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News: Supreme Court says it’s OK for employers to reduce retiree health benefits

Jim Giuliano
by Jim Giuliano
March 28, 2008
1 minute read
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The long battle appears to be over, as the High Court ruled that employers can reduce health benefits for retirees age 65 and over.

The legal question at stake: Does cutting health benefits for Medicare-eligible former employees amount to age discrimination? AARP, the seniors’ lobby, argued in court that the proposed cut, previously OK’d by federal regulators, would be bias. Employers argued that it wouldn’t, and said a ban on reducing retiree benefits would make overall health coverage too expensive to fund.
The Supreme Court sided with employers and gave the go-ahead to reduce benefits for 65-year-olds.
Here’s what the ruling means to you:
If you offer retiree health benefits: Your company won’t be saddled with full funding for lifetime expensive coverage. You legally can put in a stipulation that funding can be reduced when retirees reach eligibility for Medicare. For many companies, that funding represents a big number.
If you’re thinking about offering retiree coverage: You might want to go ahead and offer it, if it makes some financial sense. Retiree coverage is an attractive benefit for a lot of job-hunters, particularly older ones. And now you know you’ll be locked in to full coverage only until the retiree reaches 65.
A 2004 survey by AARP showed 49% of retirees age 55 to 64 had health coverage from a former employer. However, the figure includes government retirees. So if you’re a private employer offering retiree coverage, that’s something to shout about when recruiting.

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