The U.S. Equal Employment Opportunity Commission, in a final rule published Dec. 26, said employers could effectively trim back their health insurance expenses for retired workers once they reach 65 and qualify for Medicare without violating age discrimination laws.
Under the rule, employers can factor in the costs and services that Medicare offers as they develop their overall health benefit packages. The EEOC decision allows employers to spend more on healthcare for retirees under the age of 65 than they do for those who are older. While the benefit structure likely will remain the same for both age groups, it allows the company to save money because Medicare will pay for a portion of the overall healthcare costs.
By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits, which are increasingly less available and less generous, Commission Chair Naomi Earp said in a written statement. Millions of retirees rely on their former employer to provide health benefits, and this rule will help employers continue to voluntarily provide and maintain these critically important benefits in accordance with the law.
In 2000, a federal court ruled that if an employer provides retiree health benefits, it would have to be equal to the health insurance benefits received by younger retirees. But after the EEOC adopted this interpretation, labor groups, employers and state and local governments said that it runs contrary to existing practice and said that to do so would mean they would have to reduce or eliminate the retiree health benefits they currently provide.
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