The U.S. Equal Employment Opportunity Commission



Rule Should Preserve, Not Erode, Employer-Sponsored Insurance Plans

WASHINGTON - Leslie E. Silverman, a Commissioner of the U.S. Equal Employment Opportunity Commission (EEOC), testified on behalf of the agency this afternoon before the U.S. Senate Special Committee on Aging to discuss a proposed final rule on the treatment of retiree health benefits under the Age Discrimination in Employment Act (ADEA).

During a public meeting on April 22, by a vote of 3-1, the EEOC approved for interagency coordination a proposed final rule that would permit employers to lawfully coordinate retiree health benefit plans with eligibility for Medicare or a comparable state-sponsored health benefit without violating the ADEA. The common practice of coordinating retiree health benefits with Medicare was called into question in 2000, when a decision by the U.S. Court of Appeals for the Third Circuit, Erie County Retirees Association v. County of Erie, unleashed a torrent of concerns from employers, labor unions, and state and local governments.

Commission Chair Cari M. Dominguez provided the following statement: "Fear of running afoul of the law, coupled with escalating costs, continues to have a serious chilling effect on employer-provided retiree health benefits at a time when our retirees need them the most."

In her testimony, Commissioner Silverman said that, when the Commission adopted the Erie County rule, it believed the rule would protect health benefits for retirees. "In practice, however, that rule threatens to have the opposite effect it encourages employers to curtail or eliminate retiree health benefits," she said. "The Commission views such a consequence as contrary to the public policy of encouraging health benefits for retirees, and contrary to the spirit of the ADEA."

Commissioner Silverman explained how the agency's proposed final rule, and the events that gave rise to it, can only be understood against the backdrop of the fact that employers have no legal obligation to provide any health benefits to retirees. Employers, unions and state and local governments have told the Commission that, if forced to provide health benefits of equal type and value to all retirees, regardless of whether they also were receiving Medicare, the employers would have to either reduce existing coverage or eliminate existing health benefits for all retirees.

"After studying the issue for three years," said Commissioner Silverman, "the Commission concluded that there was only one way it could end the negative incentive created by the Erie County decision. The Commission's new rule, providing a narrow exemption from ADEA prohibitions for the coordination of health benefits with Medicare, would remove this incentive."

An interagency review period required under Executive Order 12067, which provides sister federal agencies an opportunity to review the rule and submit comments, concludes this week. A review at the Office of Management and Budget will follow, pursuant to Executive Order 12866. The rule will become final after it is published in the Federal Register.

Commissioner Silverman's complete written statement to the Committee will be posted on the Commission's web site at this afternoon.

In addition to the ADEA, which prohibits discrimination against individuals age 40 and older, the five-member Commission enforces Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on race, color, religion, sex or national origin; the Equal Pay Act; Title I of the Americans with Disabilities Act, which prohibits employment discrimination against people with disabilities in the private sector and state and local governments; the Rehabilitation Act of 1973's prohibitions against disability discrimination in the federal government; and sections of the Civil Rights Act of 1991.

This page was last modified on May 17, 2004.

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