hether 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.
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