no choice. It is likewise irrelevant that the Arizona plan includes two options — the lump-sum option and the fixed-sum-for-a-fixed-period option — that are provided on equal terms to men and women. An employer that offers one fringe benefit on a discriminatory basis cannot escape liability because he also offers other benefits on a nondiscriminatory basis. Cf. Mississippi University for Women v. Hogan, 458 U. S. 718, 723-724, n. 8 (1982).

 The present actuarial value of an annuity policy is determined by multiplying the present value (in this case, the value at the time of the employee’s retirement) of each monthly payment promised by the probability, which is supplied by an actuarial table, that the annuitant will live to receive that payment. An annuity policy issued to a retired female employee under a sex-based retirement plan will have roughly the same present actuarial value as a policy issued to a similarly situated man, since the lower value of each monthly payment she is promised is offset by the likelihood that she will live longer and therefore receive more payments.

 See Spirt v. Teachers Ins. & Annuity Assn., supra, at 1061-1062; Brilmayer, Hekeler, Laycoek, & Sullivan, Sex Discrimination in Employer-Sponsored Insurance Plans: A Legal and Demographic Analysis, 47 U. Chi. L. Rev. 505,512-514 (1980).

 The exception for bona fide occupational qualifications, 42 U. S. C. §2000e-2(e), is inapplicable since the terms of a retirement plan have nothing to do with occupational qualifications. The only possible relevant exception recognized in the Bennett Amendment, see n. 8, supra, is inapplicable in this case for the same reason it was inapplicable in Manhart: a scheme that uses sex to predict longevity is based on sex; it is not based on “any other factor other than sex.” See 435 U. S., at 712 (“any individual’s life expectancy is based on any number of factors, of which sex is only one”).

 In his separate opinion in Manhart, Justice Blackmun expressed doubt that that decision could be reconciled with this Court’s previous decision in General Electric Co. v. Gilbert, 429 U. S. 125 (1976). In Gilbert a divided Court held that the exclusion of pregnancy from an employer’s disability benefit plan did not constitute discrimination “because of. . . sex” within the meaning of Title VII. The majority reasoned that the special treatment of pregnancy distinguished not between men and women, but between pregnant women and nonpregnant persons of both sexes. Id., at 135. The dissenters in Gilbert asserted that “it offends common sense to suggest that a classification revolving around pregnancy is not, at the minimum, strongly ‘sex related,”’ id., at 149 (Brennan, J., dissenting) (citation omitted), and that the special treatment of pregnancy constitutes sex discrimination because “it is the capacity to become pregnant which primarily differentiates the female from the male.” Id., at 162 (Stevens, J., dissenting).
The tension in our cases that Justice Blackmun noted in Manhart has since been eliminated by the enactment of the Pregnancy Discrimination Act of 1978 (PDA), Pub. L. 95-555, 92 Stat. 2076, in which Congress overruled Gilbert by amending Title VII to establish that “[t]he terms ‘because of sex’ or ‘on the basis of sex’ include . . . because of or on the basis of *1085pregnancy, childbirth, or related medical conditions.” 42 U. S. C. § 2000e (k) (1976 ed., Supp. V). See Newport News Shipbuilding & Dry Dock Co. v. EEOC, 462 U. S. 669 (1983).
The enactment of the PDA buttresses our holding in Manhart that the greater cost of providing retirement benefits for women as a class cannot justify differential treatment based on sex. 435 U. S., at 716-717. Justice Rehnquist’s opinion for the Court in Gilbert relied heavily on the absence of proof that the employer’s disability program provided less coverage for women as a class than for men. 429 U. S., at 138-139. In enacting the PDA, Congress recognized that requiring employers to cover pregnancy on the same terms as other disabilities would add approximately $200 million to their total costs, but concluded that the PDA was necessary “to clarify [the] original intent” of Title VII. H. R. Rep. No. 95-948, pp. 4, 9 (1978). Since the purpose of the PDA was simply to make the treatment of pregnancy consistent with general Title VII principles, see Newport News Shipbuilding & Dry Dock Co. v. EEOC, supra, at 678-679, 680-681, Congress’ decision to forbid special treatment of pregnancy despite the special costs associated therewith provides further support for our conclusion in Manhart that the greater costs of providing retirement benefits for female employees does not justify the use of a sex-based retirement plan. Cf. 462 U. S., at 685, n. 26. See also 29 CFR § 1604.9(e) (1982) (“It shall not be a defense under Title VII to a charge of sex discrimination in benefits that the cost of such benefits is greater with respect to one sex than the other”).

