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December 26, 2007 EEOC Ruling Pertaining to Retiree Health Care Benefits

    On December 26, 2007, the Equal Employment Opportunity Commission (EEOC) published in the Federal Register its final rule that gives employers free reign to use age as a basis for reducing or eliminating healthcare benefits for retirees 65 and older. The EEOC's rule is in response to a decision in the Erie County (PA) lawsuit in 2000 by the U.S. Court of Appeals for the 3rd Circuit. The Court ruled that the Age Discrimination in Employment Act requires employers to spend the same amount on health insurance benefits provided Medicare-eligible retirees as those received by younger retirees.

      The NRLN believes the EEOC is misguided in its view that employers' compliance with the Court's decision would result in companies reducing or eliminating the retiree health benefits they were providing - leaving millions of retirees under 65 with less health insurance, or no health insurance at all.

      The NRLN has had this issue on its plate since 2004. Here is some background:

• The EEOC created the "proposed rule" in July 2003 and solicited public opinion before approving the rule in April 2004.
• The NRLN issued a news release on 4/21/04 and sent messages to Congress opposing the "proposed rule" at that time. 
• The NRLN accused the EEOC of legislating, rather than upholding, the law. 
• The NRLN supported AARP's decision to sue the EEOC at the U.S. District Court level. In February 2005, the federal judge temporarily blocked the EEOC rule. The same District Court judge who ruled in favor of AARP the first time later reversed her own decision.
•  AARP appealed the ruling to the U.S. Court of Appeals for the 3rd Circuit. The same federal appeals court that brought the Erie County decision in 2000 ruled in June 2007 that the EEOC was authorized to issue exemptions if a strict interpretation of the age discrimination law would be contrary to the public interest. "We recognize with some dismay that the proposed exemption may allow employers to reduce health benefits to retirees over the age of 65 while maintaining greater benefits for younger retirees," the Court said. But it said the Commission had shown that the exemption was "a reasonable, necessary and proper exercise" of its authority.
• The NRLN has commended the AARP for its filing of an appeal with the U.S. Supreme Court. The NRLN's Washington, D.C. staff has met with AARP's legal staff to see if they would allow the NRLN to file an amicus (friend of the court) brief. Eventually, the Lucent Retirees Organization connected with AARP's attorneys and those from National Employment Lawyers Association (NELA). The LRO board has approved funding to support filing of the brief. NELA filed the amicus brief in the pre-certification stage of the legal proceeding, meaning the brief was intended to urge the court to agree to hear AARP's appeal. They filed on the 12/20/07 deadline.
• In spite of the U.S. Supreme Court deliberation as to whether to hear the case or not, the EEOC "issued" the final rule, making it effective last week.
  
  Here is the game plan as the NRLN currently sees it:
• The NRLN issued today the following news release. It will serve as a precursor to future lobbying for Congressional action, if necessary.
• The NRLN 2008 Legislative Agenda that will be issued following the NRLN's Annual Leadership Conference/Board Meeting in late January will feature this issue, the EEOC rule, as an action item.
• Should the U.S. Supreme Court agree to hear the case, there will be another round of preparation and filing of amicus briefs, this time urging the Court to strike down the EEOC rule.
• Should the U.S. Supreme Court refuse to hear the case or uphold the lower courts' decisions, the NRLN will immediately lobby Congress for legislative change to reverse the EEOC rule. Congress threatened to do this earlier but may have to be persuaded again. 
• The NRLN will want to stimulate Congress to change the law that now grants the EEOC some latitude to make judgments like this "if deemed to be in the public interest."
  
  Stay tuned and be prepared to take action if the NRLN requests your assistance.

NEWS RELEASE - National Retiree Legislative Network

Pension Benefit Guaranty Corporation (PBGC)

We have been asked many times what the Pension Benefit Guaranty Corporation, PBGC, is, and how does it operate. In response to those that have friends or family members that have lost their employer defined pension benefits, we have prepared this very brief explanation. For complete details, visit the PBGC web-site: www.pbgc.gov

Who they are:

The PBGC is a federal corporation created by the Employee Retirement Security Act of 1974 (ERISA). It does not receive any funds from general tax revenues. Its operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans.

What the PBGC guarantees:

PBGC guarantees “basic benefits” earned before your plan ended, which includes:

Pension benefits at normal retirement age.

Most early retirement benefits.

Annuity benefits for survivors of plan participants.

Disability benefits for disabilities that occurred before the date the plan ended.

PBGC does not guarantee:

Health and welfare benefits

Vacation Pay.

Severance benefits.

Lump sum death benefits that occur after your plan ended.

Legal limits on PBGC guarantees:

Generally, PBGC does not guarantee any monthly pension amount that is greater than the monthly benefit you plan would have provided if you had retired at your normal retirement age.

The maximum amount the PBGC guarantees is set each year under provisions of ERISA.

If your plan was created or amended to increase benefits within five years before it ended, your benefits may not be fully guaranteed.

How Pension Plans End:

Employers can end a pension plan through a process called “plan termination”. There are two ways an employers can terminate its pension plan.

Standard Termination : Employer can end its plan only after showing the PBGC that the plan has enough money to pay all benefits owed to participants. The plan must either purchase an annuity or, if your plan allows, issue one lump-sum payment that covers your entire benefit. There are other reporting requirements. PBGC's guarantee ends when your employer purchases your annuity or gives you the lump-sum payment.

Distress Termination: If the plan is not fully funded, the employer may apply for a distress termination. To do so, however, the employer must prove to a bankruptcy court or to PBGC that the employer cannot remain in business unless the plan is terminated. If this application is granted, PBGC will take over the plan as trustees and pay plan benefits, up to the legal limits, using plan assets and PBGC guarantee funds.

Note: You cannot earn additional benefits after the plan ends.

How PBGC Operates:

PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, and assets from pension plans for which PBGC is the trustee, and recoveries from the companies formerly responsible for the pans.

PBGC pays monthly retirement income benefits, up to a guaranteed maximum to retirees of pension plans that ended.

This summary was prepared for general information purposes only. For complete details about the Pension Benefit Guaranty Corporation, visit their web site at: www.pbgc.gov

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