EEOC v. Jefferson Co. Sheriff's Dept. & Kentucky Retirement Systems Brief as appellant November 15, 2004 No. 03-6437 IN THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant, v. JEFFERSON COUNTY SHERIFF'S DEPARTMENT, KENTUCKY RETIREMENT SYSTEMS, and COMMONWEALTH OF KENTUCKY, Defendants-Appellees. ______________________________________________________ On Appeal from the United States District Court for the Western District of Kentucky Docket No. 99-00500 Hon. Jennifer B. Coffman ______________________________________________________ FINAL COPY OF THE OPENING BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION ______________________________________________________ ERIC S. DREIBAND EQUAL EMPLOYMENT General Counsel OPPORTUNITY COMMISSION Office of General Counsel VINCENT J. BLACKWOOD 1801 L Street, N.W., Room 7046 Acting Associate General Counsel Washington, D.C. 20507 (202) 663-4734 CAROLYN L. WHEELER Assistant General Counsel DORI K. BERNSTEIN Attorney TABLE OF CONTENTS Page TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . .iii STATEMENT IN SUPPORT OF ORAL ARGUMENT. . . . . . . . . . . . viii JURISDICTIONAL STATEMENT . . . . . . . . . . . . . . . . . . . .1 STATEMENT OF THE ISSUE . . . . . . . . . . . . . . . . . . . . .1 STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . .2 Nature of the Case. . . . . . . . . . . . . . . . . . . . .2 Course of Proceedings and Disposition in the Court Below. .2 Statement of Facts. . . . . . . . . . . . . . . . . . . . .4 District Court Decision . . . . . . . . . . . . . . . . . 19 SUMMARY OF ARGUMENT. . . . . . . . . . . . . . . . . . . . . . 21 STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . 23 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 AN EMPLOYEE BENEFIT PLAN THAT DENIES OR PAYS FEWER DISABILITY BENEFITS TO AN OLDER EMPLOYEE BECAUSE HE IS ABOVE OR NEAR NORMAL RETIREMENT AGE WHEN HE BECOMES DISABLED FROM WORKING DISCRIMINATES BASED ON AGE WITHIN THE MEANING OF THE ADEA. . . . . . . . . . . . . . . . . 23 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . 56 CERTIFICATION OF COMPLIANCE WITH RULE 32(a). . . . . . . . . . 57 ADDENDA Tab Appellant's Designation of Appendix Contents . . . . . . . . .A-1 Kentucky Revised Statutes, pertinent provisions . . . . . . . . . . . . . . . . . . . .A-2 Age Discrimination in Employment Act, pertinent provisions . . . . . . . . . . . . . . . . . . . .A-3 Older Workers Benefit Protection Act, Title I, Pub. Law 101-433 (S. 1511) (1990). . . . . . . . . . . . . .A-4 29 C.F.R. § 1625.10. . . . . . . . . . . . . . . . . . . . . .A-5 EEOC Compliance Manual, Chapter 3: Employee Benefits, No. 915-003, excerpted portions . . . . . . . . . . . . . . . . . . . . .A-6 Halfhill v. Kentucky Retirement Systems, 2003 WL 21419587 (Ky. App. June 20, 2003) . . . . . . . . . .A-7 CERTIFICATE OF SERVICE TABLE OF AUTHORITIES Page CASES Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). . . . . . . . . . . . . . . . . . . . . 23 Arizona Governing Committee v. Norris, 463 U.S. 1073 (1983) . . . . . . . . . . . . . . 46, 47, 48, 54 Betts v. Hamilton County Bd. of Mental Retardation and Developmental Disabilities, 848 F.2d 692 (6th Cir. 1988) . . . . . . . . . . . . 26, 42, 52 Betts v. Hamilton County Bd. of Mental Retardation and Developmental Disabilities, 631 F. Supp. 1198 (S.D. Ohio 1986) . . . . . . . 25, 26, 42, 52 Coomer v. Bethesda Hospital, Inc., 370 F.3d 499 (6th Cir. 2004) . . . . . . . . . . . . . . . . 23 EEOC v. Kentucky Retirement Systems, 2001 WL 897433 (6th Cir. 2001), cert. denied, 534 U.S. 1079 (2002) . . . . . . . . . . . . . .3 General Dynamics Land Systems, Inc. v. Cline, 124 S. Ct. 1236 (2004). . . . . . . . . . . . . . . . . . . 24 Halfhill v. Kentucky Retirement Systems, 2003 WL 21419587 (Ky. App. June 20, 2003). . . . . . . . 32, 33 Hazen Paper Co. v. Biggins, 507 U.S. 604 (1993) . . . . . . . . . . 33, 43, 44, 47, 48, 54 Lorillard v. Pons, 434 U.S. 575 (1978). . . . . . . . . . . . . . . . . . . . . 48 Page Los Angeles Dept. of Water and Power v. Manhart, 435 U.S. 702 (1978). . . . . . . . . 44, 45, 46, 47, 48, 49, 54 Lyon v. Ohio Education Association and Professional Staff Union, 53 F.3d 135 (6th Cir. 1995). . . . . . . 49, 50, 51, 52, 53, 54 Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998) . . . . . . . . . . . . . . . . . . . . 28 Public Employees Retirement System of Ohio v. Betts, 492 U.S. 158 (1999) . . . . . . . . . . . . 25, 26, 27, 42, 52 Rowan v. Lockheed Martin Energy Systems, Inc., 360 F.3d 544 (6th Cir. 2004) . . . . . . . . . . . . . . . . 23 Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994). . . . . . . . . . . . . . . . . . . . . 30 Trans World Airlines, Inc. v. Thurston, 469 U.S. 111 (1985). . . . . . . . . . . . . 44, 48, 49, 54, 55 International Union, United Automobile, Aerospace & Agricultural Implement Workers of America v. Johnson Controls, Inc., 499 U.S. 187 (1991). . . . . . . . . . . . . . . . . . . . . 44 STATUTES 28 U.S.C. § 451. . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1331 . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1337 . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1343 . . . . . . . . . . . . . . . . . . . . . . . .1 Page 28 U.S.C. § 1345 . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1291 . . . . . . . . . . . . . . . . . . . . . . . .1 29 U.S.C. § 217. . . . . . . . . . . . . . . . . . . . . . . . .1 Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621 et seq. . . . . . . . . . . . . . . . . . . .1 29 U.S.C. § 621 note . . . . . . . . . . . . . . . . 25, 42, 53 29 U.S.C. § 623(a)(1). . . . . . . . . . . . .2, 23, 24, 28, 33 29 U.S.C. § 623(f)(1). . . . . . . . . . . . . . . . . . . . 55 29 U.S.C. § 623(f)(2)(A) . . . . . . . . . . . . . . . . . . 55 29 U.S.C. § 623(f)(2)(B) . . . . . . . . 18, 27, 30, 42, 51, 55 29 U.S.C. § 623(f)(2) (1989) . . . . . . . . . . 26, 27, 28, 29 29 U.S.C. § 623(i)(1)(B)(2). . . . . . . . . . . . . . . . . .6 29 U.S.C. § 623(l)(1)(A) . . . . . . . . . . . . . . . . . . 37 29 U.S.C. § 623(l)(3). . . . . . . . . . . . . . . . 38, 42, 53 29 U.S.C. § 626(b) . . . . . . . . . . . . . . . . . . . . 1, 2 29 U.S.C. § 630(l) . . . . . . . . . . . . . . . . . . . 24, 27 29 U.S.C. § 631(a) . . . . . . . . . . . . . . . . . . . . . 24 Older Workers Benefit Protection Act, Pub. Law 101-433 (1990). . . . . . . . . . . . . . . . 1, 2, 27 Kentucky Revised Statutes, Ky. Rev. Stat. § 16.505. . . . . . . . . . . . . . .5, 6, 8, 32 Ky. Rev. Stat. § 16.510. . . . . . . . . . . . . . . . . . . .5 Ky. Rev. Stat. § 16.576. . . . . . . . . . . . . . . . .5, 6, 8 Ky. Rev. Stat. § 16.577. . . . . . . . . . . . . . . . . . . .5 Ky. Rev. Stat. § 16.582. . . . . . . . . . .7, 8, 9, 10, 13, 32 Ky. Rev. Stat. § 16.582 (1999) . . . . . . . . . . . . . .7, 31 Ky. Rev. Stat. § 16.652. . . . . . . . . . . . . . . . . . . .5 Ky. Rev. Stat. § 61.510. . . . . . . . . . . . . . .5, 6, 8, 32 Ky. Rev. Stat. § 61.515. . . . . . . . . . . . . . . . . . . .4 Ky. Rev. Stat. § 61.525. . . . . . . . . . . . . . . . . . . .4 Page Ky. Rev. Stat. § 61.592. . . . . . . . . . . . . . . . . . 4, 5 Ky. Rev. Stat. § 61.595. . . . . . . . . . . . . 4, 5, 6, 8, 32 Ky. Rev. Stat. § 61.600. . . . . . . . . . .4, 7, 8, 10, 13, 32 Ky. Rev. Stat. § 61.600 (1999) . . . . . . . . . . . . . .7, 31 Ky. Rev. Stat. § 61.605. . . . . . . . . . . . . . 8, 9, 10, 13 Ky. Rev. Stat. § 78.545. . . . . . . . . . . . . . . . . . . .4 Ky. Rev. Stat. § 344.040 . . . . . . . . . . . . . . . . . . 33 2004 Kentucky Laws Ch. 33, HB 290. . . . . . . . . . . . . . . 10 RULES AND REGULATIONS 6 Cir. R. 34(a). . . . . . . . . . . . . . . . . . . . . . . viii 6 Cir. R. 26.1(a). . . . . . . . . . . . . . . . . . . . . . viii 6 Cir. R. 28(g). . . . . . . . . . . . . . . . . . . . . . . . 33 Fed. R. App. P. 4(a)(1). . . . . . . . . . . . . . . . . . . . .1 Fed. R. Civ. P. 56(c). . . . . . . . . . . . . . . . . . . . . 23 29 C.F.R. § 1625.10. . . . . . . . . . . . . . 26, 27, 28, 29, 30 LEGISLATIVE HISTORY H.R. Rep. No. 664, 101st Cong., 2d Sess. (1990). . . . 37, 39, 53 S. Rep. No. 263, 101st Cong. 2d Sess. (1990) . . . 37, 39, 52, 53 Cong. Rec. (Oct. 2, 1990). . . . . . . . . . . 38, 39, 40, 53, 54 Page Legislative History of the Older Workers Benefit Protection Act (S. 1511 and Related Bills), prepared for the Committee on Labor and Human Resources, U.S. Senate (U.S. Gov. Printing Office, June 1991)40, 41 ADMINISTRATIVE GUIDANCE EEOC Compliance Manual, Chapter 3: Employee Benefits, No. 915-003 (Oct. 2000)30, 31, 32, 34, 35, 36, 38, 40, 54 STATEMENT IN SUPPORT OF ORAL ARGUMENT This appeal concerns whether the benefit plan provided by the Commonwealth of Kentucky to state and county employees discriminates based on age against older employees who are disqualified from disability retirement, or paid fewer annual disability benefits, solely because they became disabled from working at or near normal retirement age. Due to the complexity and significance of the issues raised in this appeal, plaintiff-appellant Equal Employment Opportunity Commission believes oral argument would assist the Court. See 6 Cir. R. 34(a). As an agency of the United States government, the Commission is exempt from filing a corporate disclosure statement. See 6 Cir. R. 26.1(a). JURISDICTIONAL STATEMENT The Equal Employment Opportunity Commission (EEOC or Commission) sued Kentucky Retirement Systems (KRS), the Jefferson County Sheriff's Office (Jefferson County), and the Commonwealth of Kentucky (Kentucky), in the federal District Court for the Western District of Kentucky, to enforce the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621 et seq., as amended by the Older Workers Benefit Protection Act (OWBPA), Pub. Law 101-433 (1990). (Record Entry Number (R.) 1, Complaint p.1, Appendix (App.) p.21). The district court had subject matter jurisdiction over the EEOC's suit pursuant to 28 U.S.C. §§ 451, 1331, 1337, 1343, and 1345, and 29 U.S.C. §§ 217 and 626(b). The district court entered final judgment against the EEOC on September 4, 2003. (R.137, Judgment, App. p.28). The Commission timely filed a notice of appeal on November 3, 2003. (R.138, Notice of Appeal, App. p.38). See Fed. R. App. P. 4(a)(1). This Court has appellate jurisdiction under 28 U.S.C. § 1291. STATEMENT OF THE ISSUE Whether an employee benefit plan that denies or pays fewer annual disability benefits to an older employee because he is above or near normal retirement age when he becomes disabled from working discriminates based on age within the meaning of the ADEA? STATEMENT OF THE CASE Nature of the Case This is a public enforcement action brought by the Commission pursuant to the ADEA, 29 U.S.C. § 626(b). (R.1, Complaint p.1, App. p.21). The EEOC claims that KRS, Jefferson County, and Kentucky operate an employee benefit plan that denies or pays fewer disability retirement benefits to older employees over 40 on the basis of age, in violation of the ADEA, 29 U.S.C. § 623(a)(1), as amended by the OWBPA.