Compliance June 6, 2003

EEOC Does 180 on Retiree Benefits Levels

June 18, 2002 (PLANSPONSOR.com) - Later this year, the federal anti-discrimination agency is expected to signal employers that they won't be violating federal laws if they cut back on retiree benefits as their former employees become Medicare eligible at age 65.

Reported by

Fred Schneyer

The position, which will be released as part of a proposed revision to the Equal Employment Opportunity Commission (EEOC) compliance manual, represents a complete reversal of policy followed under the Bill Clinton administration, according to Kiplinger Business Forecasts.

The EEOC says the new rule aims to “ensure that the application of the ADEA (Age Discrimination in Employment Act) does not discourage employers from providing health benefits to their retirees.”

The EEOC’s new position represents a big win for employers – one that they’ve been lobbying for since George W Bush became president. Not only does it mean they don’t have to worry about the EEOC scrutinizing their retiree health plans, it also means employers will have an extra weapon should they face age discrimination lawsuits concerning retiree health care plans, Kiplinger reported.

Issue Comes From Erie County Case

This issue came to the forefront two years ago when the Third US Circuit Court of Appeals ruled that the ADEA applies to retirees, not just active workers.

The court found that Erie County, Pennsylvania, discriminated against older retirees by offering them coverage that was alleged to be less valuable than that offered to retirees who were not yet eligible for Medicare.

The case caused a firestorm of complaints from employers. Although the decision applied only to Pennsylvania, Delaware and New Jersey, employers were afraid copycat lawsuits would spring up in other jurisdictions.

Setting it Down

Then the EEOC incorporated the court’s position into its compliance manual, which meant employers could face enforcement actions from the commission as well.

Retiree health plans are almost always more generous to younger retirees, recognizing that they have a greater need for private-sector insurance coverage.

The US Supreme Court refused Erie County’s appeal of the case, and the county ultimately settled with its retirees. Meanwhile, employer groups turned their attention to the commission, seeking the policy change now in the works, according to Kiplinger (see EEOC Reviewing Policy on Retiree Health Benefits ).

Read more about the Erie County case at Erie Go Again