EEOC Provides Exemption for Medicare-Coordinated Retiree Health Plans

On April 22, 2004 , the Equal Employment Opportunity Commission (EEOC) approved a proposed final rule to exempt Medicare-coordinated retiree health plans from the Age Discrimination in Employment Act (ADEA).  The EEOC had previously determined that the process of coordinating retiree health benefits with Medicare eligibility violated the ADEA.  Under the new rule, employers are now permitted to lawfully coordinate retiree health benefits with eligibility for Medicare or comparable state-sponsored health benefits without violating the ADEA. 

The foregoing practice was questioned in the Third Circuit decision of Erie County Retirees Assoc. v. County of Erie, No. 99-3877 (3rd Cir. Aug. 1, 2000 ).  In that case, the Third Circuit held that eliminating retiree health benefits at the age of 65, when Medicare became available, was unlawful under the ADEA and that the ADEA requires employers to assure that pre- and post-Medicare eligible retirees receive equal benefits. 

The new EEOC ruling creates an exemption to the ADEA that is ostensibly intended to encourage employers to provide health benefits to retirees and allow them to coordinate these benefits with Medicare.  The General Accounting Office has estimated that approximately 10 million retirees over 55 rely on employer-sponsored health plans as a primary source of health coverage or as a Medicare supplement.  These benefits are provided voluntarily by employers, and the EEOC, through its ruling, seeks to preserve such arrangements. 

The rule change applies to all existing retiree health plans and to newly created ones.  The rule will become effective after it has been submitted to government agencies for review and published in the Federal Register.