<1> (Id. p.3, App. p.23). The Commission seeks injunctive and monetary relief on behalf of all individuals who were denied disability benefits, or receive fewer benefits, because of age. (Id. pp.4-6, App. pp.24-26). The EEOC appeals from an order granting summary judgment and dismissing all claims. (R.136, Order, App. p.29). Course of Proceedings and Disposition in the Court Below The EEOC filed this ADEA enforcement action against KRS, Jefferson County, and Kentucky on August 2, 1999. (R.1, Complaint, App. p.21). Defendants moved to dismiss the EEOC's suit as barred by sovereign immunity under the Tenth and Eleventh Amendments of the federal Constitution. (R.20, KRS Motion to Dismiss; R.30, Kentucky Motion to Dismiss; R.34, Jefferson County Motion to Dismiss). The district court denied the motions to dismiss on September 25, 2000. (R.27, Mem. Op. and Order; R.37, Order). Each defendant filed an interlocutory appeal. (R.28, KRS Notice of Appeal; R.38, Jefferson County Notice of Appeal; R.41, Kentucky Notice of Appeal). The district court stayed proceedings pending resolution of the appeals. (R.37, Order). In an unpublished opinion issued August 2, 2001, this Court held that "to the extent that the EEOC seeks Defendants' compliance with the ADEA, as well as relief on behalf of [the charging party] and those similarly situated for ADEA violations, Defendants are not entitled to immunity on either Tenth or Eleventh Amendment grounds," and largely affirmed the district court. EEOC v. Kentucky Retirement Systems, 2001 WL 897433, **8 (6th Cir. 2001). The Court reversed the "denial of immunity with regard to section D of the EEOC's prayer for relief," holding that "Defendants are entitled to Tenth Amendment immunity from a mandate that [the State] ‘enact permanent legislation'" to conform its disability plan to the ADEA, as requested in that portion of the EEOC's complaint. Id. at **9. The Supreme Court denied certiorari on January 7, 2002. Kentucky Retirement Systems v. EEOC, 534 U.S. 1079 (2002). This Court issued its mandate on January 24, 2002. (R.47, Mandate). The EEOC moved for summary judgment on liability, (R.72, EEOC Motion for SJ), and defendants filed a cross-motion for summary judgment. (R.100, KRS Motion for SJ). On September 4, 2003, the district court granted summary judgment against the EEOC, (R.136, Order, App. p.29), and entered final judgment. (R.137, Judgment, App. p.28). The EEOC filed a timely notice of appeal on November 3, 2003. (R.138, Notice of Appeal, App. p.38). Statement of Facts KRS operates a retirement program for state and county employees of participating departments. See Ky. Rev. Stat. §§ 16.510, 61.515, 61.525, 78.545. KRS provides service (also called "normal") retirement benefits, Ky. Rev. Stat. §§ 16.576, 61.592(4), 61.595, and disability retirement benefits, Ky. Rev. Stat. §§ 16.582, 61.592(4), 61.600, pursuant to terms set forth in statutory provisions. These provisions establish eligibility requirements and formulas to compute the benefits of employees in "hazardous" positions, i.e., "[a]ny position whose principal duties involve active law enforcement," Ky. Rev. Stat. § 61.592(1)(a), (hazardous employees), and employees in all other jobs (non-hazardous employees).<2> KRS Normal Retirement Benefits The "normal retirement date" of an employee with at least five years of service in a hazardous job is his 55th birthday. Ky. Rev. Stat. §§ 16.505(15), 16.576(1).<3> The "normal retirement date" of an employee in a non-hazardous job is his 65th birthday. Ky. Rev. Stat. §§ 61.510(18), 61.595(1). A hazardous employee is eligible to retire and receive unreduced pension benefits at 55 (normal retirement age) with five years of service, or after 20 years of service regardless of age. Ky. Rev. Stat. §§ 16.576(1), 16.577(2). A non-hazardous employee is eligible to retire with an unreduced pension at 65 (normal retirement age), or after 27 years of service regardless of age. Ky. Rev. Stat. §§ 61.595(1), (2)(b). The pension benefits of an employee who chooses to retire "prior to normal retirement date" – i.e., before he turns 55/65 – "shall be reduced to reflect the earlier commencement of benefits." Ky. Rev. Stat. §§ 16.577(1), 61.595(2). An employee's service retirement benefits are calculated as a fixed percentage of his "final compensation" multiplied by the years of service he has accrued, as follows: a hazardous employee receives 2.5% of his final compensation for each year of service (i.e., 2.5% x final compensation x years of service), Ky. Rev. Stat. § 16.576(3); a non-hazardous employee receives 2% of his final compensation for each year of service (i.e., 2% x final compensation x years of service). Ky. Rev. Stat. § 61.595(1).<4> "Final compensation" is determined by computing the highest average salary an employee earned during a prescribed number of fiscal years. See Ky. Rev. Stat. §§ 16.505(9), 61.510(14). The KRS plan does not cap or limit the length of service counted toward accrual of normal retirement benefits. See 29 U.S.C. § 623(i)(1)(B)(2). The only statutory limit on the amount of such benefits is the "maximum benefit as set forth in the Internal Revenue Code." Ky. Rev. Stat. §§ 16.576(3), 61.595(1)(f). Thus, an employee may continue to work indefinitely beyond his normal retirement date, accruing additional years of service that will increase his annual pension when he elects to retire. A hazardous employee, for instance, who retires after 40 years with final compensation of $60,000 will receive annual benefits of $60,000 (2.5% x $60,000 x 40). A non-hazardous employee who retires after 40 years with finalcompensation of $50,000 will receive annual benefits of $40,000 (2% x $50,000 x 40). The EEOC has not challenged any aspect of the KRS normal retirement plan. KRS Disability Retirement Benefits KRS provides disability retirement benefits to an employee who becomes incapacitated from performing his job, or similar work, due to "bodily injury, mental illness, or disease" that is expected to last for at least a year, or to result in death. See Ky. Rev. Stat. §§ 16.582(1), (3)-(4), 61.600(2)-(4). There is a five- year minimum service requirement to qualify for disability retirement, which is waived for hazardous employees disabled in the line of duty. Ky. Rev. Stat. §§ 16.582(2)(a), 61.600(1)(a). A hazardous employee disabled in the line of duty is also guaranteed monthly benefits of at least 25% of his final monthly salary, and a dependent children's benefit equal to 10% of his monthly salary for each dependent child, up to a 40% maximum dependent children's benefit. Ky. Rev. Stat. § 16.582(6). Prior to July 2000, KRS required an employee to "be less than normal retirement age" to "qualify to retire on disability." See Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b) (1999), included as an addendum to this brief at Tab A- 2. The plan by its terms disqualified employees from disability retirement based solely on age: hazardous employees were denied disability benefits if they became disabled from working at 55 or older, and non-hazardous employees were disqualified at 65 or older. See Ky. Rev. Stat. §§ 16.505(15), 61.510(18). Effective July 2000, after the EEOC filed suit, Kentucky amended the plan to omit the explicit reference to "normal retirement age," and substituted language that disqualifies from disability retirement any employee who is "eligible for an unreduced retirement allowance." Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b). As amended, the KRS plan still excludes from disability retirement employees who have reached normal retirement age (i.e., hazardous employees with five years of service at 55, and non-hazardous employees at 65), and also disqualifies employees who have accrued sufficient seniority to receive unreduced normal retirement benefits (i.e., hazardous employees with 20 years, and non-hazardous employees with 27 years). Disability retirement benefits are calculated using the same percentage and final compensation factors used to compute unreduced normal retirement benefits (i.e., 2.5% of final compensation for hazardous employees; 2% of final compensation for non-hazardous employees). See Ky. Rev. Stat. §§ 16.582(5), 16.576(3) (hazardous); §§ 61.605, 61.595(1) (non-hazardous). The formulas to determine disability benefits differ from the normal retirement formulas, however, in one crucial respect: the third factor - the service multiplier - is increased. See Ky. Rev. Stat. §§ 16.582(5), 61.605. For hazardous employees who become disabled with fewer than 20 years of service, service shall be added beginning with his last date of paid employment and continuing to his fifty-fifth birthday. The maximum service credit added shall not exceed the total service the member had on his last day of paid employment, and the maximum service credit for calculating his retirement allowance, including his total service and service added under this section, shall not exceed twenty (20) years. Ky. Rev. Stat. § 16.582(5). For non-hazardous employees who become disabled, service credit shall be added to the employee's total service beginning with his last date of paid employment and continuing to his sixty-fifth birthday; however, the maximum service credit added shall not exceed the total service the employee had upon his last day of paid employment, and the maximum combined service credit for calculating his disability retirement allowance, including total service and added service shall not exceed twenty-five years. If, however, an employee has accumulated twenty-five (25) or more years of total service, he shall receive added service necessary to bring his combined service credit, including total and added service, to twenty- seven (27) years. Ky. Rev. Stat. § 61.605. To determine the service multiplier used to compute disability benefits under these formulas, KRS adds to the number of years a disabled employee has actually worked the lesser of: (1) the number of years between his age and normal retirement age (i.e., 55/65 - age at disability), or (2) the number of years he has accrued, up to a total maximum multiplier of 20 for a hazardous employee or 25 for a non-hazardous employee.<5> Stated as an equation, the service multiplier used to determine an employee's disability benefits is: # years of service + [the lesser of: (55/65 - age at disability) OR (# years of service)] up to a maximum multiplier of 20/25.<6> The formula for calculating disability benefits operates as follows. A hazardous employee who retires on disability at 45 after 10 years of service, for example, will receive benefits based a multiplier of 20 (10 years of service plus the 10-year difference between his age/45 and normal retirement age/55). If he retires on disability at 50 after 10 years of service, his benefits will be based on a multiplier of 15 (10 years plus the five-year difference between his age/50 and 55). If he becomes disabled at 45 with seven years of service, his benefits will be based on a multiplier of 14 (double his seven years of service, because the 10-year difference between his age/45 and 55 exceeds his seven years of service). If he retires on disability at 50 with seven years of service, he will receive benefits based on a multiplier of 12 (his seven years of service plus the 5-year difference between his age/50 and 55, because the 5-year age differential is less than his seven years of service). An employee who retires on disability at 45 or 50 after 16 years of service will receive benefits based on the maximum multiplier of 20. Similarly, a non-hazardous employee who retires on disability at 55 after 15 years of service will receive benefits based on a service multiplier of 25 (15 years of service plus the 10-year difference between his age/55 and normal retirement age/65). If he retires on disability at 60 after 15 years of service, his benefits will be based on a multiplier of 20 (15 years of service plus the five-year difference between his age/60 and 65). If he is disabled at 50 with 12 years of service, he will receive benefits based on a multiplier of 24 (twice his 12 years of service, since the 15-year difference between his age/50 and 65 exceeds his 12 years of service). If he retires on disability at 55 with 12 years of service, his benefits will be based on a multiplier of 22 (his 12 years of service, plus the 10-year difference between his age/55 and 65, since the 10-year age differential is less than his 12 years of service). If he takes disability retirement at 50 or 55 after 20 years of service, his benefits will be based on the maximum multiplier of 25. For ease of reference, the eligibility criteria and formulas for calculating normal and disability retirement benefits for employees in hazardous and non- hazardous positions are summarized in the chart below: Chart A - KRS Benefit Eligibility Criteria and Formulae Hazardous Non-Hazardous Unreduced Normal Retirement Eligibility age 55 with 5 years OR age 65 OR 20 years 27 years Amount 2.5% x final pay x # years 2% x final pay x # years Disability Retirement Eligibility disabling condition disabling condition 5 years (waived if line-of-duty) 5 years under age 55 under age 65 less than 20 years less than 27 years Amount 2.5% x final pay x 2% x final pay x [# years + lesser of [# years + lesser of (55-age) OR (# years), (65-age) OR (# years), up to 20 years] up to 25 years] Under the KRS plan, as amended in July 2000, an employee who can no longer work due to disability is disqualified from disability retirement and must take normal retirement if he is above normal retirement age (55/65), or if he has 20/27 years of service. Ky. Rev. Stat.