EEOC Issues Controversial ADEA Exemption for Retiree Health Benefits

December 31, 2007 (PLANSPONSOR.COM) - With a long and hard-fought legal battle behind it over its controversial stance on discrimination in retiree health benefits, the U.S. Equal Employment Opportunity Commission (EEOC) has issued the final rule opposition groups tried to prevent.

The EEOC rule allows employers to coordinate their retiree health benefit offerings with Medicare without violating the Age Discrimination in Employment Act (ADEA).

The agency first proposed the rule after a controversial 2000 decision by the 3 rd  U.S. Court of Appeals in Erie County Retirees Association v. County of Erie. In that decision, the appellate court ruled that the ADEA requires the health insurance benefits received by Medicare-eligible retirees be the same, or cost the employer the same, as the health insurance benefits received by younger retirees (See Supreme Court Lets Erie Stand ).

Agency officials said, rather than discriminating against older workers, the practice of coordinating coverage with Medicare would effectively head off threatened retiree benefit cutbacks or elimination by employers.

Employers who provide retiree health benefits generally coordinate those benefits with Medicare by supplementing the government health care or by offering retirees a “bridge” benefit to cover health expenses after employees retire until they become Medicare-eligible, the agency said.

“Implementation of this rule is welcome news for America’s retirees, whether young or old,” said Commission Chair Naomi C. Earp, in a statement. “By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits which are increasingly less available and less generous. Millions of retirees rely on their former employer to provide health benefits, and this rule will help employers continue to voluntarily provide and maintain these critically important benefits in accordance with the law.”

The EEOC said the new rule has the support of organizations such as the Society for Human Resource Management, the AFL-CIO, the American Federation of Teachers, the National Education Association, and the American Benefits Council,.

The commission voted to approve the regulation on April 22, 2004 (See  EEOC Approves ‘Erie County’ Exemption ), but the AARP sued the EEOC in early 2005 to prevent its publication (See AARP Sues Over EEOC Retiree Health Coverage Policy ). After several years of litigation, the EEOC eventually won the fight as the 3rd Circuit found the rule was “a reasonable, necessary and proper exercise of [EEOC’s] authority” (See Appellate Court Backs EEOC Retiree Health Rulemaking ).

The final rule is  here .