Judge Reverses Ruling on EEOC Rule Change Regarding Retiree Health Benefits
In a reversal of her previous ruling, U.S. District Judge Anita Brody in Philadelphia on Tuesday said the Equal Employment Opportunity Commission has the right to enact a rule allowing employers to reduce or eliminate health benefits for retirees once they reach the age of Medicare eligibility while retaining health benefits for younger retirees, AP/USA Today reports (AP/USA Today, 9/29). The rule, originally scheduled to take effect in April before it was blocked by Brody's original decision, would allow employers to eliminate health benefits for retirees after they became eligible for Medicare.
AARP in February filed suit to block the rule, saying EEOC had exceeded its authority. AARP cited a 2000 decision by the 3rd U.S. Circuit Court of Appeals that found different benefits packages for younger and older retirees would violate U.S. anti-discrimination laws. Brody in March blocked the rule, which prompted EEOC to ask the Department of Justice to appeal the decision. AARP and others opposed to the rule say it amounts to age discrimination.
However, those who support the new rule, including the U.S. Chamber of Commerce and the National Education Association, say that if employers were required to provide equal levels of benefits to young and older retirees, it would accelerate the decline in retiree health benefits by providing a disincentive to businesses to provide any coverage at all (California Healthline, 5/2).
On Tuesday, Brody reversed her previous ruling, saying she was compelled to do so by a recent U.S. Supreme Court ruling. In the Supreme Court "Brand X" case, which was related to Internet access, Justice Clarence Thomas ruled in June that judges in most cases should defer to the expertise of federal agencies. Brody said the ruling means she must uphold EEOC's request to enact a rule that allows companies to depart from the equal value or equal benefit standard of the Age Discrimination in Employment Act, AP/USA Today reports.
However, she prohibited EEOC from enacting the rule until AARP has had a chance to appeal. AARP said an appeal is likely. AARP Foundation attorney Laurie McCann said, "There are so many factors driving employers away from retiree health benefits," such as increased health care costs and demographics, adding, "all sorts of things influence employers' decisions."
EEOC Chair Cari Dominguez said on Wednesday that the rule change is in the public's interest because otherwise employers might decide to eliminate retiree health benefits altogether. Paul Dennett, a vice president at the American Benefits Council -- which represents many large corporations -- said, "We think that retirees of all ages could end up, inadvertently, having a reduction or loss of benefits if the AARP decision were to prevail" (AP/USA Today, 9/28).