§§ 16.582(2)(b), 61.600(1)(b). An employee, regardless of age, who is excluded from disability retirement because he has accumulated sufficient seniority to retire with an unreduced pension (i.e., 20/27 years) will invariably receive annual normal retirement benefits that equal or exceed the amount he would have received had he been eligible to retire on disability, because disability benefits are capped at or below that amount. See Ky. Rev. Stat. §§ 16.582(5) (20-year cap), 61.605 (25-year cap). By contrast, an employee with fewer than 20/27 years of service who is disqualified from disability retirement solely because he has reached normal retirement age will invariably receive less each year in normal retirement benefits than if he were younger (i.e., under 55/65) and therefore eligible for disability retirement. The effect of an employee's age in calculating his disability benefits can be illustrated through the example of an employee who is disabled after 10 years in a hazardous job with final compensation of $50,000. The amount of benefits he receives annually will depend on how old he is when his disability requires him to stop working. If he is over 55, he is disqualified from disability retirement and will receive annual normal retirement benefits of $12,500: 2.5% x $50,000 x 10. If he is under 55, and therefore eligible for disability retirement, the younger he is when he retires, the greater his annual benefits will be, up to the 20-year cap on the disability benefit multiplier. If he retires at 50, he will receive benefits of $18,750: 2.5% x 50,000 x 15 (10 years plus the 5-year difference between normal retirement age/55 and his age/50). If he retires at 45 or younger, his benefits will be $25,000: 2.5% x $50,000 x 20 (10 years plus the 10-year difference between 55 and 45), due to the 20-year cap on the disability benefit multiplier. A hazardous employee with 10 years of service who is 55 or older when be becomes disabled and retires will thus receive only half as much in yearly benefits as an employee with the same length of service and final pay who is disabled at 45 or younger. The effect of age in computing the annual benefits of a hazardous employee who must retire due to disability is graphically illustrated in the chart below: Chart B - KRS Benefit to Hazardous Employee Disabled from Working Age at Final Pay # Years Multiplier Annual Monthly Disability Service Benefits Payment 55 or older $50,000 10 10 $12,500 $1,041.66 53 $50,000 10 12 $15,000 $1,250.00 50 $50,000 10 15 $18,750 $1,562.50 48 $50,000 10 17 $21,250 $1,770.83 45 or younger $50,000 10 20 $25,000 $2,083.33 Similarly, the effect of a non-hazardous employee's age in computing his disability benefits can be illustrated through the example of an employee who becomes disabled after 15 years with final compensation of $50,000. Once again, the amount of his annual retirement benefits will depend on his age when he becomes too disabled to work. If he is 65 or older, he is disqualified from disability retirement and will receive annual normal retirement benefits of $15,000: 2% x $50,000 x 15. If he is under 65, he is eligible for disability retirement, and the younger he is when he retires, the greater his annual benefits will be, up to the 25-year cap on the disability benefit multiplier. If he retires at 60, he will receive annual disability benefits of $20,000: 2% x $50,000 x 20 (15 years of service plus the 5-year difference between normal retirement age/65 and his age/60). If he retires at 55 or younger, his annual disability benefits will be $25,000: 2% x $50,000 x 25 (15 years plus the 10-year difference between 65 and 55), due to the 25-year cap. The effect of age in computing the annual benefits of a non-hazardous employee who must retire due to disability is illustrated in the chart below: Chart C - KRS Benefit to Non-Hazardous Employee Disabled from Working Age at Final Pay # Years Multiplier Annual Monthly Disability Service Benefits Payment 65 or older $50,000 15 15 $15,000 $1,250.00 63 $50,000 15 17 $17,000 $1,416.66 60 $50,000 15 20 $20,000 $1,666.66 58 $50,000 15 22 $22,000 $1,833.33 55 or younger $50,000 15 25 $25,000 $2,083.33 As these examples and charts illustrate, an employee's age when he becomes disabled and must stop working will determine the type and amount of retirement benefits he receives. In every case, a worker younger than normal retirement age (55/65) who retires on disability will receive more benefits each year than an older employee who retires from the same job, with the same disabling condition, length of service, and final compensation, who becomes disabled after reaching 55/65 and must take normal retirement. Furthermore, assuming every factor, other than age, that is relevant to determine an employee's benefits (i.e., type of position, disabling condition, final compensation, and length of service) is identical, the amount paid annually to a worker who retires on disability at a younger age will frequently exceed (and will never be less than) the annual benefits of a worker who retires due to disability at an older age. ADEA Charge and Litigation In February 1996, Charles Lickteig filed administrative charges claiming he was denied disability retirement benefits because of age, in violation of the ADEA. (R.106, Lickteig Charges, Ex. 1-3 to Ryan Affidavit, attached to EEOC Response to Cross-Motion for Summary Judgment, App. pp.57-59). Lickteig began working as a Deputy Sheriff for Jefferson County in 1978. (R.106, Lickteig Affidavit p.1, attached to EEOC Response to Cross-Motion for Summary Judgment, App. p.48). Although he planned to continue working and did not want to retire, by 1995 Lickteig's various medical conditions (deteriorating vertebra, arthritis, nerve damage, and Parkinson's disease) had seriously impaired his ability to perform his hazardous duty job, or any other position. (Id.). At age 61, after 17 years of service, Lickteig applied for disability retirement benefits. (Id. p.2; App. p.49). On August 25, 1995, KRS informed Lickteig by letter that he was "ineligible to apply for Disability Retirement since you are over age 55 and in a hazardous position." (R.106, KRS Letter, Ex. 1 to Lickteig Affidavit, attached to EEOC Response to Cross-Motion for Summary Judgment, App. p.51). Upon investigating Lickteig's charge, the EEOC determined that KRS denies disability retirement benefits, or pays fewer benefits, to employees over 40 because of age. (R.1, Complaint p.3, App. p.23). After conciliation efforts failed, the EEOC sued KRS, Kentucky, and Jefferson County on August 2, 1999.<7> (Id. p.3, App. p.23). The EEOC sought to enjoin the age-based denial or reduction of disability benefits to employees over 40, and requested monetary relief for employees who had been denied disability benefits, or paid lower benefits, because of age. (Id. pp.4-6, App. pp.24-26). The parties filed cross-motions for summary judgment. The EEOC argued that the KRS plan, by denying disability benefits to otherwise eligible employees because they are over normal retirement age (55/65), and by paying lower annual benefits to older disabled retirees than to similarly situated younger retirees, facially discriminates based on age in violation of the ADEA. (R.72, EEOC Motion for Summary Judgment pp.9-10). KRS countered that the EEOC did not present prima facie evidence of age discrimination, and asserted a statutory affirmative defense under 29 U.S.C. § 623(f)(2)(B)(i), that the difference in benefits paid to older employees who retire due to disability is "cost justified" and therefore not unlawful. (R.100, KRS Motion for Summary Judgment p.1). District Court Decision The district court granted summary judgment for KRS and dismissed the Commission's suit. (R.136, Order, App. p.29). The court held the EEOC "failed to make out a prima facie case of discrimination" based on age, and declined to address KRS's affirmative defenses to liability. (Id. p.2, App. p.30). "If prohibited stereotypes have not played a role in the institution of the disability retirement benefits plan," the court reasoned, "then the plan is not the result of inaccurate and denigrating generalizations about age, but instead represents an accurate judgment about employees." (Id. p.3, App. p.31). The court rejected the EEOC's claim that the KRS plan, by its terms, discriminates based on age in denying disability benefits to employees because they are above normal retirement age (55/65) when they become disabled from working. (Id. pp. 4-5, App. pp.32-33). The court observed that "age is necessarily a factor" in a retirement program, and decided it would be "illogical" to find the KRS "retirement policy facially discriminatory merely because age is a factor in the plan." (Id.). In the court's view, a ruling in favor of the EEOC would "undermin[e] every retirement policy in existence" and do "nothing to further the purpose of the ADEA, which is to prevent employers from making employment decisions (including provision of benefits) based on denigrating stereotypes about age." (Id. p.5, App. p. 33). "Disability retirement is for those employees who become disabled and are forced to retire prematurely," the court determined, so eligibility is limited to "only . . . those employees who become disabled before they are entitled to receive normal retirement, and not because the . . . plan discriminates against older workers." (Id. p.7, App. p.35). Nor was the court persuaded that "the mechanism used to calculate" benefits "is facially discriminatory because the closer an employee is to reaching normal retirement age (fifty-five [or sixty-five]) before becoming disabled and seeking disability retirement benefits, the fewer service credits" will be added to his actual years of service in computing his annual benefits. (Id. p.5, App. p.33). "The service credit calculation," the court explained, "takes age into consideration because the credits are intended only to provide the disabled employee with those benefits that would have been available through normal retirement had the employee not become disabled" before reaching normal retirement age. (Id. p.8, App. p.36). An employee's "age comes into play in the determination" of his disability benefits, the court concluded, "only because age is one of the factors of [normal] retirement eligibility." (Id.) SUMMARY OF ARGUMENT The KRS employee benefit