Retiree Health Benefits

Four categories of discrimination prohibited by federal and state law are disparate treatment, failure to accommodate, disparate impact, and present effects of past discrimination.

On March 30, 2005, in AARP v. EEOC, a federal judge in Philadelphia blocked an EEOC rule change regarding health care benefits for retirees. The ruling endeed a battle of a continuing war between younger and older retirees.

Erie County Retirees Assoc. v. County of Erie: In 2000, the Third Circuit held that an employer violates the ADEA if it reduces or eliminates retiree health benefits when retirees become eligible for Medicare, unless the employer can show either (1) that the health benefits available to Medicare-eligible retirees are equivalent to the benefits provided to retirees not yet eligible for Medicare, or (2) that it is expending the same costs for both groups of retirees. The EEOC later adopted the opinion as its national enforcement policy.

EEOC Rule: In response to intense pressure from employers, labor organizations, benefits experts and state and municipal governments, the EEOC published a final rule in 2004 which reversed its national enforcement policy. The new rule created an exemption from the ADEA for employee benefit plans which “alter, reduce or eliminate health benefits when [a retiree] is eligible for Medicare health benefits or for health benefits under a comparable State health benefit plan.” The exemption applies whether or not the retiree enrolls in the other benefit program.

AARP Sues: In February 2005, the AARP sued in federal court to block the EEOC rule. The AARP argued that the rule allowed younger retirees to be provided with better health care benefits than older retirees, in violation of the ADEA. In her March 30 opinion, the federal judge agreed and stated that the EEOC lacked the power to change the judicial construction of the ADEA as set forth in the earlier Third Circuit opinion.

Plans for Appeal: EEOC Chairwoman Cari M. Dominguez immediately announced her plan to appeal the adverse ruling. The appeal route, however, is not an especially friendly one for the EEOC. Any appeal will be heard by the Third Circuit.

REMINDER

Employers must post in a prominent place a notice explaining the rights of employees under the Unformed Services Employment and Reemployment Rights Act ("USERRA"). A notice in poster format is now available to be downloaded by employers at the United States Department of Labor website: www.dol.gov/vets/programs/userra/poster.pdf.

Robert G. Chadwick, Jr.,is a shareholder with the law firm of Campbell & Chadwick, P.C. His areas of practice are labor and employment, occupational safety and health, employee benefits (ERISA), TWC audits, and selected contract and tort litigation. He has 24 years of experience providing counsel for employment decisions and policies, drafting policies and agreements, representing clients in contract and settlement negotiations and representing clients in proceedings before arbitrators, administrative agencies, federal and state trial courts and federal and state appellate courts.

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