On December 26, 2007, the United States Equal Employment Opportunity Commission (EEOC) issued a final rule that exempts the coordination of retiree health benefit plans with Medicare or comparable state, health benefit programs from “the prohibitions of the [federal Age Discrimination in Employment Act of 1967 (ADEA)].”

The ADEA generally protects individuals who are 40 years of age or older from employment discrimination based on age. In 2000, in Erie County Retirees Association v. County of Erie, the United States Court of Appeals for the Third Circuit held that an employer violated the ADEA if it reduced the health benefits of retired employees when those employees became eligible for Medicare, unless the employer could show that it met the exception under the ADEA because either (i) “the benefits available to Medicare-eligible retirees were equivalent to the benefits provided to retirees not yet eligible for Medicare” or (ii) “the employer was expending the same costs for both groups of retirees.” The EEOC became concerned that, as a result of the Erie County decision, employers would eliminate or reduce all retiree health benefits provided to retirees not yet eligible for Medicare or similar state health benefit programs. To avoid these potential unintended consequences of Erie, the EEOC proposed a rule in 2003 that would create a limited exemption under the ADEA to allow retiree health benefit plans to coordinate with Medicare or comparable state health benefit programs. In American Association of Retired Persons v. EEOC (June 4, 2007), the Third Circuit Court of Appeals upheld the proposed EEOC rule because, among other things, it has the “necessary and proper purpose of encouraging employers to provide the greatest possible health benefits for all retirees.” The EEOC rule became effective upon publication on December 26, 2007.