By Margaret Steen
San Jose Mercury News
Posted on Sat, Apr. 24, 2004
A day after the Equal Employment Opportunity Commission ruled that employers could alter health benefits for retirees who turn 65 and are eligible for Medicare without violating age discrimination laws, the commission's chairwoman tried to reassure worried seniors.
``We acted so that you may continue to receive the health benefits you want and need,'' said Cari M. Dominguez, the commission's chairwoman, in a written statement.
Referring to a federal court decision that offering better benefits to younger retirees than to older ones constituted age discrimination, she said: ``Unions, teachers' organizations, state and local governments, and employers told us that the court's ruling would force them to cut back or eliminate their retiree health benefit programs.''
But officials at the AARP, the nation's largest seniors group, said they would work with government agencies and private employers -- and in court if necessary -- to preserve the benefits despite the EEOC's finding.
``We think we have a very good legal case and we think we can win in court. And we're prepared to take that step if necessary,'' said Michael Naylor, AARP's director of advocacy.
The ruling's effect remained unclear.
Advocates for seniors said Friday that more than 12 million retirees 65 and older who have employer-sponsored health coverage could see those benefits cut or dropped.
However, employer representatives said that even before the ruling, many companies were offering different coverage to retirees who were eligible for Medicare and those who weren't.
``I don't think a lot will change,'' said Lee Trucker, an attorney with Trucker Huss in San Francisco who specializes in employee benefits. However, he said companies that had been following this practice would be glad to know the EEOC had given its approval.
The controversy takes place against a backdrop of declining retiree health coverage. Companies have no obligation to offer retirees health benefits at all, and many do not. In addition, they generally have the right to change the coverage, as long as they make that clear to their employees.
In the late 1980s, 34 percent of retirees had employer-sponsored health coverage; now, the figure is less than 15 percent, according to the American Benefits Council, an employer advocacy organization.
The percentage of employers with 500 workers or more that offer health benefits to Medicare-eligible retirees also declined, from 40 percent in 1993 to 23 percent in 2001, according to the Employee Benefit Research Institute, a non-profit research group.
Cisco Systems, Sun Microsystems, Solectron, Sanmina-SCI and Calpine are among the large employers in Silicon Valley that do not offer retirees any health benefits.
Agilent Technologies does provide retiree benefits, and a spokeswoman said the EEOC's ruling would have no effect on the company's plan.
Intel has provided retiree health benefits since 1996, spokeswoman Gail Dundas said. Retirees pay their own premiums for the coverage provided by Intel's insurance company, but Intel gives each retiree $1,500 per year of service to help pay for them.
The EEOC's action may not be the final word. Attorneys and consultants said it doesn't necessarily overturn the federal court decision, although it makes it less likely that a company could be successfully sued.
Federal agencies have three weeks to submit comment on the EEOC's proposal. The feedback will go to the White House Office of Management and Budget, which has up to 90 days to amend or accept the proposal. If no changes are necessary, it can be published in the Federal Register as a final rule and employers can act on the measure. Tony Pugh of the Knight Ridder Washington Bureau contributed to this report.
Contact Margaret Steen at [email protected] or (408) 278-3499.