plan, by its terms, requires disparate treatment of older employees based on the age when they become disabled from working and must retire. Pursuant to the explicit terms of the plan, KRS uses an employee's age to determine whether he is eligible for disability retirement and, if so, to compute the amount of his annual disability benefits. The plan denies disability benefits to otherwise eligible employees solely because they were over normal retirement age (55/65) when they became disabled from working, and pays lower annual benefits to older disabled workers than to younger workers who are similarly situated in every relevant respect other than age. The plan's disparate treatment of older disabled employees who, but for their age, would receive more benefits each year, is facial discrimination based on age. No further evidence is required to establish a claim of intentional age discrimination under the ADEA. The district court plainly erred in holding that the EEOC failed to present a prima facie case of age discrimination. The undisputed facts demonstrate that KRS discriminates against older workers who, solely because of their age, are denied disability benefits or receive fewer annual benefits than similarly situated younger retirees. In granting summary judgment against the Commission, the court ignored the text, structure, history, and purpose of the ADEA, as amended by the OWBPA, and the pertinent administrative regulations and interpretive guidance. Properly understood, these authorities establish that the ADEA prohibits an employee benefit plan that denies or reduces disability benefits to older employees because they became disabled at or near normal retirement age, unless the employer demonstrates the disparate treatment is justified under an affirmative defense provided by Congress. KRS asserted a statutory affirmative defense to liability and sought to prove that the cost of providing disability retirement benefits to older workers was at least equal to the cost incurred to provide such benefits to younger employees. The EEOC contested the validity of KRS's equal cost defense on legal and evidentiary grounds, and the district court declined to address it, having erroneously concluded that the EEOC failed to present a prima facie case. Absent a viable affirmative defense, the age-based denial and calculation of disability benefits in the KRS plan discriminates against older employees in violation of the ADEA. Summary judgment therefore must be reversed. This Court should remand the case to determine whether KRS can meet its statutory burden to prove such discrimination is not unlawful because it satisfies the ADEA's equal cost defense. STANDARD OF REVIEW Summary judgment is reviewed de novo. Rowan v. Lockheed Martin Energy Systems, Inc., 360 F.3d 544, 547 (6th Cir. 2004). Summary judgment is proper where the record materials "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In deciding a summary judgment motion, "the court must view the evidence and draw all reasonable inferences in favor of the nonmoving party." Coomer v. Bethesda Hospital, Inc., 370 F.3d 499, 504 (6th Cir. 2004). "The proper inquiry is ‘whether the evidence is so one-sided that one party must prevail as a matter of law.'" Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). ARGUMENT AN EMPLOYEE BENEFIT PLAN THAT DENIES OR PAYS FEWER DISABILITY BENEFITS TO AN OLDER EMPLOYEE BECAUSE HE IS ABOVE OR NEAR NORMAL RETIREMENT AGE WHEN HE BECOMES DISABLED FROM WORKING DISCRIMINATES BASED ON AGE WITHIN THE MEANING OF THE ADEA. The ADEA makes it unlawful for an employer to "discriminate against any individual [age 40 or older] with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age." 29 U.S.C. §§ 623(a)(1), 631(a). "The term ‘compensation, terms, conditions, or privileges of employment' encompasses all employee benefits, including such benefits provided pursuant to a bona fide employee benefit plan." 29 U.S.C. § 630(l). The ADEA thus generally "forbids discriminatory preference for the young over the old" in providing benefits to employees over 40. See General Dynamics Land Systems, Inc. v. Cline, 124 S. Ct. 1236, 1239 (2004); id. at 1240 ("the ADEA's prohibition covers ‘discriminat[ion] . . . because of [an] individual's age,' . . . that helps the younger by hurting the older"). By its terms, the KRS plan denies disability retirement benefits to older workers who become disabled at 55/65 or older, and pays fewer benefits to an older employee than to a younger employee with the same job, the same seniority, the same compensation, and the same disabling condition, solely because the older worker was closer to age 55/65 when he became disabled. The plan thus disfavors older employees solely because they were over, or close to, normal retirement age when disabled from working. Despite these undisputed facts, the district court held the EEOC "failed to show how this retirement plan's age elements are discriminatory, either facially or through disparate treatment combined with intent." (R.136, Order p.6, App. p.34). The court's conclusion cannot be reconciled with the plain language, legislative history, and congressional intent of the ADEA, as amended by the OWBPA. In 1990, Congress found that "as a result of the decision of the Supreme Court in Public Employees Retirement System of Ohio v. Betts, [492 U.S. 158] (1989), legislative action is necessary to restore the original congressional intent in passing and amending the [ADEA], which was to prohibit discrimination against older workers in all employee benefits except when age-based reductions in employee benefit plans are justified by significant cost considerations." 29 U.S.C. § 621 note. At issue in Betts, as in this case, was whether the ADEA proscribed a state-sponsored benefit plan that disqualified employees over a specified age (60 and up) from disability retirement, and instead provided lower service retirement benefits to an employee who retired when she became disabled from working at age 61. See Betts, 492 U.S. at 162-63. The district court in Betts held the "retirement scheme was discriminatory on its face, in that it denied disability retirement benefits to certain employees on account of their age." Id. at 164 (citing Betts v. Hamilton County Bd. of Mental Retardation and Developmental Disabilities, 631 F. Supp. 1198, 1202-03 (S.D. Ohio 1986)). The court further ruled that the discrimination was not justified under ADEA section 4(f)(2), "which exempt[ed] from the [ADEA's] prohibitions certain actions taken in observance of ‘the terms of . . . any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of [the Act] . . . .'" Betts, 492 U.S. at 164 (quoting 29 U.S.C. § 623(f)(2)). "Relying on interpretive regulations promulgated by the EEOC" in 29 C.F.R. § 1625.10, the district court held that employee benefit plans were exempt from the general prohibition against age discrimination in ADEA section 4(a), 29 U.S.C. § 623(a), "only if any age-related reductions in employee benefits are justified by the increased cost of providing those benefits to older employees." Betts, 492 U.S. at 164. Because the "reduction in available benefits at age 60 . . . [was] not shown to be justified by considerations of increased costs, the district court concluded that [the retirement] plan was not entitled to claim the protection of the § 4(f)(2) exemption." Id. This Court agreed that the "age-based reduction in benefits" had not been "justified by age-related cost considerations," and affirmed. Id. at 164-65 (citing Betts v. Hamilton County Bd. of Mental Retardation and Developmental Disabilities, 848 F.2d 692 (6th Cir. 1988)). The Supreme Court reversed, based on its interpretation of section 4(f)(2) "as exempting the provisions of a bona fide benefit plan from the purview of the ADEA so long as the plan is not a method of discriminating in other, non-fringe- benefit aspects of the employment relationship." Id. at 177. In so holding, the Court in Betts ruled that 29 C.F.R. § 1625.10, the EEOC's regulation interpreting section 4(f)(2) to exempt only "benefit plans in which all age-based reductions in benefits are justified by age-related cost considerations," was "contrary to the plain language of the statute" and hence "invalid." Betts, 492 U.S. at 175. The legislative response to Betts was swift and unequivocal. The year after Betts was decided, Congress amended the ADEA by enacting the OWBPA, Pub. L. 101-433. In a new subsection to the ADEA's definitions, Congress provided that "[t]he term ‘compensation, terms, conditions, or privileges of employment' encompasses all employee benefits, including such benefits provided pursuant to a bona fide employee benefit plan." 29 U.S.C. § 630(l). Congress also codified an "equal cost" defense to justify age-based reductions in employee benefits, and incorporated by reference the EEOC regulation invalidated by the Court in Betts. As amended, section 4(f)(2)(B) reads, in pertinent part: (f) It shall not be unlawful for an employer, employment agency, or labor organization – . . . (2) to take any action otherwise prohibited under subsection (a), (b), (c), or (e) of this section – . . . (B) to observe the terms of a bona fide employee benefit plan – (i) where, for each benefit or benefit package, the actual amount of payment made or cost incurred on behalf of an older worker is no less than that made or incurred on behalf of a younger worker, as permissible under section 1625.10, title 29, Code of Federal Regulations (as in effect on June 29, 1989); . . . (ii) . . . An employer . . . acting . . . under clause (i) . . . of subparagraph (B), shall have the burden of proving that such actions are lawful in any civil enforcement proceeding brought under this chapter . . . . 29 U.S.C. § 623(f)(2)(B). As the Supreme Court has recognized, "[t]he policy of the OWBPA is . . . clear from its title: It is designed to protect the rights and benefits of older workers." Oubre v. Entergy Operations, Inc., 522 U.S. 422, 427 (1998). The EEOC regulation, now codified in the statutory text, states that "[s]ection 4(f)(2) is an exception to [the ADEA's] general prohibition" of age discrimination "‘against any individual with respect to his compensation, terms, conditions, or privileges of employment.'" 29 C.F.R. § 1625.10(a)(2) (quoting 29 U.S.C. § 623(a)).<8> "Where . . . an employee benefit plan provides the same level of benefits to older workers as to younger workers, there is no violation of section 4(a), and accordingly the practice does not have to be justified under section 4(f)(2)." Id. Rather, "the section 4(f)(2) exception is limited to otherwise discriminatory actions which are actually prescribed by the terms of a bona fide employee benefit plan." 29 C.F.R. § 1625.10(c). "In general," the regulation states, "a plan or plan provision which prescribes lower benefits for older employees on account of age" falls within the statutory exemption of section 4(f)(2), and is therefore lawful, "provided that the lower level of benefits is justified by age-related cost considerations." Id. Thus, a "benefit plan will be considered in compliance with the statute where the actual amount of payment made, or cost incurred, in behalf of an older worker is equal to that made or incurred in behalf of a younger worker, even though the older worker may thereby receive a lesser amount of benefits or insurance coverage." 