Employee Benefits

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Background

 The Older Workers Benefit Protection Act (OWBPA), passed in 1990, states that employee benefits are among the “terms, conditions, compensation and privileges of employment” that are protected under the ADEA. The OWBPA also codifies long-standing regulations embodying the “equal benefit or equal cost” rule. This requires employers either to provide older workers and retirees with benefits equal to those of younger workers and retirees or to incur the same cost for providing a benefit regardless of the age of the beneficiary. The OWBPA also establishes stringent standards and information requirements for employers who seek to have workers waive their ADEA rights when they are terminated or when they accept early retirement or exit incentives.

But, although the law clearly establishes requirements for a knowing and voluntary waiver of ADEA rights, and despite EEOC regulations on the subject, those regulations are sorely out of date. More than 25 years after the passage of the OWBPA, the EEOC has yet to issue comprehensive regulations interpreting and implementing the OWBPA in its entirety (except for rules pertaining to the Title II waiver provisions). Consequently, the courts have often either ignored the OWBPA or refused to enforce its clear mandates.

Regarding disability discrimination in employee benefits, the EEOC has strengthened protections by taking the position that the ADA applies not only to employers but also to certain insurance providers, such as those created for the sole purpose of providing insurance benefits for specific employers. The EEOC also prohibits employers from reducing or denying benefits on the basis of disability.

One employment benefit important to retirees is retiree health insurance, although the number of employers offering this health coverage has dwindled. The continued availability of health benefits in retirement is a key factor in the timing of retirement for most workers, especially those not yet eligible for Medicare. Retiree health benefits are offered on a contractual or voluntary basis by the employer and may differ substantially from those offered to active employees.

As of 2014, under health care reform, early retirees without retiree health benefits are guaranteed access to coverage regardless of any health problems, and those qualifying for premium and cost-sharing assistance have help with the cost of their coverage. (For more on retiree health coverage, see Chapter 7, Health: Health Care Coverage—Retiree Health Coverage.)

Another key employee benefit issue of concern to older workers is early retirement. Voluntary early retirement incentives (ERIs) may be attractive to both employees and employers and, given the right program design, can comply with the ADEA. However, ERIs may pressure older workers to retire prematurely and reinforce the stereotype that older workers are dispensable.

These programs, most frequently employed by educational institutions, deny valuable additional benefits to workers above a certain age or to workers eligible for pension benefits, reduce the incentive benefits with increasing age, or reduce routine benefits of employment for people who choose to continue working beyond “normal” retirement age. The Pension Protection Act of 2006 provides an ADEA exemption for the payment of voluntary ERIs by educational institutions. However, except for voluntary ERIs offered to tenured faculty at institutions of higher education, the OWBPA requires that all voluntary ERIs further the “relevant purpose or purposes” of the ADEA. The OWBPA also prohibits ERIs that “permit or encourage” involuntary retirement.

Employee Benefits

Equal benefit or equal cost rule

AARP endorses the ADEA’s equal benefit or equal cost rule, which applies to employment benefits for older workers. Exceptions to the rule provided for in the ADEA must be narrowly construed to ensure that the rights of older workers and retirees to fair employment benefits are not jeopardized.

Older Workers Benefit Protection Act (OWBPA) regulations

The EEOC should issue comprehensive regulations under the OWBPA making clear the rights of older workers to fair and nondiscriminatory benefits under the ADEA. AARP supports a broad interpretation of ADEA coverage and its prohibitions against discrimination in employee benefit plans.

Employment benefits and the Americans with Disabilities Act (ADA)

AARP endorses the EEOC’s position that, with regard to employee benefit plans, the ADA applies not only to employers but also to certain insurance providers and prohibits employers from reducing or denying benefits on the basis of disability.

Retiree health coverage

Congress and federal policymakers, including the EEOC, should protect the rights of older retirees to equitable treatment in all employer-provided benefits, including retiree health benefits.

AARP supports measures to encourage employers to provide retiree health benefits.

Early retirement incentives

AARP opposes using benefits plans to accomplish illegal involuntary retirement.

Congress and policymakers should ensure that the rights of older workers to receive fair and nondiscriminatory benefits are protected and that participation in early retirement and exit incentive plans is truly voluntary.

Employers should be required to educate employees about the impact of accepting early retirement on company benefits, Social Security benefits, future wages, and economic security throughout retirement.

Employers should use nondiscriminatory exit incentives for employees of all ages and develop nondiscriminatory, cost-saving options that do not involve layoffs or terminations, such as flexible or part-time employment and job sharing.

The OWBPA’s prohibition of age-limited early retirement incentive plans must be strictly enforced and should be broadly interpreted to prohibit plans that deny or reduce early retirement benefits based on pension eligibility.

The EEOC should develop and promulgate regulations under Title I of the OWBPA to guide employers on the legality of various exit and early retirement incentive plans under the ADEA. Any ambiguities in the statutory language must be resolved in favor of protecting older workers’ rights.