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Originally published December 28, 2007 at 12:00 AM | Page modified December 28, 2007 at 12:39 AM

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Ruling allows benefit cut at 65 in retiree plans

Employers can reduce their health-insurance expenses for retired workers once they turn 65 and qualify for Medicare, the Equal Employment...

WASHINGTON — Employers can reduce their health-insurance expenses for retired workers once they turn 65 and qualify for Medicare, the Equal Employment Opportunity Commission (EEOC) has affirmed.

In essence, the rule published Wednesday formally authorizes the long-standing practice used by employers to take Medicare into account when structuring the health-benefit packages they voluntarily provide retired workers. The rule makes clear employers can spend more on retirees younger than 65 than those older than 65 without running afoul of age-discrimination laws.

In practice, retirees in both age groups might get essentially the same benefits, but it is less costly to the company for those older than 65 because Medicare picks up much of the tab for them.

The EEOC said it proposed the rule in response to a decision in 2000 by the U.S. Court of Appeals for the 3rd Circuit that held that the Age Discrimination in Employment Act requires employers to spend the same amount on health-insurance benefits provided Medicare-eligible retirees as those received by younger retirees.

The commission said that after the 2000 decision, labor unions and employers alike maintained that complying with the decision would result in companies reducing or eliminating retiree health benefits, leaving millions of retirees younger than 65 with less health insurance, or no health insurance.

The same appeals court that issued the original decision in 2000 ruled in June the EEOC was authorized to issue exemptions if a strict interpretation of the age-discrimination law would be contrary to the public interest.

Copyright © 2007 The Seattle Times Company

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