<nobr>Feb 22, 2005</nobr>

AARP Suit Puts Retiree Health Benefits on the Line, Business Groups Claim

The ERISA Industry Committee (ERIC), The Equal Employment Advisory Council, and a coalition of other business organizations today filed an amicus brief urging a federal court in Pennsylvania to block an AARP petition that -- if allowed to stand -- could permanently jeopardize the health benefits currently offered to millions of retirees by many of America's largest employers.

The brief urged the court to reject a motion filed by AARP earlier this month that resulted in the court delaying for 60 days the EEOC from enforcing regulations allowing employers to coordinate retiree health benefits with Medicare.

AARP, the amicus brief argues, is wrong in claiming that employers' coordination of retiree health benefits with Medicare violates the Age Discrimination in Employment Act.

"The ADEA gives the EEOC broad authority to establish reasonable exemptions that are necessary and in the public interest," the amicus brief states. "It is both necessary and in the public interest for the EEOC to remove any incentives for employers to reduce or eliminate retiree helath benefits...."

AARP, et al. v. Equal Employment Opportunity Commission was filed Feb. 22 in the United States District Court for the Eastern District of Pennsylvania. In addition to ERIC, parties that signed onto the brief are: the Equal Employment Advisory Council, the HR Policy Association, America's Health Insurance Plans, the American Benefits Council, the Chamber of Commerce of the United States, the National Rural Electric Cooperation and the Society for Human Resource Management.

Organized labor is expected to file its own brief supporting the EEOC.

The AARP position is that coordination of the employer provided benefit with Medicare results in a benefit that is less valuable to Medicare-eligible retirees than the benefit provided to retirees who are not yet eligible for Medicare. In fact, the employer provided benefit is very often offered as a bridge between "early" retirement and Medicare eligibility. In some cases the benefit is coordinated with the Medicare benefit and in some cases it ends when the retiree becomes eligible for Medicare.

"AARP is flat wrong on two accounts," contends Mark Ugoretz, ERIC's president. "First they have erroneously claimed that Congress intended to bar employers from shaping their retiree benefit packages to coordinate with Medicare. The legislative history is quite clear that Congress specifically intended to permit coordination of benefits."

In addition, Ugoretz said, "AARP's assertion jeopardizes the benefits of countless retirees. Coordinating retiree benefits with Medicare is a time-proven, fair and cost effective way for companies to ensure that their retirees have access to health coverage. But it's also voluntary on the part of employers. If the AARP position prevails, employers will be forced to curtail the benefit to 'early' retirees in order to make up for the increased cost of providing a 'super-benefit' to Medicare eligible retirees who would, in effect, be double dipping."

Moreover, Ugoretz said, "In an era of double-digit health care inflation, it is not likely that employers will bear the cost of a double-dipping mandate and also providing a generous benefit to pre-Medicare eligible retirees. Under the AARP scenario, employers will be forced to cut back on providing the benefit to those who need it the most - those who are not yet eligible for Medicare."

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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's Amicus Brief

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