March 3, 2008

To NRLN Grassroots Network

From Bill Kadereit, NRLN President

Recently there have been rules issued by the Equal Employment Opportunity Commission and the U.S. Treasury Department that will negatively impact millions of retirees. The leadership of the NRLN is appalled by these rules and we intend to lobby Congress to, in general, put an end to the Executive Branch overruling laws passed by Congress. This has to stop!

The EEOC rule allows companies to reduce or eliminate health care benefits to retirees when they turn age 65 and become eligible for Medicare. The EEOC rule not only discriminates against and sanctions the reduction of benefits for those age 65 and older, thereby taking money out of their pockets, it does absolutely nothing to preserve or assure benefits for those under age 65. They are not protected. They are not guaranteed coverage. There are cases already evident to prove this point; where those over and under age 65 have both lost benefits as a result of the EEOC rule.

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 (ADEA) requires employers to spend the same amount on health benefits provided Medicare-eligible retirees as those received by younger retirees. The EEOC has been hoodwinked by employers into believing that if they had to provide identical benefits for retires under 65 and over 65, they would just drop retiree health benefits altogether for both groups.

Now companies can discriminate against retirees age 65 and older and they have retained the right to take back benefits from those under age 65. All retirees lose!

You would think that if companies wanted to dump retirees age 65 and older onto Medicare, the EEOC or Congress would require companies that do discriminate to meet two requirements: (1) maintain supplementary coverage for those 65 and older that would maintain parity with benefits in effect before such action, as a condition of waiver of ADEA rights, and (2) require that companies guarantee those under age 65 continuation of coverage in effect at the time the rule was issued.

NRLN retiree associations are actively working in support of amicus (friend of the court) briefs that have been filed urging the U.S. Supreme Court to hear AARP's appeal of lower courts’ decisions upholding the EEOC rule. Should the Justices agree to hear the case, we intend to then support other amicus briefs urging the overturning of the EEOC rule.

Should the court rule in favor of the EEOC rule, the NRLN is prepared to seek passage of a bill that would nullify the effect of the rule.

Another situation where the Executive Branch has run roughshod over the intent of Congress is the recent U.S. Treasury Department Revenue Ruling 2008-7. This rule allows companies to selectively freeze the pension accruals of older workers in certain cases without violating laws that were intended to protect retirement nest eggs.

At the heart of the issue is whether employers who change from defined benefit pensions to cash-balance plans can freeze the growth of older workers' pensions for months or years following the change while younger workers' pensions continue to grow. (This is known as “wearaway.”) Many companies allow employees to remain in the old plan for a time, but this only delays the onset of wearaway. The Treasury ruled that the decades-old laws that effectively prohibit companies from temporarily freezing pension growth don't apply when the freeze is delayed.

Treasury’s ruling validates pension wearaways and could tip in favor of companies the outcome of long-running lawsuits alleging age discrimination in pension benefits by a number of employers, including AT&T.

Treasury’s ruling allowing years with “zero accruals” is inconsistent with the very strong statements against wearaways in the Pension Protection Act of 2006 that the NRLN urged Congress to pass. Special interest groups have undone Congress’ work through compromising efforts with the Executive Branch.

The NRLN is looking into the potential of lobbying Congress to counteract Treasury’s ruling and provide the full measure of protection to employees and retirees that was intended by Congress when it passed the Pension Protection Act of 2006.

The NRLN will continue to oppose the EEOC’s and Treasury’s rulings that are harmful to millions of retirees. When the time comes that we need the support of the NRLN Grassroots Network to write to your elected representatives, we will let you know.

Bill Kadereit,

President National Retiree Legislative Network