The U.S. Equal Employment Opportunity Commission
Questions & Answers about the EEOCfs Retiree Health Rule
The Equal Employment Opportunity Commission (EEOC or Commission) enforces the
Age Discrimination in Employment Act (ADEA), which prohibits age discrimination
in all aspects of employment. The Commission has approved a rule that allows
employers to coordinate the health benefits they offer retirees with Medicare
(or comparable state health benefits), without violating the ADEA. This document
answers some common questions about this final rule.
1. What does the rule do?
The rule allows employers who provide retiree health benefits to continue the
practice of coordinating those benefits with Medicare, without ensuring that
Medicare eligible retirees are receiving the same benefits as younger retirees.
Some employers coordinate with Medicare by supplementing the Medicare benefit;
others simply provide retirees under age 65 with health insurance to gbridgeh
the gap between the time they retire and the time they become eligible for
Medicare. Thus, the rule allows retirees to continue receiving the benefits they
currently enjoy. The rule also allows unions to negotiate for health benefits
that coordinate with Medicare.
The rule does not affect the benefits that employers provide to their current
employees.
2. Why was the rule needed?
The rule was needed because in 2000, in Erie County Retirees Association
v. County of Erie, 220 F.3d 193 (3d Cir. 2000), a federal court ruled that
if an employer provides retiree health benefits, the ADEA requires that the
health insurance benefits received by Medicare-eligible retirees be the same, or
cost the same, as the health insurance benefits received by younger retirees.
After the EEOC adopted this interpretation of the ADEA as its enforcement
position, labor organizations, employers, and state and local governments told
us that it was contrary to existing practice, and that if they were forced to
ensure that Medicare-eligible retirees received benefits identical to those of
younger retirees, they would comply by reducing or eliminating the retiree
health benefits that they currently provide. In fact, that is what happened when
the Erie County case was settled in March 2002 – the Countyfs plan
gives older retirees the same benefit they had prior to the litigation, but
requires younger retirees to pay more for health benefits that offer fewer
choices.
3. Who urged the Commission to change the Erie County rule?
The groups asking the Commission to reverse the effect of Erie
County and preserve the current system included, for example, the AFL/CIO,
representing 13 million workers; the American Federation of Teachers,
representing 1.2 million workers; the American Association of Health Plans,
representing more than 1,000 plans that cover approximately 160 million
Americans; and the Chamber of Commerce of the United States, representing more
than 3 million businesses.
The resulting rule ensures that the Erie County decision does not
induce unions, state and local governments, and employers to cut back or
eliminate their retiree health benefit programs.
4. Does the rule require that retiree health benefits be cut?
No. To the contrary, the rule simply ensures that the ADEA does not impede
employersf ability to provide retiree health benefits.
5. Does the rule affect Medicare benefits or other legal obligations?
No. The rule simply eliminates the ADEA as a factor in coordinating retiree
health benefits with Medicare. It does not alter Medicare, other benefits
programs, or legal obligations other than the ADEA. The rule also does not
require any changes to contractual agreements, including union-negotiated
collective bargaining agreements, to provide retiree health benefits.
6. Why doesnft the rule require employers to provide retiree health
benefits?
The Commission lacks the authority to impose such a requirement. No federal
law has ever required employers to provide any health benefits to employees or
retirees. The ADEA requires only that if an employer chooses
to provide benefits, it must do so in a way that does not constitute illegal age
discrimination.
7. Why is the Commission authorized to adopt this rule?
The ADEA authorizes the Commission to approve exemptions to the law in those
instances when applying the law would be contrary to the public interest.
Because the Commission was advised that the Erie County decision would
contribute to a continuing decline in the availability of employer-provided
retiree health benefits, the Commission concluded that it is in the best
interest of employers, employees, and retirees to allow employers to coordinate
benefits with Medicare-eligibility without having to also consider the ADEA. The
Commission did not reach this conclusion lightly – it acted only after
performing an extensive study that included meeting with interested groups
representing all viewpoints, carefully reviewing available information about
retiree health programs, and considering comments received from the public.
The Commissionfs authority to adopt this exemption has been confirmed by a
federal district court and the Court of Appeals for the Third Circuit, the same
court that issued the Erie County decision. AARP sued the Commission in
federal court arguing that it was not authorized to issue the exemption.
However, the courts ruled not only that Congress gave the Commission authority
to issue the rule, but also that the Commission carefully considered the
evidence before it and that the rule was a greasonable, necessary and proper
exercise of [EEOCfs] authority.h
8. Did the public have an opportunity to comment on the Commissionfs
rule?
Yes. The Commission published a proposed rule in the Federal
Register in July 2003 and provided a sixty day period for the public to
make comments and suggestions. The Commission received many comments and all
were carefully considered before it approved the final rule.
9. When does the rule go into effect?
The rule went into effect when it was published in the Federal
Register on December 26, 2007. A copy of the rule is available on the
Commissionfs web site at www.eeoc.gov/policy/regs/index.html.
10. Why was there such a long delay between when the rule was
approved by the Commission and when it was published?
After the Commission approved the rule but before it was published, AARP sued
to prevent it from going into effect. An injunction preventing publication of
the rule was imposed while the courts considered the issue. In June 2007, the
Court of Appeals ruled that the Commission had properly promulgated the rule
and, in September 2007, it clarified that the injunction was lifted and the
Commission could publish the rule. Before final publication, the Office of
Management and Budget (OMB) had 90 days to review it.
This page was last modified on December 26, 2007.
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