<nobr>Mar 30, 2005</nobr>

AARP v. EEOC Decision: District Court Ruling Will Accelerate Employer Retreat From Retiree Health Plans

Below please find Judge Brody's decision in the AARP v. EEOC litigation. The decision was just released this afternoon and is reason for great concern among ERIC members. Judge Brody, of the District Court for the Eastern District of Pennsylvania, ruled that the EEOC does not have exemption authority regarding the Age Discrimination in Employment Act (ADEA), having found that Congressional intent was otherwise clear in the statutory language.

The judge discussed the possibility to interpret the exemption power of the EEOC as a "real provision" rather than "surplusage" without giving the EEOC the power to legalize practices that directly contravene the intent of Congress. The order states that "[a]gencies have broad power to regulate when Congress has explicitly left a gap for the agency to fill." Chevron v. Natural Resources Defense Council, Inc., 476 U.S. at 843 (1984). The judge further stated that "[t]he EEOC has the power to issue rules, regulations and exemptions within these explicit, or implicit, gaps that Congress left in the ADEA. In the case of the challenged exemption, however the Third Circuit held that Congress did not allow for ambiguity with regard to the applicability of the ADEA to retiree health benefits."

We are very concerned about the impact of litigation to overturn the April 22 EEOC exemption from the ADEA that permits employers to coordinate post-employment healthcare coverage with Medicare. The EEOC proposed final rule had calmed the waters, giving more confidence and certainty to ERIC members. Efforts to derail the EEOC's responsible decision would result in an increased number of employers retreating from health arrangements. The AARP's actions will increase the numbers of retirees, whether Medicare eligible or not, that will be dropped from employers' retiree health plans.

Today's decision puts us one step closer to requiring a legislative solution. We will keep you all informed of any additional developments in this matter. At this point, the EEOC has the option to appeal to the Third Circuit. We do not know if they plan to appeal at this point. If you need additional information please contact Edwina Rogers at 202-789-1400 or erogers@eric.org.

Edwina Rogers
Vice President, Health Policy
The ERISA Industry Committee
1400 L Street, N.W., Suite 350
Washington, DC 20005
(202) 789-1400
Cell (202) 674-7800
Fax (202) 789-1120
e-mail: erogers@eric.org
www.eric.org

Websites:

Amended Memorandum and Order from Eastern District of Pennsylvania

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