We recently reported (see page 2) that the EEOC had approved and intended to publish a rule specifically authorizing retiree health benefit plans to coordinate plan benefits with Medicare or comparable state-sponsored health benefits without violating the Age Discrimination in Employment Act (ADEA). Recently, a federal district court in Pennsylvania issued an order enjoining, or prohibiting, the EEOC from publishing or implementing the retiree health benefit regulation. AARP v. EEOC, No. 05-CV-509 (E.D. Pa. March 30, 2005), 2005 WL 723991. The EEOC has indicated its intent to appeal the recent ruling.

The EEOC’s new rule-to-be was an about-face of an earlier EEOC enforcement policy adopting the ruling in Erie County Retiree Ass’n. v. County of Erie, 220 F. 3d 193 (3d. Cir. 2000), writ den., 532 U.S. 913, 121 S. Ct. 1247, 149 L. Ed. 2d 153 (2001). In Erie, the Third Circuit held that the reduction of retiree health plan benefits for Medicare-eligible retirees was age-based discrimination, unless the sponsoring employer could demonstrate “equal cost or equal benefit” or other statutory ADEA exemption. Although the Erie County decision itself was not applicable to employers outside of the Third Circuit (which includes Delaware, Pennsylvania, New Jersey, and the U.S. Virgin Islands), the EEOC had supported the ruling of the Erie County court – even filing an amicus curiae brief to the appellate court urging that the plain language of the ADEA made the Medicare-based changes in retiree health plans unlawful – and then quickly adopted the ruling as part of its nationwide enforcement policy.

However, the EEOC subsequently realized that its position presented an incentive for employers to reduce or eliminate their retiree benefit plans. In August 2001, the EEOC rescinded its enforcement policy based on Erie County, though the court decision remained applicable in the Third Circuit. The EEOC argued that it was specifically authorized under the ADEA to make any exemption it found “necessary and proper in the public interest.” The federal district court hearing the AARP’s challenge, however, disagrees. Now, the Third Circuit will have an opportunity to evaluate the EEOC’s post-Erie County position because it will hear an appeal of the recent AARP v. EEOC ruling.