On December 26, 2007, the EEOC published its final rule permitting an exemption from the ADEA for employers who offer retiree health care benefits that coordinate with Medicare. The final rule confirms the ability of employers to continue the practice of offering retirees eligible for Medicare benefits that differ from those offered to retirees who are under the age of 65. The exemption is effective immediately and applies to all current or newly created retiree benefits plans.

The final rule was drafted in reaction to a string of decisions by the Third Circuit Court of Appeals. Beginning with Erie County Retirees Association v. County of Erie, the court held that: (1) the ADEA applies to retired workers as well as current employees; and (2) the ADEA requires employers to spend the same amount on health benefits provided to retirees over and under age 65. Shortly thereafter, many employers (including the County of Erie) began dropping retiree health benefit coverage for all retirees. Their rationale? For many, the cost of providing retiree benefit coverage in compliance with the ADEA was simply too high. For this reason, many saw the ironic result of a court's desire to maximize access to retiree benefits having the opposite effect.



Click here for the entire report.