The U.S. Equal Employment Opportunity Commission

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

May 21, 2004


Your April 26, 2004 letter to the EEOC Washington Field Office concerning retiree health benefits was redirected to the EEOC Office of Legal Counsel. This complex issue has been the subject of much misinformation, and we hope that our response clarifies what the Commission's recently issued rule will, and will not, do.

The Commission's proposal does not involve the "transfer" of benefits between pre and post-Medicare eligible retirees. It merely allows employers to continue a common practice without fear of violating the Age Discrimination in Employment Act of 1967 (ADEA) -- the practice of coordinating the benefits it provides to retirees with the retirees' eligibility for Medicare. Many employer-provided health plans provide one level of benefit to retirees under age 65 to cover them until they are eligible for Medicare and then reduce or eliminate the benefit when the retiree becomes Medicare eligible. These are often called "bridge" plans." Employers who do provide health care for retirees over age 65, do so by adding to the Medicare benefit with coverage known as "supplemental," "carve-out," or "wrap-around" plans.

No law requires employers to provide these or any other health benefit to retirees. The Age Discrimination in Employment Act of 1967 (ADEA), as interpreted in a Third Circuit Court of Appeals decision entitled, Erie County Retirees Association v. County of Erie, merely ruled that if employers chose to provide health benefits to their retirees, they could not differentiate between their retirees benefits on the basis of the retirees' Medicare-eligibility. The court gave employers one defense -- they must prove that they expended equal costs for both groups, or that the total benefits provided to both groups were equivalent. The defendants in Erie County, like most employers with Medicare-coordinated retiree health benefits, could not meet the defense.

But the Erie County ruling had an unintended consequence; the defendant in that case equalized benefits not by raising the benefits for Medicare-eligible retirees, but by lowering the benefits available to retirees not yet eligible for Medicare. Other employers, fearing an Erie County-type lawsuit or EEOC charges, took similar action.

The EEOC drafted its rule to combat this unintended consequence, and to eliminate any ADEA-inspired incentive for employers to cut retiree health benefits. The draft final rule simply allows employers to coordinate health benefits with their employees' Medicare eligibility. It is a narrow exemption to ADEA protections, and does not apply in any other circumstance. The EEOC took this action to help preserve retiree health benefits, and to discourage employers from using the ADEA as an excuse to reduce or drop these important benefits.

The exemption does not require, and is not intended to encourage, employers to eliminate benefits for Medicare-eligible retirees. It also does not affect any contractual obligation between an employer and its retirees or their union representative to provide certain health benefits. If the employer has entered into a legally binding contract to provide a particular benefit, this rule will not alter the contract's terms.

The rule has been the subject of much analysis both within EEOC and from the public. Before drafting the rule, the Commission undertook a three year study of the issue. A proposed version of the rule was subject to a public notice and comment period. The draft final rule has been the subject of a public Commission meeting, and a hearing before the Senate Select Committee on Aging. Further information, including a copy of the proposed rule, a transcript of the Commissioners' statements in their April 22, 2004 meeting, and Commissioner Silverman's written testimony before the Senate Committee on May 17, 2004, is available on our web site, at

We hope that this information is helpful to you. Please note, however, that this letter does not constitute an opinion or interpretation of the Commission within the meaning of §10 of the Portal-to-Portal Act of 1947, incorporated in § 7(e) of the ADEA.


Dianna B. Johnston
Assistant Legal Counsel

This page was last modified on April 27, 2007.

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