Spencer Benefits Reports, February 14, 2005

Court Blocks EEOC From Issuing Regs On Retiree Health Care Benefits

In response to a suit filed by AARP, U.S. District Court Judge Anita Brody in Philadelphia has delayed for at least 60 days the Equal Employment Opportunity Commission's issuing of final regulations regarding retiree health care benefits. The judge set March 1 for the beginning of oral arguments in the case.

In April 2004, the EEOC board approved final regulations that would exempt retiree medical benefits from the Age Discrimination in Employment Act (ADEA) if an employer decides to change or eliminate its employer-sponsored health care benefits when retirees become eligible for Medicare. Those regulations, however, have not been given final approval and have not been published in the Federal Register.

The EEOC regulations were in response to the 2000 decision of the Third Circuit U.S. Court of Appeals in Erie County Retirees Association v. County of Erie (220 F.3d 193), in which the Third Circuit held that employer-sponsored health care plans that provide different benefits for Medicare-eligible retirees than for retirees younger than age 65 violate the ADEA.

In a press release, EEOC chair Cari M. Dominguez stated, "I'm saddened and disappointed by AARP's premature legal action. The Commission and AARP share values and goals for protecting retirees' health benefits. But AARP, after failing to work in good faith to offer a viable compromise, is now trying to block a Commission rule that would safeguard those benefits. The rule has drawn strong support from both the employer and labor communities as well as from members of Congress on both sides of the aisle. The major teachers unions continue to urge the Commission to act because benefits of thousands of teachers nationwide are in jeopardy without the Commission's rule."

According to Ms. Dominguez, "The new rule will help safeguard existing and future health benefits for America's retirees by ensuring that the Age Discrimination in Employment Act does not impede employers' ability to offer retiree health plans.

Specifically, the rule will clarify that employers may continue to coordinate retiree health benefit plans with eligibility for Medicare or a comparable state health benefit without violating the ADEA. It does not change current employer practices or plans, nor does it affect any other legal obligations an employer may have. On the contrary, the rule removes an impediment to employers so that they may continue providing retirees with critical health care coverage. Any delay in implementing the rule will endanger vital protections for retirees.

"The Commission is confident--on both policy and legal bases--in its authority to implement the rule, and is prepared to defend that position. The ADEA authorizes the Commission to approve exemptions to the law in those rare instances in which application of the law would be contrary to the public interest. Because the Erie County decision was contributing to a continuing decline in the availability of employer-provided retiree health benefits, the Commission concluded that it would be in the best interest of employers, employees, and retirees to permit employers to offer these benefits to the greatest extent possible."

In a prepared statement, James Klein, president of the American Benefits Council, said, "We strongly support the EEOC's efforts to clarify the application of the age discrimination law to retiree health benefits and believe the rule will simply reassure employers that the valuable health benefits they provide today to retirees of all ages comply with federal law." Mr. Klein added that "AARP is simply ignoring the fact that many retirees could lose coverage entirely if employers were told they must spend as much on health benefits for retirees who already have Medicare coverage as they spend on early retirees who have no coverage other than the health plan from their employer."