WASHINGTON – Retiree benefits may be trimmed by employers after a former worker reaches age 65 and becomes eligible for Medicare coverage, according to a recent ruling by the Equal Employment Opportunity Commission.
The widely anticipated ruling drew predictable support from business groups and consternation from organizations representing workers and retirees.
EEOC spokesmen couched the final rule as an effort to protect retiree health benefits. Specifically, the publication of the rule allows employers that provide retiree health benefits to continue the practice of coordinating those benefits with Medicare, or comparable state health benefits, without violating the Age Discrimination in Employment Act.
The EEOC proposed the rule in response to a controversial decision in 2000 by the U.S. Court of Appeals for the Third Circuit. In that decision, the court held that the ADEA requires that the health insurance benefits received by Medicare-eligible retirees be the same, or cost as much to the employer, as the health insurance benefits received by younger retirees.
The decision prompted labor unions and employers to inform the EEOC that they would not be able to afford such matching coverage and that they would reduce or eliminate the retiree health benefits they provided.
“The Erie County decision would have made most existing retiree health plans unlawful,” said EEOC Vice Chairman Leslie E. Silverman. “EEOC’s new rule will ensure that employers can continue to offer their retirees much-needed health benefits.”
“Implementation of this rule is welcome news for American retirees, whether young or old,” said Commission Chairman Naomi C. Earp. “By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits that are increasingly less available and less generous.
“Millions of retirees rely on their former employer to provide health benefits,” she added. “This rule will help employers continue to voluntarily provide and maintain these critically important benefits.”
The ruling will help companies better calculate their liability for providing healthcare benefits from the age they retire until they become eligible for Medicare coverage. It allows companies to offer a full set of benefits to those under age 65, and limited or no benefits to those over that age.
The decision sparked consternation from the AARP. The organization said it has asked for a U.S. Supreme Court ruling that the EEOC lacks the authority to issue regulations. The AARP contends that the regulation is discriminatory and shifts the burden for the cost of care to older retirees.