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Agency OKs cuts in retiree benefits

Ruling lets firms reduce healthcare obligations for those age 65 and eligible for Medicare.

December 28, 2007|From Bloomberg News

The U.S. Equal Employment Opportunity Commission ruled that employers could cut benefits for retirees who turned 65 and became eligible for Medicare without violating age discrimination laws.

The commission, which enforces workplace fairness laws, said in a regulation that took effect Wednesday that companies and unions could offer greater benefits to those who were too young to qualify for Medicare or state-sponsored health insurance.

"By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits, which are increasingly less available and less generous," commission Chairwoman Naomi C. Earp said in a statement. A two-tiered system will help forestall across-the-board reductions, the commission said.

The commission approved the regulation in April 2004. AARP, which represents millions of Americans over age 50, sued to block it. The U.S. 3rd Circuit Court of Appeals, based in Philadelphia, rejected AARP's arguments in June. The policy amounts to age discrimination, AARP said.

"This policy is a civil rights and economic fiasco," AARP said in an e-mailed statement Thursday. "It is a wrongheaded move to legalize discrimination, allowing employers to back off their healthcare commitments based on nothing more than age" and "merely passes the buck to those who can little afford it."

The government, unions, nonprofit groups and individuals need to help expand access to affordable healthcare, AARP said. The Washington-based nonprofit, nonpartisan membership organization doesn't endorse political candidates or make contributions to campaigns.

"It's time to stop shifting costs and start controlling them," AARP said. "Our country needs real solutions to control the rising costs of healthcare."

The appeals court held that the Age Discrimination in Employment Act of 1967 doesn't bar the commission from letting employers trim benefits for Medicare-eligible retirees.

The commission noted that companies, unions and local governments said forcing them to pay equal benefits for all retirees regardless of age could lead to across-the-board cuts as life expectancy and medical costs increased. Providing different levels of benefits depending on age is a common and long-standing practice of companies and public employers, the commission said.

Even without the new rule, health benefits for retirees are falling. The Government Accountability Office, a congressional auditing agency, said in a 2001 report that about 30% of large employers and fewer than 10% of small employers offered retirees health benefits in 2000, compared with about 70% of employers in the 1980s.

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