This final rule protects group retiree health benefits by allowing group plan sponsors that provide retiree health benefits to continue their longstanding practice of coordinating benefits with Medicare. This rule was first proposed many years ago but was delayed due to a parade of litigation. That litigation has now been resolved, clearing the way for EEOC to issue the final rule.
What this means is that plan sponsors may continue to offer two distinct levels of retiree benefits (1) Medicare “pays first” for Medicare-eligible retirees and (2) no Medicare offset for pre-Medicare retirees.
Plaintiffs in the earlier litigation had claimed that coordination of health plan benefits with Medicare violated ADEA because it resulted in lesser group benefits for Medicare-eligible retirees - and less cost for those benefits - than for pre-Medicare retirees. They also argued that EEOC did not have authority to issue the proposed rule.
The plan sponsors argued that disallowing coordination with Medicare would significantly increase their cost for retiree benefits and would result in termination of many retiree health plans not only for Medicare retirees, but for pre-Medicare retirees as well.
The U.S. Court of Appeals agreed that EEOC could proceed to implement the proposed rule, which it is now doing. In effect, the rule creates a narrow exemption within ADEA regulation for the practice of “coordinating employer-sponsored retiree health benefits with eligibility for Medicare.”
There seems to be little media attention on this development. I think that's odd, because both the new rule and the settlement of the litigation that blocked it for years, are quite significant.