3rd Circuit Lets Stand Ruling on Reduction of Medicare-Eligible Retiree Benefits

August 22, 2007 (PLANSPONSOR.com) - The 3rd U.S. Circuit Court of Appeals has declined to review a ruling upholding the ability of employers to reduce health benefits to retirees when they become eligible for Medicare.

Business Insurance reports that the 3rd Circuit unanimously denied a request by the AARP for the full appeals court to review its previous decision that the Equal Employment Opportunity Commission (EEOC) has the authority to implement a rule that would exempt from the Age Discrimination in Employment Act (ADEA) health plan changes for retired workers when they become eligible for Medicare (See Appellate Court Backs EEOC Retiree Health Rulemaking ).

The AARP claimed in a suit filed in Philadelphia that the EEOC would overstep its authority if it approved the rule (See AARP Sues Over EEOC Retiree Health Coverage Policy).

The rule was proposed by the EEOC in 2003 as a way of counteracting an August 2000 decision by the 3rd Circuit that found such plans were subject to ADEA, and would potentially expose employers to big damage awards, according to Business Insurance.

The rule, which never was implemented because of the AARP challenge, would allow employers to continue to provide without fear of litigation a two-tier system of retiree health care coverage, with younger retirees receiving richer benefits than Medicare-eligible retirees.

Laura McCann, a senior attorney with the AARP in Washington, told Business Insurance it is considering whether to seek a Supreme Court review of the 3 rd Circuit decision.