Life Insurance Decreases coverage 50% at age 65.

[Guest Jet352]

In the pages showing the new compliance information on the EEOC, the portion that discusses whether or not benefits are equal includes the following:

"In some cases, it may be clear from the face of a benefit plan that older workers are getting lower benefits than their younger counterparts on the basis of age.

EXAMPLE - Employer R offers employees life insurance coverage valued at 50% of their base salary at age 55. The plan states that employees will lose 5% of that payment each year, and will be ineligible for coverage altogether once they turn 65. These benefits are explicitly tied to, and reduced because of, the recipient's age.(9)"

QUESTION: If this is the case, then if my (now former) company offered life insurance to all employees at 1x salary but dropped that to only 50% coverage after age 65. Would that not be considered an unequal benefit? (only one flat rate was charged to the company, nothing was age based in the fees).

Also, Same 65 year old would be automatically vested in the 401 (k) plan, otherwise vesting would be 20% per year service.

Any comments? Are these two practices permissable?

[KIP KRAUS]

I’m not sure exactly what you are trying to get at, but will give it a stab by answering this way. It’s my understanding that under ADEA, not EEOC, that one option an employer has is to do a one time reduction in group life insurance amounts beginning at age 65 from 30% to 40% and if justifiable by its own experience reduce it more than 40%. So your former employer may be within legal limits.

As to your comment that the employer’s rates were not age based you may be somewhat mistaken. If his group life program was a true group life program then the flat rate per $1,000 of coverage was established on the basis of everyone in the group’s sex and age, and then a composite single rate was charged. There may have been other underwriting factors also taken into account in developing the composite rate, such as claims experience, industry loads, etc.

The vesting schedule for the 401(k) plan is favorable schedule, and I believe it falls within the perimeters of allowable schedules.