Retiree Medical Benefit Developments in the Courts,Congress and EEOC

Abstract

Recent legal developments will affect the design of retiree medical plans. By rejecting a reverse age discrimination claim, the Supreme Court’s General Dynamics decision clarifies the right to use design options that provide additional retiree medical rights to employees close to retirement, such as the “grandfathering” provision used by General Dynamics. In another age discrimination development, the Equal Employment Opportunity Commission (EEOC) has approved rules permitting employers to coordinate retiree health benefit plans with eligibility for Medicare. This administrative rejection of the infamous Erie County case provides important legal support for a common retiree medical plan design. Changes to retiree medical benefit plans continue to be hotly litigated across the country. Recent decisions emphasize the need for plan documents and labor agreements to reserve the plan sponsor’s rights to modify future retiree medical benefits. Finally, the Medicare Modernization Act dramatically affects retiree medical plan design by authorizing subsidies for employers who provide qualified retiree prescription drug coverage and by creating health savings accounts to provide an important new retirement medical benefits tool for employers and employees.