Employers can reduce or eliminate health coverage for retirees who are eligible for Medicare without violating the Age Discrimination in Employment Act.

The Equal Employment Opportunity Commission has come to that conclusion in a final rule that creates regulations dealing with the effects of the ADEA on retiree health benefits.

Federal law does not ordinarily require employers to provide health benefits for retirees either under or over 65, the usual Medicare eligibility age, EEOC officials write in a preamble to the new final rule, which appeared Wednesday in the Federal Register.

A 2000 4th U.S. Circuit Court of Appeals ruling and EEOC policy reflecting that ruling held that employers were guilty of ADEA violations if they reduced or eliminated retiree health benefits for Medicare-eligible retirees, unless the employers could show that the benefits for Medicare-eligible retirees were equivalent to the benefits provided for other retirees.

The AARP, Washington, has led efforts to oppose coordination of private retiree health benefits with Medicare and state retiree benefits.

The American Benefits Council, Washington, and a variety of other employer groups and labor groups have supported efforts to allow coordination of private and public retiree health benefits.

“Labor organizations, benefits experts, state and municipal governments, and employers informed us that our actions were further eroding employer-sponsored retiree health benefits by creating an additional incentive for employers to reduce, or eliminate altogether, health benefits for retirees,” EEOC officials write in the preamble to the final rule.

In 2003, the EEOC published a notice of proposed rulemaking suggesting that it would permit employers to coordinate their own retiree benefits with Medicare benefits after all.

“The final rule permits employers and labor organizations to offer retirees a wide range of health plan designs that incorporate Medicare or comparable state health benefit programs without violating the ADEA,” officials write.

Employers and unions can provide retiree health benefits designed specifically for retirees who are too young to qualify for Medicare, and they can supplement a Medicare-eligible retiree’s Medicare coverage without showing that the coverage is identical to non-Medicare eligible retirees’ coverage, officials write.

The final rule does not affect any non-ADEA obligation that employers may have to provide health benefits under Medicare or any other law, officials write.

The American Benefits Council, Washington, is welcoming publication of the EEOC final rule.

The 2000 appeals court decision “disregarded legislative history,” Klein says.

The benefits coordination issue “has been critically important to retirees, particularly early or pre-Medicare eligible retirees who would likely face significant reductions in their early retiree health benefits if the commission did not act,” Klein says.

A copy of the final rule is available