 As we noted in Manhart, “insurance is concerned with events that are individually unpredictable, but that is characteristic of many employment decisions” and has never been deemed a justification for “resort to classifications proscribed by Title VII.” 435 U. S., at 710. It is true that properly designed tests can identify many job qualifications before employment, whereas it cannot be determined in advance when a particular employee will die. See id., at 724 (Blackmun, J., concurring in part and concurring in judgment). For some jobs, however, there may be relevant skills that cannot be identified by testing. Yet Title VII clearly would not permit use of race, national origin, sex, or religion as a proxy for such an employment qualification, regardless of whether a statistical correlation could be established.
There is no support in either logic or experience for the view, referred to by Justice Powell, post, at 1098, that an annuity plan must classify on the basis of sex to be actuarially sound. Neither Title VII nor the Equal Pay *1086Act “makes it unlawful to determine the funding requirements for an establishment’s benefit plan by considering the [sexual] composition of the entire force,” Manhart, 436 U. S., at 718, n. 34, and it is simply not necessary either to exact greater contributions from women than from men or to pay women lower benefits than men. For example, the Minnesota Mutual Life Insurance Co. and the Northwestern National Life Insurance Co. have offered an annuity plan that treats men and women equally. See The Chronicle of Higher Education, Vol. 25, No. 7, Oct. 13, 1982, pp. 25-26.

 The statute applies to employers and “any agent” of an employer. 42 U. S. C. § 2000e(b).

 Petitioners also emphasize that an employee participating in the Arizona plan can elect to receive a lump-sum payment upon retirement and then “purchase the largest benefit which his or her accumulated contributions could command in the open market.” Brief for Petitioners 3. The fact that the lump-sum option permits this has no bearing, however, on whether petitioners have discriminated because of sex in offering an annuity option to its employees. As we have pointed out in n. 10, supra, it is no defense to discrimination in the provision of a fringe benefit that another fringe benefit is provided on a nondiscriminatory basis.
Although petititioners contended in the Court of Appeals that their conduct was exempted from the reach of Title VII by the McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U. S. C. § 1011 et seq., they have made no mention of the Act in either their petition for certiorari or their brief on the merits. “[0]nly in the most exceptional cases will we consider issues not raised in the petition,” Stone v. Powell, 428 U. S. 465, 481, n. 15 (1976); see this Court’s Rule 21.1(a), and but for the discussion of the question by Justice Powell we would have seen no reason to address a contention that petitioners deliberately chose to abandon after it was rejected by the Court of Appeals.
Since Justice Powell relies on the Act, however, post, at 1099-1102, we think it is appropriate to lay the matter to rest. The McCarran-Ferguson Act provides that “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, . . . unless such Act specifically relates to the business of insurance.” 15 U. S. C. § 1012(b). Although there are no reported Arizona cases indicating the effect of the Arizona statute cited by Justice Powell on classifications based on sex in annuity policies, we may assume that the statute would permit such classifications, for that assumption does not affect our conclusion that the application of Title VII in this case does not supersede the application of any state law regulating “the business of insurance.” As the Court of Appeals explained, 671 F. 2d 330, 333 (1982), the plaintiff class in this case has not challenged the conduct of the business of insurance. No insurance company has been joined *1088as a defendant, and our judgment will in no way preclude any insurance company from offering annuity benefits that are calculated on the basis of sex-segregated actuarial tables. All that is at issue in this case is an employment practice: the practice of offering a male employee the opportunity to obtain greater monthly annuity benefits than could be obtained by a similarly situated female employee. It is this conduct of the employer that is prohibited by Title VII. By its own terms, the McCarran-Ferguson Act applies only to the business of insurance and has no application to employment practices. Arizona plainly is not itself involved in the business of insurance, since it has not underwritten any risks. See Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 133 (1982) (McCarran-Ferguson Act was “intended primarily to protect ‘mira-industry cooperation’ in the underwriting of risks”) (emphasis in original), quoting Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S. 205, 221 (1979); SEC v. Variable Annuity Life Ins. Co., 359 U. S. 65, 71 (1959) (“the concept of ‘insurance’ [for purposes of the McCarran-Ferguson Act] involves some investment risk-taking on the part of the company”). Because the application of Title VII in this case does not supersede any state law governing the business of insurance, see Spirt v. Teachers Ins. & Annuity Assn., 691 F. 2d, at 1064; EEOC v. Wooster Brush Co., 523 F. Supp. 1256, 1266 (ND Ohio 1981), we need not decide whether Title VII “specifically relates to the business of insurance” within the meaning of the McCarran-Ferguson Act. Cf. Women in City Government United v. City of New York, 515 F. Supp., at 302-306.

 This is the natural reading of the statement, since it appears in the portion of the stipulation discussing the options offered by the companies participating in the State’s plan.

 The State’s contract procurement documents asked the bidders to quote annuity rates for men and women.

 See Peters v. Wayne State University, 691 F. 2d, at 238; EEOC v. Colby College, 589 F. 2d, at 1141; Van Alstyne, Equality for Individuals or Equality for Groups: Implications of the Supreme Court Decision in the Manhart Case, 64 AAUP Bulletin 150, 152-155 (1978).