29 C.F.R. § 1625.10(a)(1). Because section 4(f)(2) is "an exception from the general non- discrimination provisions of the Act, the burden is on the one seeking to invoke the exception to show that every element has been clearly and unmistakably met," and the "exception must be narrowly construed." Id. These statutory and regulatory provisions, properly understood, compel the conclusion that KRS discriminates against older workers who are denied disability retirement, or receive fewer disability benefits, solely because they become disabled from working at or near normal retirement age. Unless KRS can justify this age-based disparity in benefits under a statutory affirmative defense, such discrimination is prohibited by the ADEA. In October 2000, the EEOC issued interpretive guidance explaining the proper analysis of claims of discrimination in employee benefits, and the correct application of the ADEA's equal cost defense. See EEOC Compliance Manual, No. 915.003 (Oct. 3, 2000) (Benefit Guidance).<9> Because the Benefit Guidance interprets the Commission's own regulation, it deserves "substantial deference" and "must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation." See Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (internal quotation marks and citations omitted). Judicial deference is particularly warranted in this instance, where Congress has codified the EEOC's regulation interpreting the narrow exception to the general prohibition against age discrimination in benefits provided under an employee benefit plan. See 29 U.S.C. § 623(f)(2)(B)(i) (incorporating 29 C.F.R. § 1625.10). Under the ADEA, an employer that provides fringe benefits to its employees "generally must do so without regard to an employee's age." Benefit Guidance at 5. The first step in analyzing a claim of age discrimination in employee benefits is to determine whether "the employer has provided lesser benefits to older than to younger workers." Id. Fringe "benefits are ‘equal' only where they are the same for older and younger workers in all respects," in that all employees, regardless of age, are offered the same payment options, the same types of benefits, and the same amount of benefits. Id. at 6-7. "[I]f benefits are not the same for older and younger workers, the employer will have to justify the difference." Id. at 6. "[B]enefits will not be equal," the Benefit Guidance explains, "where a plan reduces or eliminates benefits based on a criterion that is explicitly defined (in whole or in part) by age." Id. at 8 (emphasis omitted). For example, "[w]here age is one of the criteria for service retirement eligibility," a plan that "denies disability benefits to any employee who is disabled less than 5 years from the date on which s/he would be eligible for service retirement" is using "an age-based distinction" to deny disability benefits. Id. at 9. In such circumstances, it is "clear from the face of a benefit plan that older workers are getting lower benefits than their younger counterparts on the basis of age." Id. at 8 (emphasis omitted). The KRS plan, until its amendment in 2000, denied disability benefits to any employee who had reached "normal retirement age," i.e., 55 or 65. See Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b) (1999). By its terms, the plan excluded older workers from disability retirement solely because of age. In accordance with these terms, KRS informed Charles Lickteig, a hazardous employee with 17 years of service, that he was "ineligible to apply for Disability Retirement since you are over age 55." (R.106, KRS Letter, Ex. 1 to Lickteig Affidavit, attached to EEOC Response to Cross-Motion for Summary Judgment, App. p.51). Since July 2000, the plan disqualifies any employee who is "eligible for an unreduced retirement allowance" from disability retirement, Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b), and defines eligibility for unreduced service retirement with explicit reference to "normal retirement age." See Ky. Rev. Stat. §§ 16.505(15), 16.576(1) (hazardous at 55 with five years service); §§ 61.510(18), 61.595(1) (non-hazardous at 65). The plan, as amended, thus perpetuates the facial reliance on age by denying disability benefits to those employees who are "eligible for an unreduced retirement allowance" only because they are over 55/65. It is thus "clear from the face" of the plan that KRS "eliminates [disability] benefits based on a criterion," i.e., eligibility for an unreduced pension, "that is explicitly defined (in whole or in part) by age." See Benefit Guidance at 8. The exclusion from disability retirement of employees who have at least 20/27 years of service, and are therefore pension-eligible, does not change the fact that employees with fewer years of service who are over 55/65 are denied disability benefits only because of their age. Nor does it change the fact that any difference in the amount of disability benefits received annually by employees who retire at the same time, from the same job, due to the same disabling condition, with the same seniority and compensation, is solely because of age and invariably favors younger over older employees. See Halfhill v. Kentucky Retirement Systems, 2003 WL 21419587, at *2-*3 (Ky.App., June 20, 2003)<10> ("expanding the pool of excluded claimants from only those over normal retirement age to include those who have served 20 years" did not "transform[] the exclusion from one ‘based solely on . . . age' into something more acceptable"). While the denial of an employment benefit based solely on an employee's years of service is not necessarily disparate treatment based on age, see Hazen Paper Co. v. Biggins, 507 U.S. 604, 611 (1993) ("Because age and years of service are analytically distinct, an employer can take account of one while ignoring the other, and thus it is incorrect to say that a decision based on years of service is necessarily ‘age based.'"), a plan that disqualifies workers above normal retirement age, i.e., 55/65, from receiving an employment benefit by its terms discriminates based on age. In any event, the EEOC does not challenge the exclusion from disability retirement of employees who are pension-eligible based on length of service – an exclusion enacted only after the EEOC filed suit – and does not seek relief for employees who are denied disability benefits, or whose benefits are enhanced to a lesser extent, due to their years of service. See R.1, Complaint pp. 3-6, App. pp. 23-26. The Commission claims only that the KRS plan facially discriminates based on age in denying disability benefits, or paying fewer benefits, to employees who, but for their age, would qualify for disability retirement or would receive a larger amount of benefits each year. Consequently, the EEOC seeks to enjoin only those plan provisions that deny or reduce disability benefits based on age, and seeks monetary relief for only those employees who were disqualified from disability retirement, or who received fewer benefits, because of age. See id. To determine "whether older and younger workers are receiving equal benefits," the Benefit Guidance instructs, "compare similarly situated older and younger workers," i.e., workers of different ages who are "the same . . . in all ways that are relevant to receipt of the benefit – e.g., in length of service and salary," and "calculate the benefit that the plan would pay to a hypothetical employee who is similarly situated in all relevant respects but who is younger than the charging party." Benefit Guidance at 9. The guidance further suggests that a chart showing the amount of benefits the plan would pay to employees of various ages, who are similarly situated in all other respects relevant to the benefit calculation, is useful to "determine if age was a factor that made a difference in the employer's calculation of benefits." Id. at 10. As illustrated in Charts B and C, supra at 14-16, the KRS plan provides lesser benefits to older employees than to younger employees who become disabled from working in the same job, with the same length of service and final compensation. Based on a comparison of employees who are similarly situated in every way relevant to determine disability retirement benefits (i.e., type of position, disabling condition, years of service, and final compensation), these charts demonstrate that "age was a factor that made a difference in [KRS's] calculation of benefits." Benefit Guidance at 10. The Benefit Guidance specifically addresses the proper analysis under the ADEA of a provision to enhance disability retirement benefits of workers disabled before reaching normal retirement age. "Basing disability retirement benefits on the number of years a disabled employee would have worked until normal retirement age by definition gives more constructive years of service to younger than to older employees," and results in lesser benefits paid to older workers. Id. at 27 (footnote omitted). To illustrate, the guidance contains a hypothetical example of a plan provision that, like the KRS plan, computes disability retirement benefits by adding a service credit for each year younger than normal retirement age an employee is when he becomes disabled from working. See id. at 26-27. Because the benefits paid to older and younger workers under this provision "are not equal," the guidance explains, "the employer would have to show that – accounting for the likelihood that more workers will qualify for disability retirement as they get older – it costs as much to pay disability retirement to [older employees] based on [fewer] extra years of service as it does to pay disability retirement to [younger employees] based on [more] extra years of service." Id. An employer who "cannot make this showing . . . is liable for a violation of the ADEA." Id. In dismissing the EEOC's suit, the district court reasoned that because age is an essential component of normal retirement eligibility, "some indication beyond the fact" that KRS denies or pays fewer disability benefits to workers who become disabled at, or close to, normal retirement age is required to demonstrate facial age discrimination in the terms of the benefit plan. (R.136, Order pp.4-5, App. pp.32-33) ("age is a necessary factor" in any retirement plan, "as the very nature of such a program requires age considerations"); see also id. p.8, App. p.36 ("age comes into play" in calculating disability benefits "only because age is one of the factors of retirement eligibility," and "age will always be a factor in retirement plans"). The text and history of the OWBPA, however, leave no doubt that Congress considered pension eligibility to be a "proxy for age," and intended to prohibit employers from using normal retirement age as a basis to disqualify employees from receiving any other fringe benefit. See H.R. Rep. No. 664, 101st Cong., 2d Sess. 40 (1990) (OWBPA House Report); S. Rep. No. 263, 101st Cong., 2d Sess. 22 (1990) (OWBPA Senate Report). Congress recognized that "employee pension benefit plans" typically "establish a minimum age as a condition of eligibility for early or normal retirement benefits" by providing, for example, "that benefits are not payable until an individual reaches the age of 55, 60, or 65." OWBPA House Report at 38; OWBPA Senate Report at 20. In order to "make clear that this practice, a universally accepted part of pension plan design . . . does not violate the ADEA's prohibition against differences in benefits based on age," id., Congress provided: It shall not be a violation of subsection (a), (b), (c), or (e) of this section solely because . . . an employee pension benefit plan . . . provides for the attainment of a minimum age as a condition of eligibility for normal or early retirement benefits . . . . 