In 2004, the Equal Employment Opportunity Commission (EEOC), the federal agency that administers and enforces laws prohibiting employment discrimination, issued proposed regulations on retiree health benefits. The regulations would allow employers to offer reduced benefits to retirees once they are eligible for Medicare, as long as the total benefits available to them from all sources are the same as those available to younger retirees.
This proposal was controversial because it creates an exemption to the general rule that prohibits employers from offering lesser benefits to older workers. Because Medicare eligibility is based on age, some workers' rights advocates argued that the regulations gave employers license to discriminate.
AARP sued the EEOC in a Pennsylvania federal district court to prevent the agency from finalizing the regulations. The trial judge first ruled in AARP's favor, then reconsidered that decision and ruled for the EEOC. However, the judge also found that the regulations should not be finalized while the case was on appeal. So, for the last couple of years, this issue has been up in the air.
On June 4, 2007, the U.S. Court of Appeals for the Third Circuit decided the case in the EEOC's favor. (American Association of Retired Persons v. Equal Employment Opportunity Commission, No. 05-4594 (3rd Cir. 2007).) The court first found that the EEOC had the authority to propose the regulations, because Congress gave it the right to carve out exemptions to the general prohibitions on discrimination found in the Age Discrimination in Employment Act (ADEA).
The court also found that the EEOC's proposal was reasonable, "necessary, and proper in the public interest," because it addressed a very real problem in benefits programs. Some employers, in an effort to avoid age discrimination claims, simply reduced or eliminated all retiree health benefits. This choice is not discriminatory, because it applies to all retirees regardless of age. However, it also deprives retirees of benefits the employer might otherwise be willing to provide. The EEOC's proposal removes the threat of a lawsuit against employers who reduce benefits for Medicare-eligible retirees. Although the court recognized that this would allow employers to provide more generous benefits to younger retirees, the court also found that it would encourage employers to provide at least some benefits to all retired workers.
The EEOC finalized these regulations on December 26, 2007. You can read them here.
Effective date:
Jun. 04, 2007
This update affects these Nolo products:
