The EEOC Puts Humpty Dumpty Back Together: Employer-Sponsored Retiree Healthcare Coverage Can Again Be Coordinated with Medicare

The Equal Employment Opportunity Commission (EEOC) has accomplished what the kings’ men could not—it has affirmed that employer-sponsored retiree healthcare benefits can be coordinated with Medicare or comparable state health benefit programs. The EEOC’s final rule is an affirmative act to encourage employers to offer retiree health benefits, while it acknowledges that employers have no obligation to do so.

In sum, after the resolution of various court challenges and appeals—and notwithstanding that the AARP still has an outstanding writ of certiorari before the U.S. Supreme Court—the EEOC, on December 26, 2007, finalized and made immediately effective a narrow exemption to the Age Discrimination Employment Act of 1967 (ADEA) that permits employer-sponsored health plans to alter, reduce, or eliminate a retiree’s benefits when that individual becomes eligible for Medicare or a comparable state health benefit plan (regardless of whether the individual actually enrolls in Medicare or the comparable state plan). Through this exemption, the EEOC has formalized the understanding that employers and unions operated under before the Third Circuit issued its 2000 decision in Erie County Retirees Ass’n v. County of Erie, which essentially held that an employer violated the ADEA if it effectively reduced or eliminated retiree health benefits when retirees became eligible for Medicare.

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