Benefits July 14, 2003

EEOC Proposes ADEA Shield for Retiree Health Plans

July 14, 2003 (PLANSPONSOR.com) - Federal officials have proposed exempting from a federal age discrimination law employer decisions to cut or eliminate retiree health benefits when workers become eligible for Medicare or a state-sponsored health program.
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In a proposed rule published in Monday’s Federal Register , the US Equal Employment Opportunity Commission (EEOC) proposed the exemption to the Age Discrimination in Employment Act (ADEA) of 1967. According to the proposal, the exemption would apply to both existing and new employer-provided retiree health programs as well as to dependent or spousal coverage options provided to retirees.

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The reason, according to the EEOC proposal: With many companies already cutting back or eliminating retiree health coverage and recognizing that employers aren’t legally obligated to provide such coverage in the first place, agency officials don’t want concerns about a potential application of the ADEA to these programs to make a bad situation worse.

“The (EEOC) believes that it is in the best interest of both employers and employees for the (EEOC) to pursue a policy that permits employers to offer these benefits to the greatest extent possible,” officials wrote in the proposed rule.

Aggravating the situation, according to the agency are:

  • double-digit health-care coverage cost increases
  • an aging workforce
  • accounting standards aimed at recognizing the retiree health coverage cost that effectively trim a company’s reported income “thus creating an incentive to reduce expenditures for employee benefits such as retiree health.”

That’s why the agency is proposing an ADEA exemption allowing employers to coordinate their health care plans with Medicare or a state-sponsored health program while keeping in mind the ADEA’s central purpose of “encouraging employers and workers (to) find ways of meeting problems arising from the impact of age on employment.”

The proposed rule invites public comment until September 12, 2003.

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