<nobr>Nov 5, 2004</nobr>

ERIC Calls for Action on EEOC Erie Rule

Washington, D.C. -- ERIC in a letter to Leslie Norwalk, Deputy Administrator of the Centers for Medicare and Medicaid (CMS/HHS) last night urged that CMS recommend that the Office of Management and Budget (OMB) approve the Equal Employment Opportunity Administration's (EEOC) regulation exempting retiree medical benefits from the Age Discrimination in Employment Act (ADEA) if an employer decides to change, alter or eliminate its employer-sponsored health benefits when pre-Medicare retirees become eligible for Medicare benefits. EEOC proposed the rule in July 2003 which met with strong support from ERIC, organized labor and other business groups but has drawn sharp opposition from the AARP. Action on the regulation has been put off until now.

ERIC's letter follows a meeting on Monday in which ERIC and other business and labor groups met with CMS officials and representatives of the AARP. CMS had been asked by the Office of Management and Budget for their comments on whether the EEOC regulation should be approved as final. OMB approval is one of the final steps before an agency can issue a regulation. During the meeting ERIC, other business groups, the American Federation of Teachers and the National Education Association argued strongly that the exemption was reasonable, lawful, and necessary for any continuation of employer retiree health plans.

AARP argued that the practice of terminating a retiree health benefit when a participant becomes eligible for Medicare was age discriminatory under the ADEA. They argued that employers should be mandated to continue to provide health care benefits after Medicare eligibility, even if they were coordinated with Medicare or "capped." AARP appeared to assume that employers would increase retiree health spending even in the face of clear evidence that, if their argument were adopted, employers would decrease support for pre-Medicare eligibles or even eliminate their retiree health plans where they could.

Plan sponsors found the AARP position confusing since it was clear that, if their position were to prevail, employers would have no choice but to curtail or eliminate benefits for pre-Medicare eligibles, generally age 55-plus, which is a significant AARP constituency. That's precisely what happened in Erie County when they settled the Erie case.

The big losers under the AARP mandate would be those pre-age-55 whose benefits would be curtailed to pay for increased benefits for those already receiving Medicare benefits. "AARP," according to Mark Ugoretz, President of ERIC, "presumes that employers would simply write yet another bigger check for the enhanced benefit for Medicare eligible retirees. It's a far-fetched presumption in an era of annual double digit health cost inflation. Adding more people at the table doesn't make the pie any bigger and in this case in particular, there is no justification to cut the pieces any smaller."

ERIC's letter urging that CMS recommend approval of the EEOC regulation is attached.

For further information contact Mark Ugoretz at ERIC 202.789.1400.

The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of employee retirement, health, and welfare benefit plans of America's largest employers and represents exclusively the employee benefits interests of major employers. ERIC's members provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

Websites:

ERIC Letter to CMS/HHS Re: Erie

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