EEOC Eliminates Uniformity Policy for Retiree Health Benefits

The Equal Employment Opportunity Commission voted last week to no longer pursue age-discrimination cases against employers who offer different health plans to retirees who are eligible for Medicare from those who are not, the Washington Post reports. The announcement is a reversal of an EEOC policy that had said that retiree health plans that are reduced or eliminated on the basis of Medicare eligibility or age violate the Age Discrimination in Employment Act (ADEA). To "encourage" employees to retire early, firms often offer coverage to younger retirees and "reduce or drop" the benefits when a retiree turns 65 and qualifies for Medicare coverage, the Post reports. However, last year the 3rd U.S. Circuit Court of Appeals ruled that the ADEA applies to retirees and their health insurance. While this ruling stands and retirees can still sue former employers based on the decision, the EEOC voted unanimously last week to drop its "compliance manual language" that was based on the court ruling. The commission voted to change the policy after hearing "concerns" from businesses and labor groups that it might encourage employers to drop employer-sponsored retiree health benefits, the Post reports. Cari Dominguez, the commission's chair, said in a statement that the EEOC will develop a new policy "consistent with the ADEA, that does not discourage employers from providing this valuable benefit." Susan Meisinger, COO of the Society for Human Resource Management, was "pleased" with the decision, as the old policy could have exposed employers to liability for offering coverage to older retirees. "[The change] reflects a deeper understanding of the implications of the policy and the potential for employers dropping health care benefits at a time when public policy is being crafted to increase employers' interest in providing health care benefits" (Crenshaw/Grimsley, Washington Post, 8/22).

Trend Toward Cutting Benefits?
The Dallas Morning News this week reports on the trend of employers restricting health benefits for retirees. Companies over the last decade have been cutting or reducing retiree health benefits, restricting access to programs and ending coverage for future employees, the Morning News reports, and in five to 10 years, more retirees under age 65 will have to cover the cost of health care before they become eligible for Medicare. Ten years ago, 88% of companies with more than 1,000 employees offered health benefits to retired workers under 65, but that amount dropped last year to 73%, according to Employee Benefit Research Institute figures. The number of retirees over 65 with health benefits who had worked for large employers dropped from 80% in 1991 to 62% in 2000. The Morning News reports that companies started reducing retiree health benefits in the early 1990s, after large companies adopted an accounting rule that "required employers to account for the future costs of health benefits" rather than "simply paying current expenses." Other contributing factors include "skyrocketing" health insurance premiums, the current "economic slowdown," rising prescription drug costs and the fact that the large population of baby boomers is approaching retirement age.

Legislative Response
The Morning News reports that there is a "movement afoot" to protect retirees' health benefits. Rep. John Tierney (D-Mass.) is sponsoring a bill (HR 1322) that would bar employers from changing workers' health benefits after they retire and would reinstate any benefits already reduced or eliminated. The Morning News reports that the bill may be debated this fall (Conklin, Dallas Morning News, 8/19).