EEOC allows employers to adopt a wide range of retiree health plan designs

The Equal Employment Opportunity Commission (EEOC) has issued a final rule that allows employers to adopt a wide range of retiree health plan designs, such as Medicare bridge plans and Medicare wrap-around plans, without violating the Age Discrimination in Employment Act (ADEA). For example, under the final rules, employers can provide retiree health coverage only to retirees not yet eligible for Medicare or offer retirees supplemental Medicare coverage without having to demonstrate the coverage is identical to that provided to non-Medicare eligible retirees. The impetus for this rule was the ruling by the U.S. Court of Appeals for the Third Circuit (DE, NJ, PA, V.I.) in Erie County Retirees Association v. County of Erie, 220 F.3d 193 (3d Cir. 2000, that an employer violated the ADEA by reducing or eliminating retiree health benefits when retirees became eligible for Medicare, unless the employer could show either (1) that the benefits available to Medicare-eligible retirees were equivalent to the benefits provided to retirees not yet eligible for Medicare, or (2) that it was expending the same costs for both groups of retirees. EEOC adopted the Third Circuit’s decision as its national enforcement policy until being informed that this policy created an incentive for employers to reduce or eliminate health benefits for retirees. When the agency proposed the rule to reverse the effect of Erie County, AARP unsuccessfully sued EEOC to enjoin the rule. Legal Clips summaries of the court decisions in that case are available below. The new rule became effective December 26, 2007.

72 Fed. Reg. 72938 (Dec. 26, 2007)
EEOC final rule
EEOC Q&A
NSBA School Law pages on AARP v. EEOC