ADEA and Retiree LTD Plan

[Guest blackacre]

I'd appreciate thoughts and comments on whether there is an ADEA violation if an LTD plan is amended to provide that LTD payments for disabilities that occur before age 60 shall end at age 65.

Obviously some participants would get longer LTD coverage depending on when their disability occurred. But, workers older than 65 would have no LTD coverage, or perhaps less if an existing schedule remains in the plan.

The schedule allows from 48 months of LTD coverage at age 61 to 15 months of coverage at age 68.

I am assuming that ADEA applies to retirees, per Erie County. Even if it doesn't apply to retirees, there are active employees over age 65 in the company.

[mroberts]

Just about all LTD plans have a reducing benefit duration once an employee goes out on disability past age 60, so no, the plan would not be in violation. Most plans end payments at age 65 for employees who were disabled prior to age 60 since that is still considered the normal retirement age.

As far as retirees go, how would they be eligible for disability benefits? The purpose of disability insurance is to help replace one's salary. If a person is retired, he or she isn't working and therefore, isn't receiving a salary.

[Guest alawyerinblack]

There is a school of thought out there that such an amendment would violate the Older Workers' Benefit Protection Act of 1990. The DOL will sometimes take this position, although to my knowledge they have never won with it.

The DOL relies primarily upon Kalvinskas v. CalTech 96 F.3d 1305 (9th Cir. 1996) and 29 USC 623(f)(2). The argument is that by cutting of disability benefits at age 65, you are essentially forcing the employee to retire "involuntarily", i.e., if you had left his disability benefits in place, he could have received them and wouldn't have been forced to "retire" from his disability to receive disability benefits.

Many disability insurance contracts will give disability insurance until the latter of age 65 or five years after disability. This appears to satisfy the DOL.

Many (probably a majority) think that Kalvinskas was either wrongly decided or shouldn't be held as good law outside of the 9th Circuit, upon the reasoning that disability is, in fact, a kind of retirement (many plans refer to "disability retirement"), so by merely forcing a shift from disability retirement to normal retirement, you have not forced a participant to retire involuntarily.

[KIP KRAUS]

blackacre

I agree with alawyerinblack LTD plans that are EDEA qualified will pay LTD benefits for a person disabled prior to age 65 for a minimum of 5 years. Typically the LTD payment language reads something to the effect of; if disabled prior to age 65 benefits will be paid to age 65, but not less than 5 years. From your post it appears that you may have an ADEA qualified payment schedule.

Some LTD plans also allow active employees to be covered until age 70. Of course at age 70 the typical benefit would last for only 1 year.

As to your retiree issue, I agree with mroberts. LTD is intended to replace lost income from the employer. In addition, by definition ADEA covers employment discrimination.

This of course doesn’t mean that a retiree couldn’t have an ADEA issue related to previous employment.

[Guest blackacre]

Thank you all so much for taking the time to reply to my post. It helps me so much when you share your thoughts. I appreciate and learn a lot from your greater experience.