 An analogy may usefully be drawn to our decision in Ford Motor Co. v. NLRB, 441 U. S. 488 (1979). The employer in that case provided in-plant food services to its employees under a contract with an independent caterer. We held that the prices charged for the food constituted “terms and conditions of employment” under the National Labor Relations Act (NLRA) *1090and were therefore mandatory subjects for collective bargaining. We specifically rejected the employer’s argument that, because the food was provided by a third party, the prices did not implicate “ ‘an aspect of the relationship between the employer and employees.’ ” Id., at 501, quoting Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U. S. 157, 178 (1971). We emphasized that the selection of an independent contractor to provide the food did not change the fact that “the matter of in-plant food prices and services is an aspect of the relationship between Ford and its own employees.” 441 U. S., at 501.
Just as the issue in Ford was whether the employer had refused to bargain with respect to “terms and conditions of employment,” 29 U. S. C. § 158(d), the issue here is whether petitioners have discriminated against female employees with respect to “compensation, terms, conditions, or privileges of employment.” Even more so than in-plant food prices, retirement benefits are matters “of deep concern” to employees, id., at 498, and plainly constitute an aspect of the employment relationship. Indeed, in Ford we specifically compared in-plant food services to “other kinds of benefits, such as health insurance, implicating outside suppliers.” Id., at 503, n. 15. We do not think it makes any more difference here than it did in Ford that the employer engaged third parties to provide a particular benefit rather than directly providing the benefit itself.

 See Williams v. New Orleans Steamship Assn., 673 F. 2d 742, 750-751 (CA5 1982), cert. denied, 460 U. S. 1038 (1983); Williams v. Owens-Illinois, Inc., 665 F. 2d 918, 926 (CA9), modified and rehearing denied, 28 FEP Cases 1820, cert. denied, 459 U. S. 971 (1982); Farmer v. ARA Services, Inc., 660 F. 2d 1096, 1104 (CA6 1981); Grant v. Bethlehem Steel Corp., 635 F. 2d 1007, 1014 (CA2 1980), cert. denied, 452 U. S. 940 (1981); United States v. N. L. Industries, Inc., 479 F. 2d 354, 379-380 (CA8 1973); Robinson v. Lorillard Corp., 444 F. 2d 791, 799 (CA4), cert. dism’d, 404 U. S. 1006 (1971).

 See Albemarle Paper Co. v. Moody, 422 U. S. 405, 417-418, 421 (1975); Griggs v. Duke Power Co., 401 U. S. 424, 429-430 (1971).

 Such a result would be particularly anomalous where, as here, the employer made no effort to determine whether third parties would provide the benefit on a neutral basis. Contrast The Chronicle of Higher Education, supra n. 15, at 25-26 (explaining how the University of Minnesota obtained agreements from two insurance companies to use sex-neutral annuity tables to calculate annuity benefits for its employees). Far from bargaining for sex-neutral treatment of its employees, Arizona asked companies seeking to participate in its plan to list their annuity rates for men and women separately.

 The court did not explain its reasons for choosing this remedy.
Since respondent did not appeal the District Court’s refusal to award damages for benefit payments made prior to the court’s decision, see n. 5, supra, there is no need to consider the correctness of that ruling.

 Only one of the several lower court decisions since Manhart has accepted the argument that the principle established in that decision is limited to plans that require women to make greater contributions than men, see n. 9, supra, and no court has held that an employer can assert as a defense that the calculation and payment of retirement benefits is made by third parties selected by the employer. See also Van Alstyne, supra n. 20, at 152-155 (predicting that the involvement of an independent insurer would not be recognized as a defense and noting that an employer offering a sex-based retirement plan funded by such an insurer would be well advised to act expeditiously to bring himself into compliance with the law). After Manhart an employer could not reasonably have assumed that a sex-based plan would be lawful. As explained supra, at 1088-1089, Arizona did not simply set aside wages and permit employees to purchase annuities in the open market; it therefore had no basis for assuming that the open-market exception recognized in Manhart would apply to its plan.

 Since the actual calculation and payment of retirement benefits was in the hands of third parties under the Arizona plan, petitioners would not automatically have been able to apply sex-neutral tables to pr e-Manhart contributions even if pre-existing contractual rights posed no obstacle. However, petitioners were in a position to exert influence on the companies participating in the plan, which depended upon the State for the business generated by the deferred compensation plan, and we see no reason why petitioners should stand in a better position because they engaged third parties to pay the benefits than they would be in had they run the entire plan themselves.

 Since the amount of monthly annuity payments is ordinarily fixed by the time of retirement, sex-neutral tables presumably could not have been applied after Manhart to male employees who had retired before that decision without violating their contractual rights.