Remarks of Vice Chair Naomi C. Earp

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

Good morning everyone. I'd like to acknowledge my fellow Commissioners and welcome the members of the public visiting us today. During the rule making process, we heard from many of our stakeholders and other members of the public. I appreciate your commitment and thank you for your input. At this time, I'd like to take just a few minutes to talk about why I believe the Commission should move forward with this proposal.

We know that health benefits are very important to retirees. My mother's best friend is currently seeking re-employment because she is too young for Medicare and her former employer did not provide retiree health insurance. Nationally, over half of early retirees and about a third of Medicare-eligible retirees rely on their former employer to provide this valuable benefit.

Employers provide retiree health benefits in a variety of different ways. Many employers provide retirees with a bridge to some other health care source, such as Medicare. Other employers provide retirees with health benefits to supplement insurance they may have through other sources.

This type of insurance is a good thing, but I believe this very valuable benefit is at risk. Studies show that employer-provided retiree health benefits have declined steadily over the past ten years. Employers are struggling to continue providing this benefit under skyrocketing costs and accounting rule changes.

In 1999, a group of retirees sued Erie County, PA arguing that an employer violates the ADEA if it reduces or eliminates retiree health benefits when retirees become eligible for Medicare. The retirees won that lawsuit. Or did they?

Most people do not know what happened to retirees in the county of Erie after the decision. In response to the court decision, the county reduced health benefits for all retirees. Since the decision, employers in many other communities have done the same thing - or even worse, they have eliminated retiree health coverage altogether.

How did this happen? How did a "win" result in a loss of health benefits for retirees all across America? The answer is simple. The ADEA does not require employers to provide retiree health benefits. It is a completely voluntary benefit. And EEOC does not have the authority to force employers to provide it in the first instance, or to force continuation once an employer has provided retiree health benefits in the past.

Given that reality, the last thing I want to do is make it harder for employers to provide thisvaluable benefit. I believe the Erie County decision did exactly that. I believe the decision makesit extremely difficult for employers to provide any health benefits to retirees whether young or old. Since we know that retirees want and need these benefits, it seems obvious to me that Erie County is the problem not the solution.

We are here today to solve the Erie County problem. I don't want to see what happened in Erie County continuing across the country. I don't want retirees losing employer-provided retiree health coverage. This hurts all retirees - older and younger.

I know that some organizations and individuals have expressed concern about the EEOC's current proposal. So before I decided that this was the right thing to do, I gave a lot of thought to it. I thought about what would happen if we did not move forward with this proposal. What would happen if we continued to take the position that employers must choose either to provide the same benefits to all retirees, or no benefits at all? I am persuaded that if employers are forced to make that choice, the result will not be the one most seniors are looking for.

Our prior rule is an all or nothing proposition. Employers have to provide the same benefits or no benefits. And the prior rule does not come with a guarantee that employers will choose all over nothing. What the Commission has learned from a three year review of this issue is this: if employers are forced to make that choice (all or nothing), it is likely many seniors will not receive employer-sponsored health benefits upon leaving the workforce. In essence, the only thing our prior rule guaranteed was that some retirees would lose their employer-provided coverage.

The current proposal does not change the fact that employers are not required to provide retiree health benefits. Nothing in the ADEA can provide that guarantee. The proposed rule does not require that employers eliminate any coverage they already provide to retirees whether they are young or old, or eligible for Medicare or not. However, the rule does allow employers to coordinate whatever benefits they voluntarily provide to retirees with other available health benefits, like Medicare. This is a common practice and this rule allows that practice to continue. It is the way most retirees' health insurance currently works. And I believe it makes sense.

We cannot guarantee or promise our seniors that employers will always offer retiree health benefits. What we can do is remove obvious barriers that the ADEA may have inadvertently posed to employer-provided retire health coverage.

I support the Commission's efforts to preserve retiree health benefits and I believe we should move forward with finalizing this rule. I look forward to hearing the views of my fellow Commissioners, and I thank the public again for participating in our process.

This page was last modified on April 27, 2004.