EEOC Issues Final Rules on the Coordination of Retiree Health Insurance Benefits with Medicare

On December 26, 2007, the Equal Employment Opportunity Commission (EEOC) published final rules allowing employers, who provided retiree health benefits, to continue the practice of coordinating those benefits with Medicare without violating the Age Discrimination in Employment Act (ADEA).

The final rules bring much needed and welcome clarity for employers about their obligations under the ADEA for retirees. The EEOC has been working to finalize the rules permitting the reduction or elimination of benefits to coordinate with Medicare Eligibility, since July of 2003. The proposed rules were the subject of several lawsuits by the AARP in the Federal Courts. On November 20, 2007, AARP petitioned the United States Supreme Court to review the case. The Supreme Court has not ruled on AARP’s petition yet.

While employers are not legally obligated to provide retiree health benefits, many do. Some employers coordinate with Medicare by supplementing the Medicare benefits, others just provide retirees under age 65 with health insurance to “bridge” the gap between the time they retire and time they become eligible for Medicare. Most employees who retire prior to age 65 rely on employer-provided health benefits until they become eligible for Medicare.

The final rules issued by the EEOC provide a narrow exception to the ADEA for coordinating employer-sponsored retiree health benefits with eligibiliy for Medicare or a comparable State health benefits program. These rules apply only to retired employees. The final rules do not create any exceptions to the ADEA for other types of retiree benefits. Nor do the final rules affect any non-ADEA obligation that employers may have to provide health insurance benefits under Medicare or any other law. For example, fede4ral law requires employers to offer employees eligible for Medicare the same coverage offered to employees who are not Medicare eligible.
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