ERIPs, ADEA, and with EEOC Regulation Section 1625.32

[KimberlyC]

Before the EEOC enacted Regulation Section 1625.32, the EEOC and courts took the position that an early retirement incentive plan (ERIP) that uses an upper age limit or age-based window for eligibility violated ADEA. For example, in Jankovitz v. Des Moines Indep. Comty Schools, the court found that an ERIP that paid for retiree health insurance premiums only until age 65 was discriminatory on its face for using an age limiting factor (age 65) and was inconsistent with the purposes of ADEA. This case is still good law and is cited by other courts to strike down age limits.

However, in 2007 the EEOC issued Regulation Section 1625.32, which provides a broad exemption for employers to offer different retiree health plans for retired participants that are not eligible for Medicare and retired participants that are eligible for Medicare. This rule allows employers to offer carve out and supplemental plans for Medicare that are not as valuable as the plan for retiree that are not eligible for Medicare.

What is not clear, is whether the regulation also applies in the context of an ERIP. Can an employer as part of an ERIP offer employees who retired during the window subsidized retiree medical in the non-Medicare eligible retiree health plan without offering a subsidy to employees that retire during the window and will be eligible for the retiree health plan for Medicare eligible employees.

As you can see, I have avoided calling the plans the "under age 65 plan" ) and the "age 65 and older plan". I have a call into EEOC but have not heard back. Any thoughts are welcome!

[Eric Taylor]

Just curious if you received a response to your question.  I am looking at a company that is proposing to basically cover full COBRA cost for 18 months for those retiring before becoming Medicare eligible and then providing reimbursement up to 85% of the active employee amount to be capped at a maximum benefit of 5 years.  Seems easiest and safest approach might be to simply limit all benefits to maximum of 85% of active employee premium no matter when one retires but I know they are concerned about the initial adjustment and added COBRA administrative fee, etc.