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.
December 22, 2014
This letter responds to your inquiry to the U.S. Equal Employment Opportunity Commission (Commission or EEOC) Legal Counsel regarding health insurance options for Medicare-eligible employees. You ask whether your company, as a health care consultancy, might be encouraging clients to take unnecessary legal risks by instructing them to give eligible employees a choice between remaining on employer-provided group health insurance or receiving employer-provided payment of Medicare Part B premiums. You advise clients to provide workers with information about their options and, if they decide to accept Medicare Part B reimbursement, to require them to acknowledge, in writing, that they have reviewed the information and voluntarily chosen to withdraw from employer-provided group health insurance.(1) You note that workers enrolled in Medicare Part B would be eligible for Medicare Advantage plans, which you believe compare favorably to the coverage available under the company’s group health plan. Please note that this response does not address the federal Medicare and tax questions you raised, as the EEOC does not enforce those laws.
The EEOC enforces the Age Discrimination in Employment Act (ADEA), which prohibits employers from taking age-based adverse actions against applicants, current employees, and retirees age forty and older. Under the ADEA, the Commission and some courts have found that distinctions based on Medicare-eligibility are based on age, because most individuals qualify for Medicare by reaching age 65.(2) However, the ADEA only prohibits conduct that treats older workers adversely – not treatment that provides them with advantageous options in comparison to younger workers.(3) Therefore your proposal would not constitute an adverse action against older workers if, as applied in a specific circumstance, it creates an advantageous option available only to them.
Whether a specific plan in fact provides advantageous options, or imposes an adverse action, cannot be answered in the abstract, separate from an investigation into its facts. If the Medicare Part B reimbursement plan were to create an adverse action for older workers, it would be lawful only if it met an ADEA exemption or defense. The EEOC has promulgated a “retiree health” exemption that allows employers to limit or eliminate employer-provided health benefits for Medicare-eligible retirees, but this exemption does not apply to the health benefits of current employees.(4) Therefore, a health benefit for current employees based on Medicare-eligibility that creates an adverse action would violate the ADEA unless the employer either incurs an equal (or greater) cost for the benefit relative to the health insurance provided to younger employees, or provides an equivalent benefit to older employees.
The equal cost or equal benefit defense applies to “bona fide” employee benefit plans.(5) If older workers receive lesser benefits as a result of the employer expending equal costs relative to younger workers, then the benefit difference must be required by the terms of the benefit plan. 29 C.F.R. § 1625.10(c). Although EEOC regulations generally allow employers to group fringe benefits into a “benefit package” for purposes of determining whether it expends an equal cost on older workers,
“[a] benefit package approach shall not be used to justify reductions in health benefits greater than would be justified under a benefit-by-benefit approach. … Therefore, the ‘benefit package’ approach may not be used to reduce health insurance benefits by more than is warranted by the increase in the cost to the employer for those benefits alone.”
29 C.F.R. § 1625.10(f)(2)(iii).
If the employer instead attempts to comply with the equal benefit ADEA defense, EEOC regulations specifically address how to account for government-provided benefits:
(e) Benefits provided by the Government. An employer does not violate the Act by permitting certain benefits to be provided by the Government, even though the availability of such benefits may be based on age. For example, it is not necessary for an employer to provide health benefits which are otherwise provided to certain employees by Medicare. However, the availability of benefits from the government will not justify a reduction in employer-provided benefits if… an older employee is entitled to a lesser benefit of any type (including coverage for family and/or dependents) than a similarly situated younger employee. For example, the availability of certain benefits to an older employee under Medicare will not justify denying an older employee a benefit which is provided to younger employees and is not provided to the older employee by Medicare.
29 C.F.R. § 1625.10(e).
This letter does not constitute a formal opinion as defined in 29 C.F.R. § 1626.18 on which employers may rely pursuant to section 10 of the Portal to Portal Act of 1947, as incorporated by Section 7(e)(1) of the ADEA. Rather, it is an informal discussion of the questions you raised, and therefore “does not commit the Commission to the views expressed therein.” 29 C.F.R. § 1626.20(c). We nonetheless hope this informal discussion letter proves helpful. If you have further questions about this matter, feel free to contact me or Senior Attorney-Advisor Ray Peeler by calling the Office of Legal Counsel at (202) 663-4640.
Carol R. Miaskoff
Acting Associate Legal Counsel
1 If this acknowledgment requires workers to waive their rights under the Age Discrimination in Employment Act (ADEA), then it must comply with Older Workers Benefit Protection Act (OWBPA) requirements. More information on the minimum requirements for waivers under the OWBPA is available at 29 C.F.R. § 1625.22.
2 See 72 Fed. Reg 72938, 72939 (Dec. 26, 2007) (codified at 29 C.F.R. §§ 1625.30-32) (detailing court decisions and Commission positions applying the ADEA to claims involving the health benefits of Medicare-eligible retirees).
3 See generally, General Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 600 (2004) (finding no ADEA violation in a contract that provided full health care benefits only to retirees who were over age 50 by a certain date, because “the statute does not mean to stop an employer from favoring an older employee over a younger one.”).
4 29 C.F.R. app. § 1625.32 (“Q7. Does the exemption apply to health benefits that are provided to current employees . . . . ? A7. No.”); see 29 C.F.R. § 1625.32(c) (“[t]his exemption shall be narrowly construed”).
5 29 C.F.R. § 1625.10(b). A bona fide employee benefit plan “accurately describes” the plan terms and options in writing to all eligible employees, and it “actually provides the benefits in accordance with the terms of the plan.” Id.
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