The U.S. Equal Employment Opportunity Commission has ruled that employers can cut benefits for retirees who turn 65 and become 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 can offer greater benefits to those who are 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 EEOC said.
The commission in Washington approved the regulation on April 22, 2004. The AARP, which represents millions of Americans over the age of 50, sued to block it. The 3rd U.S. Circuit Court of Appeals based in Philadelphia rejected the AARP's arguments in June.
The AARP said the policy amounts to age discrimination.
"This policy is a civil-rights and economic fiasco," the AARP said in an e-mailed statement Thursday. "It is a wrong-headed move to legalize discrimination, allowing employers to back off their health-care commitments based on nothing more than age" and "merely passes the buck to those who can little afford it."
The government, unions, nonprofits and individuals need to help expand access to affordable health care, said the AARP, a Washington-based nonprofit, nonpartisan membership organization.
"It's time to stop shifting costs and start controlling them," the AARP said.
The appeals court held that the 1967 Age Discrimination in Employment Act doesn't bar the EEOC from letting employers trim benefits for Medicare-eligible retirees.
The EEOC noted that companies, unions and local governments say 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 increase. Providing different levels of benefits depending on age is a common and longstanding practice of companies and public employers, the EEOC 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 one-third of large employers and less than 10 percent of small employers offered retirees health benefits in 2000, compared with about 70 percent of employers in the 1980s.