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AARP to seek review of retiree health care ruling


PHILADELPHIA--A lengthy legal battle involving whether employers--without running afoul of federal age discrimination law--can provide smaller health care benefits to retired employees eligible for Medicare than to younger retirees may have another round in the courts.

Last month, a three-judge panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia ruled unanimously that the Equal Employment Opportunity Commission has the authority to implement a rule to exempt retiree health plans from the Age Discrimination in Employment Act when those plans reduce benefits to retired workers once they are eligible for Medicare.

The practical effect of the EEOC rule is to enable employers to continue to provide a two-tier system of retiree health care coverage. However, the rule first proposed in 2003 never was implemented because of a legal challenge by the AARP.

Now Laurie McCann, a senior attorney with the AARP in Washington, says the organization will ask the full 21-judge 3rd Circuit to rehear the case. The deadline for filing the petition is July 19, which Ms. McCann said the organization will meet.

Whether the full appeals court will hear the case isn't known, though legal experts say such reviews are unlikely when a decision handed down by panel of an appeals court is unanimous.

The EEOC proposed its rule to counteract an August 2000 decision by the 3rd Circuit in a case involving Erie County, Pa., that found that retiree health care plans were subject to the ADEA. That decision exposed employers to age discrimination suits.

Without an ADEA exemption, the EEOC feared that if employers had to provide the same level of benefits to older retirees as to younger retirees to avoid age discrimination charges, they would reduce health care benefits for all retirees.

In the more recent case, the 3rd Circuit ruled the EEOC has the authority to issue its retiree health care plan exemption, noting that it met an ADEA test of being reasonable, "necessary and in the public interest."