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EEOC Informal Discussion Letter

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: Severance Pay/Retiree Health

March 21, 2003

Dear :

This is in reply to your letter of March 6, 2003. You state that when you were laid off from your job, the severance pay you were due from your employer was reduced (to zero) by the value of retiree health insurance provided by your employer, even though you have refused health insurance coverage for the past fifteen years, and have declined to accept the retiree health coverage. The employer stated that you had no right to refuse the lifetime retiree health coverage, even though you were covered by your husband's health insurance plan.

Section 4(a)(1) of the Age Discrimination in Employment Act of 1967 (ADEA) prohibits discrimination against any individual with respect to compensation, terms, conditions, or privileges of employment, because of such individual's age. Section 11(l) of the ADEA states that age discrimination in employee benefits (such as severance pay) would violate section 4(a)(1). Unless permitted by other sections of the ADEA, reducing severance pay by any retirement benefit would violate section 4(a)(1).

You have cited EEOC's Compliance Manual section on Employee Benefits. As stated in the Manual, section 4(l)(2)(A) of the ADEA permits severance pay to be reduced by (i) "the value of any retiree health benefits received by an individual eligible for an immediate pension" and/or (ii) "the value of any additional pension benefits that are made available" to a retiree. Emphasis supplied. The difference in the statutory provisions is significant. Even if a retiree declines to receive an additional pension benefit, the employer is still permitted to take the credit against severance pay. On the other hand, if the retiree refuses the insurance coverage, the employer is not permitted to take the credit.

Without a detailed analysis of the health plan, we cannot determine whether the plan prohibits retirees from waiving lifetime coverage. If you have made a valid waiver of retiree health benefits, the employer is not permitted to take the credit against severance pay provided in section 4(l)(2).

If you wish to pursue a claim against your employer, you should contact EEOC's Philadelphia District Office, 21 South 5th Street, Suite 400, Philadelphia, Pennsylvania 19106, (215) 440-2600. That office will be able to discuss with you the procedures for protecting your rights under the ADEA. Charges of age discrimination must be filed the earlier of 300 days after

the discriminatory act or 30 days after the termination of proceedings before a state fair employment practices agency.

We hope this information has been helpful.


Dianna B. Johnston
Assistant Legal Counsel

This page was last modified on April 27, 2007.