29 U.S.C. § 623(l)(1)(A). The OWBPA thus ensures that employers can continue to set a minimum age for pension eligibility – a normal retirement age – without running afoul of the ADEA. Congress also added a provision designed to eliminate the "double dipping" that could occur when an employee who is eligible for pension benefits is simultaneously receiving long-term disability benefits. Section 4(l)(3) permits an employer to deduct from an employee's long-term disability benefits the amount of "any pension benefits (other than those attributable to employee contributions) . . . paid to the individual that the individual voluntarily elects to receive; or . . . for which an individual who has attained the later of age 62 or normal retirement age is eligible." 29 U.S.C. § 623(l)(3). According to a summary explanation that accompanied the final bill, by "allowing disability to be offset by pension whenever an employee voluntarily elects to receive a pension or when the employee reaches the later of age 62 or normal retirement age[, t]his provision largely eliminates the possibility that employers will be required to make double payments to individuals – for example, both pension and long term disability." Cong. Rec. p. H8621 (Oct. 2, 1990); see also Benefit Guidance at 24 (under section 4(l)(3), employer may "reduce long-term disability benefits to an older worker by the amount of the worker's pension benefits that are attributable to employer contributions . . . if: the worker voluntarily (at any age) elects to receive the pension, or the worker has attained the later of age 62 or the pension plan's normal retirement age and is eligible for an unreduced pension"). Absent such an explicit exemption, Congress understood that the ADEA's prohibition against age discrimination, as amended to encompass all employee benefits, would forbid an employer from using normal retirement age, or age- based pension eligibility, to disqualify an employee from receiving any other employment benefit. The House and Senate Committee Reports emphasize that pension benefits are age-related. Pension eligibility is a proxy for age. Accordingly, it is per se age discrimination to use pension- eligibility as a basis for denying an older worker any other benefit. See OWBPA Senate Report at 22 (emphases in original); OWBPA House Report at 40 (same). Rep. Clay (Mo.), a floor manager, introduced the final Senate bill, S. 1511, to his colleagues and explained, "[w]e do not permit employers to pay an older worker less than a younger worker solely because of age; employers must be prohibited from providing older workers smaller benefits or no benefits solely because of their age or other proxies for age for example, pension . . . eligibility." Cong. Rec. p. H8617 (Oct. 2, 1990) (Rep. Clay). During the final House debate, Rep. Roukema (N.J.) remarked, The purpose of this legislation is to ensure that older workers do not receive less benefits than younger workers. . . . [T]he bill provides that workers who are on disability cannot be forced to receive only their pension at retirement age. Under this bill, they will receive the difference between what is typically a lower pension benefit and the higher disability benefit. The end result is that the older workers will not find themselves penalized by virtue of their age and pension eligibility when it comes to receiving benefits. Id. p. H8622 (Rep. Roukema). The House passed the Senate bill the following day, without further amendment, by a vote of 406 to 17. Cong. Rec. p. H8738 (Oct. 3, 1990) (House Vote on S. 1511). The history of the OWBPA, moreover, shows Congress was aware of provisions in employee benefit plans that used normal retirement age to calculate disability benefits, enhancing the benefits of employees who become disabled at a younger age and awarding fewer, or no, additional benefits to older disabled employees. Included in the legislative record is a statement prepared on behalf of the Association of Private Pension and Welfare Plans, in opposition to key components of the draft legislation, S. 1511. The statement describes a provision that is materially the same as the disability benefit formula in the KRS plan (and the hypothetical example in the Benefit Guidance at 26-27), and alerts Congress to the potential effect of the legislation on such provisions: Many plans also provide that employees may receive credited service for periods of disability prior to their normal retirement age. Such crediting of service assures that an employee is not prevented from accruing the benefit that the employee would have been able to earn if the employee had not been disabled. The conceptual framework of such a benefit program hinges on the assumption that an employee is entitled to such credit only for periods prior to normal retirement age. The additional service credited to an individual disabled at a younger age will always exceed the amount credited to an individual who is disabled when older, and therefore could present problems under S. 1511. Senate Joint Hearing before the Subcommittee on Labor of the Committee on Labor and Human Resources, and the Special Committee on Aging, on S. 1511 (Sept. 27, 1989), reprinted in Legislative History of the [OWBPA] (S. 1511 and Related Bills), prepared for the Committee on Labor and Human Resources, U.S. Senate, p. 570 (U.S. Gov. Printing Office, June 1991). Although the proposed bill was amended in some respects before passage, none of the changes altered its application to provisions that enhance the disability benefits of younger workers based on age. Congress thus chose to pass the OWBPA knowing or, more precisely, intending that the legislation would invalidate the very type of age- based disability benefit enhancements KRS provides. The district court thus plainly erred in concluding that because age is commonly used as a condition of normal retirement eligibility, an employer is free to deny or pay fewer disability benefits to older employees because they become disabled at or near normal retirement age. The legislative record of the OWBPA demonstrates that Congress recognized and authorized the universal practice of setting a minimum age for pension eligibility, see 29 U.S.C. § 623(l)(1)(A), yet clearly meant to prohibit an employer from using age-based pension eligibility to deny or reduce any other benefit to older workers, absent a specific exemption, see, e.g., 29 U.S.C. § 623(l)(3), or affirmative defense. See, e.g., 29 U.S.C. § 623(f)(2)(B)(ii). In fact, the very provision challenged in Betts – the case that prompted Congress to overrule the Supreme Court legislatively by enacting the OWBPA, see 29 U.S.C. § 621 note – disqualified an employee from disability retirement because, due to her age when she became disabled from working (over 60), she was eligible for an unreduced pension, which paid fewer annual benefits than those she would have received had she been younger and eligible for disability retirement. Congress clearly understood – as had the district court and this Court in Betts, see 492 U.S. at 164, citing 631 F. Supp. at 1202-03 ("retirement scheme was discriminatory on its face, in that it denied disability retirement benefits to certain employees on account of their age"), aff'd, 848 F.2d 692 (6th Cir. 1988) – that in disqualifying an employee from disability retirement because she is over normal retirement age, and therefore eligible to receive less favorable pension benefits, a benefit plan discriminates based on age under the ADEA. The district court further erred in requiring additional evidence, beyond the terms of the KRS plan, to demonstrate that the plan discriminates against older employees because of age within the meaning of the ADEA. Despite undisputed proof that KRS uses normal retirement age to disqualify employees from disability retirement, and to calculate disability benefits in a manner that favors younger employees over similarly situated older employees, the court held "the retirement plan is not facially discriminatory" and found "no evidence of discrimination" against older employees based on age. (R.136, Order p.7, App. p.35). "If prohibited stereotypes have not played a role in the institution of the disability retirement benefits plan," the court reasoned, "then the plan is not the result of inaccurate and denigrating generalizations about age, but instead represents an accurate judgment about employees." (Id. p.3, App. p.31) (citing Hazen Paper). Without evidence that such stereotypes motivated KRS in adopting its benefit plan, the court decided, the EEOC could not prove that KRS discriminates based on age in using normal retirement age to deny or reduce the disability benefits of older workers. (Id. pp.3-5, App. pp.31-33) ("finding a retirement policy discriminatory because it calculates [disability] retirement eligibility" and benefits "based on age and years of service does nothing to further the purpose of the ADEA, which is to prevent employers from making employment decisions (including provision of benefits) based on denigrating stereotypes about age"). The court's holding and rationale cannot be reconciled with well established Supreme Court precedent, and its reliance on Hazen Paper is misplaced. The Supreme Court in Hazen Paper reaffirmed the fundamental principle that intentional discrimination based on a protected trait (such as age) is established where an employer "relied upon a formal, facially discriminatory policy requiring adverse treatment of employees with that trait." Hazen Paper, 507 U.S. at 610. The Court cited as examples its decisions in Trans World Airlines, Inc. v. Thurston, 469 U.S. 111 (1985), and Los Angeles Dept. of Water and Power v. Manhart, 435 U.S. 702, 704-18 (1978). In such cases, the terms of the policy furnish direct evidence that "the employee's protected trait actually played a role in [the employer's decisionmaking process] and had a determinative influence on the outcome," Hazen Paper, 507 U.S. at 610, and there is no need to demonstrate, in addition, that the employer relied on negative stereotypes or harbored discriminatory animus in establishing the facially discriminatory policy. See International Union, United Automobile, Aerospace & Agricultural Implement Workers of America v. Johnson Controls, Inc., 499 U.S. 187, 199 (1991) ("Whether an employment practice involves disparate treatment through explicit facial discrimination does not depend on why the employer discriminates but rather on the explicit terms of the discrimination."). The Supreme Court in Manhart considered whether Title VII prohibits discrimination against female workers in the terms of an employee benefit plan when the disparate treatment is based on uncontested actuarial differences between men and women rather than on gender-based stereotypes. See Manhart, 435 U.S. at 707-710. At issue in Manhart was the lawfulness of a plan that paid equal monthly retirement benefits to "men and women of the same age, seniority, and salary," but required female employees to make larger monthly contributions to the pension fund "than the contributions required of comparable male employees." See id. at 705. "Based on a study of mortality tables and its own experience," the employer determined that the "cost of a pension for the average retired female is greater than for the average male retiree because more monthly payments must be made to the average woman," and therefore imposed a higher contribution rate on women than on men. Id. In passing Title VII, the Manhart Court recognized, Congress meant to eliminate workplace discrimination "predicated on mere ‘stereotyped' impressions about the characteristics of males or females," or "[m]yths and purely habitual assumptions about a woman's inability to perform certain kinds of work." Id. at 