EMPLOYERS MAY COORDINATE RETIREMENT BENEFITS
WITH MEDICARE ELIGIBILITY

by Charles D. Lawson

On April 22, 2004, the Equal Employment Opportunity Commission (“EEOC”) approved a final rule which would permit employers to reduce or eliminate health benefits for retirees eligible for Medicare, without violating the Age Discrimination in Employment Act (“ADEA”).  The rule will be sent to other federal agencies for review and comment before it is published in the Federal Register and becomes officially binding. 

Of course, employers are not obligated to provide health benefits to retirees in the first place. The new rule thus benefits retirees under age 65, as spiraling health care costs have been forcing employers to choose between either providing identical benefits to all retirees - which may be prohibitively expensive - or foregoing the benefits altogether.  Retirees over 65 also stand to benefit as employers may supplement Medicare benefits under the new rule without having to provide an identical level of benefits.  Employers also win because, under this express exemption to the ADEA, they may now coordinate the provision of benefits with Medicare eligibility, reducing their expenditure on retiree health benefits overall. 

The new rule represents a reversal of the position the EEOC took on this issue in a case heard before the Third Circuit Court of Appeals in 2000 (requiring that pre- and post- Medicare eligible retirees receive health benefits of equal type and value) and a National Policy Statement EEOC released in October of that same year.  The AARP has expressed opposition to the rule and has stated that it is exploring a range of options, including litigation, to block the rule’s implementation.