Business Groups Lobby to Uphold Erie County Decision

April 17, 2006 ( - More than 15 business groups have stepped into the middle of the longstanding legal battle over whether employers can cut back retiree health benefits.

The groups filed friend-of-the-court legal briefs with the 3 rd US Circuit Court of Appeals that is now considering an appeal of a lower court ruling approving a proposed Equal Employment Opportunity Commission (EEOC) rule exempting the practice of coordinating retiree health benefits with Medicare eligibility from federal age discrimination laws, BNA reported.

The case before the appellate court involves a challenge by AARP to EEOC’s effort to address concerns raised by an earlier Third Circuit decision (See AARP Appeals Ruling on Retiree Health Care) . In Erie County Retirees Ass’n v. County of Erie, 220 F.3d 193, 24 EBC 2390 (3d Cir. 2000), the court held that under the Age Discrimination in Employment Act, employers that voluntarily provide retirees with benefits as a “bridge to Medicare,” but intend to end those benefits when the employees reach age 65, may do so only if the bridge benefits are the same or less generous than the Medicare benefits.

Under EEOC’s proposed rule, employers are permitted to reduce or end bridge benefits when a retiree becomes eligible for Medicare or comparable state benefits, without violating the ADEA.

AARP appealed the district court decision to the appellate judges, arguing that EEOC lacked the authority to pass the rule, because it had not established a strong enough record of the public policy reasons it said supported it. After first granting an injunction and finding for AARP (See Federal Judge Tosses EEOC Retiree Health Benefit Exemption ), the trial court reversed course, in light of an intervening US Supreme Court ruling espousing broader judicial deference for federal agency rulemaking generally, and decided that EEOC had acted within its powers (See

Employers Cheery Over Latest in ‘Erie County’ Retiree Benefits Controversy ).

In three briefs, the US Chamber of Commerce, the Equal Employment Advisory Council (EEAC), and others, including the American Benefits Council, the Society for Human Resource Management, the National Education Association, and the United Auto Workers, urge the Third Circuit to uphold the trial court’s latest decision.

The coordination of retiree health benefits with Medicare benefits is a longstanding and valuable employment practice that was unquestioned until Erie County, the Chamber’s brief argued. That decision jeopardizes the provision of bridge or supplemental benefits to as many as 10 million retirees and their families, as employers are under no legal obligation to provide them, it says.

Moreover, the exemption as proposed is a narrow one, the EEAC brief added. “It applies only in the context of retiree health benefits and does not extend to benefits offered to current employees who also happen to be Medicare-eligible. Significantly, the exemption will eliminate the strong incentive the Erie County decision created for employers to reduce or eliminate retiree health benefits and thus promises to help preserve this valuable benefit for future retirees,” it said.