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Retiree Benefits Ruling Under Fire

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A federal district court decision on March 30 barring employers from providing greater health benefits to younger retirees is being heavily criticized by a trade group that advises employers on health benefits issues.

The decision by Judge Anita B. Brody of the federal district court in Philadelphia strikes down a decision by the Equal Employment Opportunity Commission to publish a rule that “clarifies” that an employer-sponsored retiree health plan would not violate the Age Discrimination in Employment Act (ADEA) even if it does not provide the same level of benefits to early retirees and to older retirees who are eligible for coverage under Medicare.

Judge Brody, citing an earlier precedent of the higher court, the 3rd Circuit U.S. Court of Appeals, also issued a permanent injunction that prohibits federal officials from enforcing it.

The judge said the agency lacked the power to make the change and that it violated the 3rd Circuit precedent that said companies may offer different health plans to retirees of different ages only if they are of equal value or provide equal benefits. That decision involved retirees who had worked for Erie County, Pa.

The EEOC had hoped to publish a final rule in February but was unable to because AARP sued to block enforcement. AARP contended in its suit that giving differing packages to the young and the old amounts to age discrimination.

EEOC Chairwoman Cari M. Dominguez said the agency planned to appeal, a decision supported by the American Benefits Council, which advises employers on employee benefits issues and also lobbies Congress on those issues. The ABC had submitted a friend-of-the-court brief supporting the agency, and said the proposed rule “had been thoroughly vented through interagency review” and was “supported by members of Congress from both sides of the aisle.”

In a statement, Dominguez contended that the law involved “clearly 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.”

Susan Relland, American Benefits Council health care legal counsel, said that should the decision stand, “it would hurt all retirees who participate in these plans and further erode employers ability to offer these benefits.” Relland argued that “the EEOC rule is a sensible one that validates a long-standing practice supported by unions and employers alike.”

She said it merely clarifies “that employers are not violating the Age Discrimination in Employment Act if they provide greater health benefits to individuals who retire early, and are not yet eligible for Medicare, than they provide to retirees who are 65 or older and qualify for Medicare benefits. Once a retiree reaches age 65, many employer health plans provide benefits that supplement Medicare. This makes the level of benefits provided equal for both pre- and post-age 65 retirees.

“Unions, employers and the EEOC all recognize the value of this long-standing means of providing health care to retirees; why cant the nations largest retiree advocacy group do the same?” she said.

Relland added that, “The early retirees employer-sponsored benefits may be more extensive, but they are often the retirees primary or only source of coverage. The Council does not want more pre-age 65 retirees to lose their health care benefits because of soaring health care costs and regulatory uncertainty. The Council will continue to vigorously support the EEOC in this matter. We urge AARP to instead join us, the unions and the EEOC in working for what really is in retirees best interests.”

Reproduced from National Underwriter Edition, April 1, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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