AARP: New EEOC Rule on Retirees' Benefits "Wrongheaded"

Companies can scale back their retiree health care coverage once their former employees qualify for Medicare, the Equal Employment Opportunity Commission has affirmed. The ruling, which took effect Dec. 26, sanctions the prevailing practice of employers offering health insurance to retirees younger than 65 and then deducting or eliminating benefits once they receive Medicare. EEOC decided the practice does not violate age discrimination laws. In contrast to their pensions, workers are not vested in retiree health benefits, so companies can terminate them, EEOC decided.

The commission began investigating the issue after a 2000 court decision ruled that the Age Discrimination in Employment Act required employers providing retiree health benefits to do the same, or spend the same amount on, benefits for Medicare-eligible retirees as for younger retirees. A coalition of employers and labor unions banded together to fight the ruling, saying it would lead companies to reduce benefits for younger retirees. EEOC agreed and said its latest ruling would safeguard retiree health benefits.

"By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits which are increasingly less available and less generous," EEOC Chairwoman Naomi C. Earp said in a statement.

Reaction to the ruling was mixed: Employer groups hailed it while the AARP condemned it. James Klein, president of the American Benefits Council, which represents large companies, said EEOC's action will not prompt companies to cut back on benefits for older retirees, but will instead allow them to keep retiree coverage in place for younger ones. "It allows companies to provide coverage to an otherwise vulnerable population--those who are no longer actively employed but are also not eligible for Medicare," he said.

But David Certner, AARP's legislative policy director, called the rule "a wrongheaded move to legalize discrimination," saying it will shift health care costs to older workers, "allowing employers to back off their health care commitments based on nothing more than age." AARP sought a temporary restraining order to block the rule from taking effect but was unsuccessful.

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