Employers who provide retiree health benefits are allowed to coordinate and offset those benefits with Medicare or comparable state health benefits without violating the Age Discrimination in Employment Act (“ADEA”), according to the Equal Employment Opportunity Commission (“EEOC”). This rule, formally issued by the EEOC on December 26, 2007, adopts the prevalent practice among employers of considering Medicare when structuring health benefits for retirees.

Back in 2000, a federal appellate court ruled that the ADEA requires that health insurance benefits received by Medicareeligible retirees be the same or cost the same as health insurance benefits received by retirees under age 65. That decision was criticized by employers and labor unions alike on the ground that it would force companies to reduce or eliminate retiree health benefits, prompting the EEOC to take action. After lengthy study and deliberation, the EEOC determined that it was in the best interest of employers, employees, and retirees to allow employers to coordinate health benefits with Medicare-eligibility without having to consider the ADEA.

Employers are not required by law to provide retiree health benefits. Employers who chose to do so, however, no longer need to be concerned about violating the ADEA if they spend more money on health benefits for retirees under the age of 65 than for retirees over the age of 65, or if they otherwise coordinate their retiree health benefits with Medicare. The EEOC’s Retiree Health Benefits Rule is available at http://www.eeoc.gov/policy/regs/index.html.