708 & n.13 ("‘In forbidding employers to discriminate against individuals because of their sex, Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.'") (citation omitted). The Court acknowledged, moreover, that the employer had not relied on gender- based stereotypes or "a fictional difference between men and women" in setting a higher contribution rate for female employees, but instead based its decision on "a generalization that the parties accept as unquestionably true: Women, as a class, do live longer than men." Id. at 708. Notwithstanding the fact that prohibited stereotypes played no role in the decision to require larger contributions from women, the Court ruled that this "practice on its face discriminated against individual employees because of their sex." Id. at 716. The Court found "no reason to believe that Congress intended a special definition of discrimination in the context of employee group coverage," id. at 710, and concluded that the employer's practice of requiring each female employee "to contribute more money into a fund" than each male "is in direct conflict with both the language and the policy of [Title VII]." Id. at 711. Similarly, in Arizona Governing Committee v. Norris, 463 U.S. 1073 (1983), the Court invalidated a benefit plan that deferred compensation at the same rate for male and female employees and "used sex-based mortality tables to calculate monthly retirement benefits." Id. at 1073. "Under these tables," the Court explained, "a man receives larger monthly payments than a woman who deferred the same amount of compensation and retired at the same age, because the tables classify annuitants on the basis of sex and women on average live longer than men." Id. In deciding "whether it is discrimination ‘because of . . . sex' to pay a retired women lower monthly benefits than a man who deferred the same amount of compensation," id. at 1079, the Court cited its conclusion in Manhart "that a plan requiring women to make greater contributions than men discriminates ‘because of . . . sex' for the simple reason that it treats each woman ‘in a manner which but for [her] sex would [have been] different.'" Id. at 1081 (quoting Manhart, 435 U.S. at 711) (internal quotations omitted). Because "the classification of employees on the basis of sex is no more permissible at the pay- out stage of a retirement plan than at the pay-in stage," id., the Court held the practice of paying female retirees lower benefits "does constitute discrimination on the basis of sex in violation of Title VII." Id. at 1074. The KRS plan by its terms disqualifies employees who are above normal retirement age from disability retirement, and pays fewer monthly benefits to an older employee who retires due to disability than to a younger worker with the same job, seniority, compensation, and disabling condition. See supra pp. 14-16 and Charts B and C. Under the analysis prescribed in Manhart and Norris (and cited with approval in the Supreme Court's ADEA decision in Hazen Paper, 507 U.S. at 610), these provisions facially discriminate against older employees who, but for their age when they became disabled from working, would have been eligible for disability retirement and received larger monthly benefits. See Manhart, 435 U.S. at 711 ("Such a practice does not pass the simple test of whether the evidence shows ‘treatment of a person in a manner which but for that person's [age] would be different.'") (citation omitted); Norris, 463 U.S. at 1081 (same). The Supreme Court has signaled, moreover, that the principles and analysis announced in Manhart and Norris should apply in assessing whether an employee benefit plan facially discriminates based on age within the meaning of the ADEA. In addition to Hazen Paper, the Court in TWA v. Thurston, 469 U.S. 111, 114-16 (1985), considered whether an airline discriminated based on age by allowing captains disqualified for any reason besides age to displace less senior flight engineers, but prohibiting such transfers by captains disqualified by federal regulation from serving as a commercial pilot after age 60. The Court decided that its previous interpretation of Title VII's prohibition against sex discrimination "applies with equal force in the context of age discrimination, for the substantive provisions of the ADEA ‘were derived in haec verba from Title VII.'" Id. at 121 (quoting Lorillard v. Pons, 434 U.S. 575, 584 (1978)). Based on "direct evidence that the method of transfer available to a disqualified captain depends upon his age," the Court ruled that "TWA's transfer policy is discriminatory on its face," and cited Manhart as supporting authority. Id. at 121-22. The Court in Thurston next considered whether TWA's "age-based transfer policy is justified" by either of two statutory affirmative defenses asserted by the airline. Id. at 122. After concluding that neither defense had merit, the Court held the "transfer policy discriminates against protected individuals on the basis of age, and thereby violates the [ADEA]." Id. at 124-25. The Court reversed the award of liquidated damages, however, because "the record makes clear that TWA officials acted reasonably and in good faith in attempting to determine whether their plan would violate the ADEA." Id. at 130. There is no indication in the Court's opinion that in adopting the discriminatory transfer policy, TWA relied on inaccurate or stigmatizing stereotypes about the abilities of older employees or harbored any age-based animus. Presumably, had such evidence existed, the Court would not have overturned the award of liquidated damages. The district court relied on Lyon v. Ohio Education Association and Professional Staff Union, 53 F.3d 135 (6th Cir. 1995), to support its holding that the EEOC "failed to show how this retirement plan's age elements are discriminatory, either facially or through disparate treatment combined with intent." (R.136, Order pp.5-6, App. pp.33-34). The Lyon decision, the court noted, "emphasized again and again the importance of proving discriminatory intent in a disparate treatment claim." (Id. p.6, App. p.34). In particular, the court found the "service credits portion" of the KRS "disability retirement policy . . . is similar" to the early retirement incentive plan upheld in Lyon. (Id.) The overwhelming authority supplied by the OWBPA's text, legislative history, and congressional purpose, however, together with binding Supreme Court precedent defining facial employment discrimination, establishes that the district court's reliance on Lyon was misplaced. The plaintiffs in Lyon brought an ADEA suit to challenge an early retirement incentive provision that calculated the pension benefits of employees retiring before they reached normal retirement age (62) by "assum[ing] that early retirees had worked until age 62" and "imput[ing] the necessary years of service to each early retiree based on their present age" at the time of retirement. Lyon, 53 F.3d at 137. Under this plan, an employee who retired at a younger age with the same compensation and years of service as an older worker "would receive a larger benefit." Id. "The net effect [of the plan] is to ensure early retirees the same benefits . . . that they would receive had they continued to work until their normal retirement date." Id. The Court in Lyon held the plaintiffs "failed to advance a prima facie case of disparate treatment . . . discrimination" based on age, and found it unnecessary to "address whether [the plan] is a lawful early retirement provision authorized under the OWBPA." Id. at 137; see 29 U.S.C. § 623(f)(2)(B)(ii) (permitting an employer to take action otherwise prohibited by ADEA "to observe the terms of a bona fide employee benefit plan . . . that is a voluntary early retirement incentive plan consistent with the relevant purpose or purposes of this chapter"). The Court found "no facts that even hint at an improper motive in drafting or executing" the plan, and emphasized that "the very purpose of offering an early retirement incentive plan is to ‘buy out' expensive workers." Id. at 139. One anticipated "effect of such a plan is to encourage workers to retire early rather than continue to work," the Court observed, and "it may, in effect, take a higher benefit to buy out a worker with more to lose (the worker with more time until retirement)." Id. In deciding that the plan "does not pay older employees lower benefits because of age," the Court reasoned that "an employee who began work when older will have less time to accumulate years of service, and therefore will receive a lower benefit upon reaching 62, other things being equal." Id. at 140. Any disparity in benefits, the Court concluded, "is a product of [plaintiffs'] length of service and their age when originally hired," and "merely reflects the actuarial reality that employees who start work at an early age accumulate more years of service in reaching the normal retirement age of 62 (the OWBPA allows employers to fix a minimum age for early or normal retirement)." Id. Noting that the OWBPA "explicitly exempted early retirement plans that were consistent with the goals of the ADEA," the Court cited legislative history showing Congress expected "‘early retirement incentive plans'" that, like the plan challenged in Lyon, "‘impute years of service and/or age would continue to remain lawful.'" Id. at 140 n.7 (quoting S.Rep. No. 263, 101st Cong., 2d Sess. 28 (1990)). Lyon is distinguishable on several grounds, and does not furnish an adequate basis to affirm the district court. First, by explicitly overturning the Supreme Court's decision in Betts, Congress in the OWBPA effectively restored the persuasive authority of this Court's decision affirming that the disability retirement plan challenged in that case facially discriminated because of age within the meaning of the ADEA. see Betts, 848 F.2d 692, affirming 631 F. Supp. at 1202-03. Given the similarities between the disability retirement provisions in the KRS plan and those at issue in Betts, that decision provides far more pertinent precedent than Lyon, which determined the lawfulness of an entirely different type of employee benefit. As the Court in Lyon recognized, a voluntary early retirement incentive plan provides financial inducement to encourage employees to retire early, and thus serves an entirely different purpose than disability retirement benefits, which provide income replacement to workers who become incapacitated from working and have no choice but to retire. See Lyon, 53 F.3d at 139-40. An employee always has the option to turn down a voluntary early retirement incentive, and instead to continue working and accruing additional service credits that will ultimately increase his pension when he elects to retire. An employee who can no longer work due to disability, by contrast, has no opportunity to remain on the job and continue building his pension for years after normal retirement age. The Court in Lyon, moreover, found that the text and history of the OWBPA showed Congress intended to permit employers to offer voluntary early retirement incentives that enhance normal retirement benefits by imputing age or years of service. Id. at 140 n.7. The pertinent statutory text, history, and purpose with respect to disability benefits, however, clearly demonstrate that Congress considered it "per se age discrimination" to use normal retirement age "as a basis for denying an older worker any other benefit," see OWBPA Senate Report at 22; OWBPA House Report at 40 (same), and intended to permit only those "age-based reductions in employee benefit plans [that] are justified by significant cost