The U.S. Equal Employment Opportunity Commission

Meeting of the U.S. Equal Employment Opportunity Commission
Proposed Final Rule: Age Discrimination in Employment Act - Retiree Health Benefits
April 22, 2004

Remarks of Commissioner Leslie E. Silverman

I strongly support the proposed Final Rule because I believe it is the right thing to do. Retiree Health benefits are critically important. I wish all employers offered them. But the fact is fewer and fewer employers do.

The reality is that for many years now, employer plans have distinguished between retirees who are pre and post 65 to coordinate their retiree health benefits with our Medicare system. Some employers have chosen to provide their retirees with health benefits that will "bridge" the gap between the time they retire and become eligible for medicare. While others continue to provide health benefits to retirees who have reached age 65, these benefits are supplemental to the Medicare benefits.

One need look no further than the second sentence of the Kaiser Family Foundation's Employer Health Benefits Annual survey to confirm this, it reads, "For the population ages 65 and older, retiree health benefits supplement medicare." Let us be clear that the Commission is not here today because we intend to create or foster a new retiree health benefit system that distinguishes based on medicare eligibility. That system already exists. That is the reality.

Rather, we are here today, because the Third Circuit Court of Appeals has construed a law that the Commission enforces, the Age Discrimination in Employment Act, and made a determination which would make most of the remaining Retiree Health plans unlawful. This decision sends a clear message to employers: find a way to give all of your retirees the exact same benefits, which is incredibly difficult, or eliminate your retiree health benefits all together. The sad reality is that if we do not rectify this decision, more and more retirees will lose these critical benefits. While the decision in Erie County did not start the erosion of retiree health benefits, it is a significant factor advancing this negative trend.

EEOC has heard from employer groups, state and local governments, and unions, including the AFL-CIO, United Auto Workers, and the American Federation of Teachers. These divergent groups have all sent us the same message, that the requirements of Erie County, on top of unchecked health care inflation and changed accounting rules, would be simply too much for our retiree health benefit system to bear. They will be forced to either sharply cut benefits for retirees who are not yet eligible for additional benefits under Medicare, or to eliminate all retiree health benefits, leaving retirees not yet eligible for Medicare with no health coverage whatsoever.

We have also been told that the uncertainty created by Erie has made it nearly impossible for unions and employers to negotiate for health benefits for future retirees and impeded efforts even to negotiate renewals of health benefits for current retirees.

There can be no more compelling evidence of the impact that the Erie decision will have if we do not act decisively than the Erie case itself. As you have heard today, the Medicare, eligible retirees who won their age discrimination case against Erie County did not receive the additional health benefits they had hoped to get. Instead, after losing the case, the county complied with the court's order by reducing the benefits early retirees were receiving and requiring them to pay a higher premium.

I do not believe that such a result for our retirees, fewer health benefits at greater expense, is one that is consistent with the public interest or the intent of the ADEA.

I happen to think the legislative history here is pretty clear. When Congress restored ADEA protection to employee benefit plans, it was aware that employers coordinated their retiree health benefits with Medicare eligibility. Both houses of Congress expressly stated that they did not intend to interfere with that practice. So employers were confident that their actions were in compliance with the ADEA. Erie County shattered that confidence, rejecting Congress' expressed retiree health policy and substituting its own.

The proposed Final Rule will restore employer confidence. It will not require, invite, or incite discrimination. It will not require any employer who now offers retiree health benefits to alter those benefits in any way. To the contrary, it will let employers, state and local governments, and unions know that they may continue to offer retiree health benefits to the extent their resources allow.

In Section 9 of the ADEA, Congress gave the Commission the authority to establish "reasonable exemptions" from the law to address unintended consequences when "necessary and proper in the public interest." While the Commission has exercised this authority on only the rarest of occasions, the ability to grant an exemption when it is needed is an important responsibility that the Commission should not shirk or ignore.

This is one of those rare occasions. We must ensure that public and private employers as well as unions can continue to lawfully coordinate their retiree health benefits with Medicare eligibility. For this reason, I believe it would be irresponsible for the Commission NOT to move forward with our proposed Final Rule.

This page was last modified on April 27, 2004.

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