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Employers May Cut Health Benefits When Retirees Reach 65

  • April 23rd, 2004

The U.S. Equal Employment Opportunity Commission (EEOC) has voted to allow employers to reduce or eliminate retiree health benefits for anyone over the age of 65. The decision affects as many as 12 million Medicare beneficiaries who also receive health benefits from their former employers.

In 2000, the U.S. Court of Appeals for the Third Circuit (Erie County Retirees Association v. County of Erie, No. 99-3877, August 1, 2000) held that cutting retiree health benefits at age 65, when Medicare kicks in, was an age-based distinction and unlawful under the Age Discrimination in Employment Act of 1967. The federal statute requires employers to assure that pre- and post- Medicare eligible retirees receive health benefits of equal type and value, the court ruled.

In its April 22 vote, the EEOC has created an exemption to the Act, allowing employers to coordinate their health benefits with what retirees receive from Medicare, or to eliminate coverage for them entirely. The vote of the commission was along party lines, with 3 Republicans favoring the rule change and a lone Democrat opposing it.

Supporters of the rule change, which would apply to all existing retiree health benefits and to newly created ones, argued that employers will be more likely to continue providing health benefits to retirees under 65 if they are allowed to reduce or eliminate benefits for those 65 and older.

The rule had come close to being included in the Medicare bill passed last year, but AARP insisted that the provision be eliminated. AARP then endorsed the bill and its support was critical to passage.

The new EEOC rule must undergo further review by federal agencies and the White House Office of Management and Budget before becoming final as early as this summer. Opponents could challenge it in court. AARP said it is considering litigation if the rule is not changed.

For an article on the rule change in the New York Times, go to: http://www.nytimes.com/2004/04/23/politics/23RETI.html

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Last Modified: 04/23/2004

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