The EEOC Puts Humpty Dumpty Back Together: Employer-Sponsored Retiree Healthcare Coverage Can Again Be Coordinated with MedicareJessica Bernanke
January 17, 2008 — 2,026 views
The Equal Employment Opportunity Commission has accomplished what the kings’ men could not — it has affirmed that employer-sponsored retiree healthcare benefits can be coordinated with Medicare or comparable state health benefit programs. The EEOC’s final rule is an affirmative act to encourage employers to offer retiree health benefits, while it acknowledges that employers have no obligation to do so.
In sum, after the resolution of various court challenges and appeals — and notwithstanding that the AARP still has an outstanding writ of certiorari before the U.S. Supreme Court — the EEOC, on December 26, 2007, finalized and made immediately effective a narrow exemption to the Age Discrimination Employment Act of 1967 that permits employer-sponsored health plans to alter, reduce or eliminate a retiree’s benefits when that individual becomes eligible for Medicare or a comparable state health benefit plan (regardless of whether the individual actually enrolls in Medicare or the comparable state plan). Through this exemption, the EEOC has formalized the understanding that employers and unions operated under before the 3rd Circuit issued its 2000 decision in Erie County Retirees Ass’n v. County of Erie, which essentially held that an employer violated the ADEA if it effectively reduced or eliminated retiree health benefits when retirees became eligible for Medicare.
Under this exemption, which applies both to existing and newly created plans, employers and unions again can offer retirees a wide range of health plan designs that account for and/or incorporate Medicare and comparable state health benefit plans. For example, retiree health plans may reduce or eliminate health coverage to retirees who become eligible for Medicare or comparable state health benefits, or may supplement Medicare Part D prescription drug coverage for Medicare eligible retirees,
while providing full prescription drug coverage for retirees who are not yet eligible. This exemption also applies to dependent/spousal retiree health benefits, with the recognition that the dependent/spousal benefits do not need to be identical to those provided to the retiree. As such, the dependent/spousal benefits may be altered, reduced or eliminated pursuant to this exemption even if the retiree’s benefits are not similarly changed.
Significantly, in issuing its final rule, the EEOC emphasized that it is to be narrowly construed and apply only to retiree health benefits. This means that the health benefits of current employees who are eligible for Medicare or comparable state health benefit plans are not covered by this exemption. Those current employees must be offered the same health benefits as employees who are under the age of
Medicare or comparable state health benefit plan eligibility. Moreover, no other aspect of the ADEA or any other benefits or employment law is impacted or excepted by this exemption.
About the Author
Jessica R. Bernanke is an associate in Morgan Lewis's Labor Employment Practice. Ms. Bernanke has significant litigation experience, including ERISA litigation, Whistleblower litigation, and labor arbitrations. Ms. Bernanke also has regulatory experience with a particular focus on compliance with the privacy regulations of the Health Insurance Portability and Accountability Act.
Ms. Bernanke originally joined the firm’s litigation practice in 1998, where she focused on general commercial and products liability litigation. Prior to joining Morgan Lewis, Ms. Bernanke was associated with a law firm in New York City. She has participated in litigating cases in federal and state courts in New York City, Maryland and Washington, D.C., and has also been involved with arbitrations before the ICC, the AAA and the FCMS.
Following law school, Ms. Bernanke was a law clerk for Judge Thomas C. Platt, U.S. District Court for the Eastern District of New York. Before law school, she worked as a legislative assistant to Congressman Hamilton Fish, Jr.
Ms. Bernanke received her J.D. in 1994 from Marshall-Wythe School of Law, College of William and Mary, where she was a member of the Moot Court Board and Bar. She earned her B.A., cum laude, from Boston College in 1989.
Ms. Bernanke is admitted to practice in the District of Columbia and New York.
Morgan, Lewis & Bockius LLP