The U.S. Equal Employment Opportunity Commission

EEOC Office of Legal Counsel staff members wrote the following informal discussion letter in response to an inquiry from a member of the public. This letter is intended to provide an informal discussion of the noted issue and does not constitute an official opinion of the Commission.


ADEA: RETIREE HEALTH

August 19, 2004

Dear

Thank you for your July 25, 2004 letter concerning the EEOC 's proposed rule regarding retiree health benefits. I hope that this letter clarifies the issues for you. You've asked whether the EEOC's proposed rule would "allow the company that made a promise to me to now dump my Health Care any time it chooses?"

The proposed rule will not alter any contractual commitment the employer has made to provide such benefits. In other words, if the employer has a legally binding contract to provide the benefit, this rule will not affect that obligation. If the employer has no such legal obligation, however, it has always had the right to eliminate health care benefits for all of its retirees, with or without the EEOC's proposed rule.

The proposed rule concerns only whether reducing or eliminating retiree health benefits for Medicare-eligible retirees is unlawful age discrimination. It provides that such reductions would not violate the Age Discrimination in Employment Act. As explained in more detail in our prior letter, this rule was drafted to address the effects of a court decision from 2000.

Prior to the court case, most employers that provided retiree health benefits routinely provided less generous benefits to Medicare eligible retirees than to younger retirees. That practice was called into question only after the 2000 court decision held - and EEOC agreed - that such practice was age discrimination. EEOC hoped employers would respond by providing better benefits to Medicare-eligible retirees. But it had the opposite effect. Employers "complied" with the rule by lowering the benefits of all other retirees (rather than by raising the benefits of Medicare-eligible retirees), or, in some cases, by eliminating retiree health benefits altogether. Either approach was legal and technically resolved age discrimination concerns, because retirees of all ages received the same benefit. The proposed rule is intended to stop this practice of reducing benefits in order to comply with age discrimination laws.

I hope this letter responds to your concerns in a clearer manner.

Sincerely,

- s -

Dianna Johnston,
Assistant Legal Counsel


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