considerations," see 29 U.S.C. 621 note, or fall within a specified exemption, e.g., 29 U.S.C. § 623(l)(3). See, e.g., Cong. Rec. p. H8626 (Oct. 2, 1990) (Rep. Hawkins) ("[S]ubject to the narrow and limited exceptions contained in the bill, pension eligibility and early retirement eligibility continue to be proxies for age, and employment decisions based on such factors are unlawful under the ADEA."). Finally, at the time Lyon was decided in 1995, the EEOC had not yet issued the comprehensive interpretation of the OWBPA's provisions governing employee benefit plans contained in the Benefit Guidance. In a section on disability retirement, the Commission distinguished Lyon, noting that the decision "did not address a disability retirement plan," and expressed "disagree[ment] with the Lyon analysis": Where a benefit plan ties the amount of benefits provided to the number of years it will be before an employee reaches normal retirement age, it is explicitly age-based. This is facial discrimination that does not require additional proof of intent. Benefit Guidance at 27 n.36. The analysis presented in the Benefit Guidance finds strong support in the OWBPA's history, and in Supreme Court decisions on facially discriminatory employment policies. See supra at pp.44-49 (discussing Hazen Paper, Manhart, Norris, and Thurston). Because Lyon is distinguishable on several grounds, the EEOC respectfully urges this Court not to extend the rationale of that case to the context of disability retirement benefits. The undisputed evidence of facial age discrimination in the terms of the KRS plan, however, does not necessarily establish a violation of the ADEA. See Thurston , 469 U.S. at 122 ("our inquiry cannot end" with finding transfer policy facially discriminates based on age where employer asserted "policy is justified by two of ADEA's five affirmative defenses"). Congress has created several affirmative defenses that shield employers from liability for certain age-based employment practices that would otherwise violate the statute's prohibition against age discrimination. See, e.g., 29 U.S.C. §§ 623(f)(1) ("bona fide occupational qualification" defense); 623(f)(2)(A) ("bona fide seniority system" defense), discussed in Thurston , 469 U.S. at 122-25. On summary judgment, KRS asserted a statutory affirmative defense under 29 U.S.C. § 623(f)(2)(B)(i), and sought to prove that the difference in benefits paid to older employees who retire due to disability is "cost justified" and therefore not unlawful. (R.100, KRS Motion for SJ p.1). The EEOC contested the viability of KRS's equal cost defense on numerous grounds and challenged the sufficiency and admissibility of the evidence offered to support the defense. (R.106, Response by EEOC to Cross- Motion for SJ pp.20-36; R.107, EEOC Motion to Strike). Having erroneously concluded that the EEOC failed to present a prima facie case, the district court declined to address KRS's equal cost defense. (R.136, Order p.2, App. p.30). Given the legal and factual complexity of the equal cost defense, remand is required for the district court to address the viability of KRS's cost-based defense of its disability retirement program in this case. CONCLUSION For the foregoing reasons, the EEOC respectfully urges this Court to reverse the summary judgment and remand the case to the district court to determine whether defendants can meet their burden to demonstrate a statutory affirmative defense to justify the age-based disparate treatment of older workers under the terms of the KRS employee benefit plan. Respectfully submitted, ___________________________ DORI K. BERNSTEIN Attorney ERIC S. DREIBAND General Counsel VINCENT J. BLACKWOOD Acting Associate General Counsel CAROLYN L. WHEELER Assistant General Counsel EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7046 Washington, D.C. 20507 (202) 663-4734 CERTIFICATE OF COMPLIANCE WITH RULE 32(a) Certificate of Compliance With Type-Volume Limitation, Typeface Requirements, and Type Style Requirements 1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 12,980 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using WordPerfect 9 in 14-point Times New Roman font. ___________________________ Dori K. Bernstein Attorney for Equal Employment Opportunity Commission Dated: _______________________ ADDENDA Tab Appellant's Designation of Appendix Contents . . . . . . . . .A-1 Kentucky Revised Statutes, pertinent provisions . . . . . . . . . . . . . . . . . . . .A-2 Age Discrimination in Employment Act, pertinent provisions . . . . . . . . . . . . . . . . . . . .A-3 Older Workers Benefit Protection Act, Title I, Pub. Law 101-433 (S. 1511) (1990). . . . . . . . . . . . . .A-4 29 C.F.R. § 1625.10. . . . . . . . . . . . . . . . . . . . . .A-5 EEOC Compliance Manual, Chapter 3: Employee Benefits, No. 915.003 (Oct. 3, 2000), excerpted portions. . . . . . . . . . . . . . . . . . . . . .A-6 Halfhill v. Kentucky Retirement Systems, 2003 WL 21419587 (Ky. App. June 20, 2003) . . . . . . . . . .A-7 APPELLANT'S DESIGNATION OF APPENDIX CONTENTS Tab A-1 APPELLANT'S DESIGNATION OF APPENDIX CONTENTS Docket # Record Document Date Filed Current Docket Sheet in District Court No. 99-500-JBC (W.D. Ky.) R.1 Complaint 08/02/1999 R.106 Lickteig Charges, Ex. 1-3 to Ryan Affidavit, 06/09/2003 attached to EEOC Response to Cross-Motion for Summary Judgment R.106 Lickteig Affidavit, attached to EEOC Response 06/09/2003 to Cross-Motion for Summary Judgment R.106 KRS Letter, Ex. 1 to Lickteig Affidavit, 06/09/2003 attached to EEOC Response to Cross-Motion for Summary Judgment R.136 Order 09/04/2003 R.137 Judgment 09/04/2003 R.138 Notice of Appeal 11/03/2003 KENTUCKY REVISED STATUTES Ky. Rev. Stat. § 16.505 - Definitions (hazardous positions) Ky. Rev. Stat. § 16.576 - Normal retirement (hazardous positions) Ky. Rev. Stat. § 16.577 - Early retirement (hazardous positions) Ky. Rev. Stat. § 16.582 - Disability retirement (hazardous positions) Ky. Rev. Stat. § 16.582 (1999) - Disability Retirement (hazardous positions) Ky. Rev. Stat. § 61.510 - Definitions Ky. Rev. Stat. § 61.515 - Retirement system established; fund created Ky. Rev. Stat. § 61.592 - Retirement of persons working in hazardous positions Ky. Rev. Stat. § 61.595 - Service retirement allowance (non-hazardous positions) Ky. Rev. Stat. § 61.600 - Disability retirement (non-hazardous positions) Ky. Rev. Stat. § 61.600 (1999) - Disability Retirement (non-hazardous positions) Ky. Rev. Stat. § 61.605 - Disability retirement allowance (non-hazardous positions) Kentucky House Bill 290, Kentucky 2004 Regular Session Tab A-2 AGE DISCRIMINATION IN EMPLOYMENT ACT 29 U.S.C. § 623 - Prohibition of Age Discrimination 29 U.S.C. § 630(l) - Definitions 29 U.S.C. § 631(a) - Age Limitation Tab A-3 OLDER WORKERS BENEFIT PROTECTION ACT, Title I Pub. Law 101-433 (S. 1511) (1990) Tab A-4 29 C.F.R. § 1625.10 Tab A-5 EEOC COMPLIANCE MANUAL, CHAPTER 3: EMPLOYEE BENEFITS, No. 915.003 (Oct. 3, 2000) Excerpted Portions Tab A-6 HALFHILL v. KENTUCKY RETIREMENT SYSTEMS, 2003 WL 21419587 (Ky. App. June 20, 2003) Tab A-7 CERTIFICATE OF SERVICE I hereby certify that two copies of this final brief were mailed, first class, postage prepaid, on this 15th day of November, to the following: Robert D. Klausner Klausner & Kaufman, PA 10059 NW 1st CT Plantation, Florida 33324 Mitchell L. Perry Office of the Jefferson County Attorney 531 Court Place Suite 1001 Fiscal Court Building Louisville, Kentucky 40202 C. Joseph Beavin, James D. Allen, Lizabeth Ann Tully Stoll, Keenon & Park 300 W. Vine Street Suite 2100 Lexington, Kentucky 40507-1801 D. Brent Irvin Attorney General - Civil & Environmental Law Division 700 Capitol Avenue Frankfort, Kentucky 40601-3449 _________________________ Dori K. Bernstein Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7046 Washington, D.C. 20507 (202) 663-4734 ***************************************************************************** <> <1> For the convenience of the Court, pertinent provisions of the ADEA are included as an addendum to this brief at Tab A-3. The text of the OWBPA, Title I, Pub. Law 101-433 (1990), is included at Tab A-4 <2> For the convenience of the Court, pertinent provisions of the Kentucky Revised Statutes are included as an addendum to this brief at Tab A-2. <3> Ky. Rev. Stat. § 61.592(4) provides that “[t]he normal retirement age, retirement allowance, other benefits, eligibility requirements, rights, and responsibilities of a member in a hazardous position . . . shall be as prescribed for a member . . . participating in the State Police Retirement System as provided for by [Ky. Rev. Stat. §§] 16.510 to 16.652.” <4> The percentage multiplier used to determine the amount of retirement benefits is 2.49% for certain hazardous employees, Ky. Rev. Stat. § 16.576(3), and ranges between 1.97% and 2.2% for non-hazardous employees, Ky. Rev. Stat. § 61.595(1), depending on circumstances immaterial to this case. To enhance clarity, we use the 2.5% figure to calculate the benefits of retirees from hazardous jobs, and the 2% figure for retirees from non-hazardous jobs. <5> A non-hazardous employee under 65 who retires on disability after 25 or more years is entitled to benefits calculated using a service multiplier of 27 years. Ky. Rev. Stat. § 61.605. <6> On April 1, 2004, the Kentucky legislature amended the statutory formula to compute the disability retirement benefits of employees hired after August 1, 2004. See HB 290, 2004 Kentucky Laws Ch. 33, included as an addendum to this brief at Tab A-2. Under this new provision, the disability retirement benefits of an employee hired after August 1, 2004 will be the higher of: a fixed percentage of his monthly final rate of pay (25% for hazardous workers; 20% for non-hazardous workers), or his unreduced normal retirement allowance based on his age and years of service as of the date he became disabled. Ky. Rev. Stat. §§ 16.582(5)(c); 61.605(2). The new amendments do not alter the eligibility criteria for disability retirement benefits. See Ky. Rev. Stat. §§ 16.582(2)(b), 61.600(1)(b). <7> The defendants have submitted unified pleadings in this litigation and, for ease of reference, will be collectively referred to as KRS. <8> EEOC regulation 29 C.F.R. § 1625.10 is included as an addendum to this brief at Tab A-5 <9> Pertinent portions of the Benefit Guidance are included as an addendum to this brief at Tab A-6. The full text of the Benefit Guidance is available on the EEOC’s website, www.EEOC.gov. <10> The unpublished decision of the Court of Appeals of Kentucky in Halfhill is included as an addendum to this brief at Tab A-7. See 6 Cir. R. 28(g). The Court in Halfhill held that KRS violated Kentucky’s prohibition against age discrimination, Ky. Rev. Stat. § 344.040, by denying enhanced disability retirement benefits to a hazardous employee solely because he was over normal retirement age (55) when he applied for disability retirement. See Halfhill, 2002 WL 21419587 at *3. Kentucky’s anti-discrimination provision is substantively the same as ADEA section 4(a)(1), 29 U.S.C. § 623(a)(1), the federal statutory basis for the EEOC’s claims against KRS. (R.1, Complaint p.3, App. p.23). Because the Halfhill decision is the only judicial authority that resolves the question at the heart of this appeal (i.e., whether the KRS benefit plan discriminates based on age in denying or paying fewer annual disability benefits to employees who become disabled at or near normal retirement age), the EEOC believes this “unpublished disposition has precedential value in relation to a material issue [on appeal], and that there is no published opinion that would serve as well.” See 6 Cir. R. 28(g).