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June 12, 2007
EEOC Rules on Coordination of Retiree Benefits Survive Challenge

The U.S. Court of Appeals for the 3rd Circuit has ruled that the U.S. Equal Employment Opportunity was acting within its authority when it issued regulations that would allow employers to coordinate retirement benefits with eligibility for Medicare without violating the Age Discrimination in Employment Act.

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In 2005, the EEOC approved a rule that would allow employers to reduce or eliminate health benefits once retirees become eligible for Medicare without violating the Age Discrimination in Employment Act (ADEA).

The AARP challenged the EEOC's regulations, arguing that the agency exceeded its authority and that the rule would lead to cuts in retiree benefits.

However, the U.S. Court of Appeals for the 3 rd Circuit--which covers Delaware, New Jersey, Pennsylvania, and the Virgin Islands--ruled that the agency has the authority to make such an exception to the ADEA.

The EEOC contends it acted with the intent of protecting the health benefits of retirees as employers face soaring healthcare costs, saying that barring the practice of coordination of benefits for retirees could have the unintended consequence of discouraging employers from offering health benefits to all retirees, including those under the age of 65.

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