Retirees Win on EEOC's Benefits Rule
By: Source: AARP Bulletin Today Date Posted: 2005-04-25 13:16:38
Millions of older retirees have a better chance of hanging on to all or some of their employer-sponsored health benefits—at least for now. On March 30 a federal judge in Philadelphia ruled that the Equal Employment Opportunity Commission overstepped its authority when it proposed giving companies a green light to offer different levels of benefits for retirees of differing ages.
It was a favorable decision for AARP, which filed a lawsuit in February as the EEOC was poised to implement a new rule that would undermine a provision of the Age Discrimination in Employment Act (ADEA). (See "Second-Class Retirees," AARP Bulletin, March 2005.) "This was a big victory for us," says Michele Pollak, AARP senior legislative representative. It was also a big victory for nearly 60,000 people who flooded the EEOC with objections after the AARP Bulletin published a story about the proposed rules in September 2003.
The court ruling settles one clash in the long-running drive by employer and labor interests to weaken the ADEA, a battle that may soon shift to Capitol Hill.
"The probability that some members of Congress will wade in is very high," Pollak says. "That's very different from whether they will succeed—and if so, how the ADEA would be rewritten."
Enacted in 1967, the ADEA prohibits employers from discriminating "against any individual with respect to his compensation, terms, conditions, or privileges of employment because of such individual's age." In her March 30 decision, Judge Anita B. Brody, an appointee of the first President Bush, said the EEOC's effort was "contrary to the plain language of the ADEA." She sharply criticized the EEOC, accusing the agency, which has the job of enforcing the law, of attempting an end-run around Congress, which has repeatedly refused to water down the law.
The EEOC has turned 180 degrees on the issue in recent years. In 2000, during the Clinton administration, the agency, agreeing with AARP's position, filed a friend of the court brief in a lawsuit involving older public retirees in Erie County, Pa., whose benefits—including Medicare—were less generous than those provided to younger retirees.
Since 2000 the EEOC has come under pressure from employer and labor interests (including the two major teachers unions and unions representing public service workers), arguing that an exemption from the ADEA is needed to control rising health costs and encourage workers to take early retirement. If employers are required to provide equal benefits for all retirees regardless of age, those interests maintain, employers' only recourse would be to cut benefits for all workers.
Under current law, employers are not required to offer health benefits, but if they do so, they must provide them on a nondiscriminatory basis. In most cases, they do so by supplementing their older retirees' Medicare coverage to keep their total benefits roughly comparable to those of younger retirees.
Susan Relland, health care legal counsel for the American Benefits Council, which represents more than 250 of the nation's largest employers, says, "We have already had calls from employers telling us they may have to drop coverage for their pre-65 retirees."
Whether they will follow through is unclear, says David Larson, a professor at Hamline University School of Law in St. Paul, Minn., and an expert on employment law. "We're in a world where employers are pulling back on everything, so it's not an entirely empty threat," he says. "But right now it's a game of chicken—that's exactly what it is."
The EEOC says it will ask the U.S. Department of Justice to appeal Brody's decision. But in all likelihood, as Pollak predicts, the final showdown will come in Congress.
preview