EEOC BLESSES
COORDINATION OF
RETIREE HEALTH
BENEFITS WITH MEDICARE
Prepared by: Debra L. Mackey, Esq.
The EEOC recently approved a final regulation that will permit coordination of retiree health benefits with Medicare, without violating the Age Discrimination in Employment Act (ADEA). The final rule reverses the position previously taken by the EEOC when it adopted the Third Circuit’s decision in Erie County Retirees Assn. v. County of Erie, 220 F. 3d 193 (3rd Cir. 2000), which held that an employer violates the ADEA if it reduces or eliminates retiree health benefits when retirees become eligible for Medicare (unless the benefits for Medicare eligible retirees are equivalent to benefits provided to other retirees or the cost of providing benefits is the same for both groups of retirees).
Because coordination of retiree health benefits with Medicare was a common practice in employer plans, the prohibition created an incentive for employers to reduce or eliminate retiree health benefits altogether for all retirees in order to avoid the ADEA issue. This policy reversal is intended to remove this unintended incentive. Note that the EEOC rule applies to both Medicare and comparable state health benefit plans.
The rule exempts from all prohibitions of the ADEA the coordination of retiree health benefits with Medicare (or comparable state plan) where an employee benefit plan that provides health benefits for retirees alters, reduces, or eliminates benefits when the retiree becomes eligible for Medicare (or comparable state plan) benefits, whether or not the retiree actually enrolls in Medicare (or comparable state plan). This exemption will be narrowly construed, according to the rule.
In a Q & A accompanying the rule, the EEOC states:
· A carve-out plan that makes Medicare (or comparable state plan) the primary payor for Medicare eligible retirees is permissible.
· The exemption also applies to dependent and/or spousal health benefits that are provided to the retiree; however, those benefits need not be identical (but may be) to the benefits provided to the retiree.
· The exemption applies to existing, as well as newly created, plans.
· The exemption does not apply to benefits for active employees who have reached the age of Medicare eligibility (or eligibility for a comparable state plan).
The EEOC’s rule is subject to inter-agency review and will not become effective until published in the Federal Register.
W0459285
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