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 20, 2004


This is in reply to your email regarding a proposed final regulation of the Equal Employment Opportunity Commission (EEOC) under the Age Discrimination in Employment Act of 1967 (ADEA). This complicated issue has been the subject of much misinformation, and we hope our response clarifies what the rule will and will not do, and explains why the Commission took action.

On April 22, 2004, EEOC voted to approve a rule providing that employers will not violate the ADEA if they provide retiree health benefits that differ based on whether or not the retiree is eligible for Medicare (or a comparable state health benefit program). Before the rule becomes effective, it will be reviewed by the Office of Management and Budget (OMB) and published in the Federal Register.

EEOC enforces the provisions of the ADEA, which prohibits age discrimination against employees and retirees age 40 and above in all aspects of employment, including fringe benefits. The ADEA also grants EEOC broad authority to "establish such reasonable exemptions to and from any or all provisions of [the ADEA] as it may find necessary and proper and in the public interest."

To understand the rule, it necessary to be aware of the fact that no law requires employers to provide any health benefit to its employees or retirees. Only an employer that has entered into a collective bargaining agreement or other contractual commitment has any ongoing legal obligation to provide such benefit. It is also necessary to understand the history of the rule.

In August 2002, the United States Court of Appeals for the Third Circuit ruled in Erie County Retirees Ass'n v. County of Erie, 220 F.3d 193 (3d Cir. 2000), that the ADEA prohibited employers from altering benefits based upon Medicare eligibility unless the benefits for Medicare-eligible retirees are equal to those provided to non-Medicare-eligible retirees, or the employer incurs equal costs for both groups of retirees. In October, 2000, EEOC adopted the Erie County rule as its own position.

In August 2001, in response to concerns voiced by employer and labor groups about the Erie County rule, EEOC announced that it would review its policy concerning the application of the ADEA to employer-sponsored retiree health benefit plans. To begin the review process, EEOC developed an internal Retiree Health Benefits Task Force which met with a wide range of EEOC stakeholders, including employers, labor unions, human resource consultants, benefit consultants, actuaries, state and local government representatives, and representatives of AARP.

Those stakeholders told the Commission that most existing retiree health plans would not meet the Erie County criteria. They said that, because no law requires employers to provide any retiree health benefits and because employers found it difficult to assure that the benefits provided to pre and post Medicare eligible retirees were equal, many employers would react to the Erie County rule by eliminating or reducing health benefits to all retirees. Those groups include the Alliance for Retired Americans; American Federation of Teachers, AFL-CIO; 60 Plus Coalition; United Seniors Association; National Education Association, and the American Benefits Counsel.

As a result of these discussions, in July 2003, EEOC published a proposed exemption in the Federal Register for notice and comment. Many of the organizations, which filed detailed comments, provided information that confirming the notion that application of the Erie County rule was further eroding retiree health benefits. Accordingly, on April 22, 2004, the Commission voted to finalize the proposed exemption, providing that the ADEA will not apply to the practice of coordinating employer-provided retiree health coverage with eligibility for Medicare (or a State-sponsored equivalent). Specifically, the rule permits employers to provide health care coverage to retirees until they are eligible for Medicare at age 65 and to alter or eliminate that coverage when the retiree becomes eligible for Medicare without violating the ADEA.

You state that you believe the proposed final regulation would harm older retirees. However, the purpose of the rule is to protect existing retiree health benefits so that all retirees have access to adequate health insurance. The rule would not require any cuts to currently provided retiree health benefits and is not intended to encourage employers to alter their retirees' health benefits.

We appreciate your comments about the EEOC's web site and will forward them to the appropriate office. Thank you for your input.


Dianna B. Johnston
Assistant Legal Counsel

This page was last modified on April 27, 2007.

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