After much back and forth, the EEOC just last week issued regulations letting companies offer lower health benefits to those age 65 and over than they do to those younger. Here’s the report on this important development, first published on our subscription website, HR.BLR.com.
The U.S. Equal Employment Opportunity Commission (EEOC) has published a final rule allowing employers to coordinate retirement benefits with eligibility for Medicare without violating the Age Discrimination in Employment Act.
The regulation, which safeguards retiree health benefits, was published in the December 26 Federal Register.
The EEOC proposed the rule in response to a decision in 2000 by the U.S. Court of Appeals for the Third Circuit in Erie County Retirees Association v. County of Erie. The court held that the ADEA requires that 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. After the Erie County decision, employers argued that complying with the decision would force companies to reduce or eliminate the retiree health benefits they currently provide.
In 2005, the EEOC approved a rule that would allow employers to reduce or eliminate health benefits once retirees become eligible for Medicare without violating the Age Discrimination in Employment Act (ADEA).
The AARP challenged the EEOC’s regulations, arguing that the agency exceeded its authority and that the rule would lead to cuts in retiree benefits. However, an appeals court ruled in the EEOC’s favor.
Employers who provide retiree health benefits generally “coordinate” those benefits with Medicare by supplementing the government healthcare or by offering retirees a “bridge” benefit to cover health expenses after employees retire until they become Medicare-eligible.
Until the 2000 interpretation, employers believed that the ADEA permitted them to coordinate any retiree health benefits they provided with Medicare without having to ensure that the benefits received by Medicare-eligible retirees were the same as those received by younger retirees. The new regulation provides an exemption for ADEA coverage for this employer practice.
Links:
Questions & Answers about the EEOC’s Retiree Health Rule
Text of Final Rule (PDF)