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Ruling Bars EEOC Change In Retiree Health Rules (Updated)

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A federal judge in Philadelphia says employers who offer retiree health benefits have to offer comparable benefits to early retirees and to retirees who are eligible for Medicare.[@@]

The judge, U.S. District Judge Anita Brody, says the U.S. Equal Employment Opportunity Commission lacks the authority to interpret the Age Discrimination in Employment Act in a way that would permit employers to offer different benefits for older and younger employees.

The judge also issued a permanent injunction that prohibits federal officials from enforcing the new EEOC interpretation of the ADEA antidiscrimination provisions.

The judge cited an earlier ruling from the 3rd Circuit U.S. Court of Appeals which held that employers may offer different health plans to retirees of different ages only if the plans 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 implementing its interpretation of the ADEA antidiscrimination provisions in February, but it was unable to do so because the AARP, Washington, sued to block enforcement. The AARP contended in its suit that giving differing packages to the young and the old amounts to age discrimination.

The American Benefits Council, Washington, a major employer group, submitted a brief supporting the EEOC. The benefits council said the proposed rule “had been thoroughly vented through interagency review” and was “supported by members of Congress from both sides of the aisle.”

The EEOC says it will appeal the Brody ruling.

In a statement, EEOC Chair Cari Dominguez says ADEA “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, the benefits council health care legal counsel, says letting the Brody decision stand “would hurt all retirees who participate in these plans and further erode employers’ ability to offer these benefits.”

The proposed EEOC rule “is a sensible one that validates a long-standing practice supported by unions and employers alike,” Relland says.

Relland says the proposed EEOC rule merely clarifies “that employers are not violating the Age Discrimination in Employment Act if they provide greater health benefits to individuals who retiree 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.”