EEOC Informal Discussion Letter

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

July 31, 2006

Dear:

This is in reply to your follow up letter of July 6, 2006, regarding the Equal Employment Opportunity Commission (EEOC) rulemaking on retiree health insurance plans. Thank you for your thoughtful letter.

We share your concern about the human cost of revoking health benefits, especially for those who reasonably believed that they would be protected. We apologize for the fact that our initial response to you, concerning the intent and effect of the proposed retiree health rule, apparently was unclear.

We did not mean to suggest that employers could grandfather older persons only if the retiree health rule contained a grandfather clause. To the contrary, we meant that employers are now permitted to grandfather older retirees, and will continue to be able to do so when the rule goes into effect. The ADEA permits employers to treat older persons more favorably than younger persons.

The purpose of the proposed rule is to counteract the effect of the policy the Commission issued in 2000, which required employers to assure that Medicare-eligible retirees received the same benefits that non-Medicare-eligible retirees’ received. After the Commission issued that policy, employers and unions told the Commission that most, if not all, existing plans would violate the policy. Moreover, they said that because the ADEA does not require employers to provide any health benefits and because health benefits are expensive, employers would equalize retiree health benefits by eliminating them entirely, rather than by improving them for Medicare-eligible retirees.

The proposed rule does permit employers to provide different benefits to Medicare-eligible retirees than to non-Medicare-eligible retirees without violating the ADEA, but it does not encourage them to eliminate benefits. It provides only that the ADEA will not be violated when the employer provides different benefits to Medicare-eligible retirees than to non-Medicare-eligible retirees.

The rule does not affect any of the employer’s contractual obligations or requirements of other federal statutes, such as the Employee Retirement Income Security Act of 1974 (ERISA. If you believe that your plan was terminated in violation of ERISA, you may contact the United States Department of Labor for assistance.

Sincerely,

Dianna B. Johnston
Assistant Legal Counsel

This page was last modified on April 27, 2007.