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Pre-65 Retirees Can They Have it Better

November 18, 2005
Whether an employer can provide a richer benefits package for younger retirees remains an unresolved question, dependent upon the outcome of an acrimonious battle between the AARP and federal officials.

    The latest twist in the convoluted dispute, which nearly requires a legal license to unravel, occurred in September, when a federal judge reversed her previous injunction against a proposed rule change by the Equal Employment Opportunity Commission. But U.S. District Judge Anita B. Brody stayed her decision to allow AARP officials the opportunity to appeal.

    The group’s lawyers filed the paperwork last month.

    At issue is whether companies can design benefits more generously for pre-65 retirees than for those eligible to receive Medicare. The conflict stems from a 2000 court decision involving Erie County, Pennsylvania. The appellate court ruled that the county of Erie couldn’t provide a richer package for younger retirees without violating the Age Discrimination in Employment Act.

    The Erie County decision sent "a shock wave through the employer community at that time," says Paul Dennett, vice president of health policy at the American Benefits Council, which advocates on benefits issues for Fortune 500 companies. "Employers aren’t intending to discriminate against older retirees," he says. "It’s simply logical that benefits are designed, when you become age 65, to be wrapped around your primary coverage at that stage, which is Medicare."

    As time passed, EEOC officials said they became concerned about a potential chilling effect. So they proposed an exception to the federal discrimination act with regard to coordinating retiree benefits.

    Laurie McCann, an AARP attorney involved in the appeal, doesn’t dispute the retiree health cost pressures faced by today’s companies.

    "But we don’t believe that the answer is to solve the problem on the backs of the oldest and most vulnerable retirees," she says. "You can’t just take one group and say it’s OK to discriminate against them in the hope that younger retirees will benefit."

    In March, Brody barred EEOC officials from implementing the rule, saying the agency had overstepped its authority. But in yet another twist along the legal maze, she reversed that decision in September, citing a subsequent Supreme Court ruling that provided greater deference to federal agencies.

    Thus, a legal stalemate persists, with both sides saying retirees will suffer if the other prevails.

    "If employers were told they had to provide equal or higher benefits to those over age 65," Dennett says, "it would cause a reduction in benefits to those under age 65, or an elimination of retiree health benefits for both age groups."

    During congressional testimony this spring, EEOC officials made a similar point. When required by the court to provide equal coverage for both age groups, county officials in Erie decided to boost payments and reduce benefits for younger retirees.

Workforce Management, November 21, 2005, p. 37 -- Subscribe Now!