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TelCo Retirees Association, Inc.

April 2, 2005

TelCo Retirees Association, Inc. Members:

Since there has been considerable discussion and news reports concerning the recent decision by the U.S. District Court for the Eastern District of Philadelphia and because this issue could have serious future implications for all retirees over the age of 65, I would like to share with you some portions of the official government report.

Judge Anita Brody of the U.S. District Court said that the proposed regulation violated Congressional intent “as expressed in the plain language of the Age Discrimination in Employment Act (ADEA) and as interpreted by the U.S. Court of Appeals for the Third Circuit.”

Brody, who granted AARP’s petition to delay implementation of the regulation, permanently enjoined the Commission “from publishing or otherwise implementing the regulation at issue.”

In April 2004, the EEOC voted 3-1 to approve the rule which permits employers to reduce or end benefits when a retiree becomes eligible for Medicare or comparable state retiree health benefits without violating the ADEA. (The Commission was on the verge of publishing this rule in final form when Judge Brody granted AARP’s request for a preliminary injunction.) The exemption to the ADEA (which is widely supported by the employer community and organized labor, is intended to address a growing concern that the Age Discrimination Act might be construed to create an incentive for employers to eliminate or reduce retiree health benefits.

In a response to those concerns in August 2001, the EEOC revoked its long held position that employee benefit plans that either end or are reduced when a retiree becomes eligible for Medicare, violated the ADEA. Recognizing that the former policy could have the effect of discouraging employers from providing health care benefits for its retirees, the agency also announced that it would no longer litigate such cases while the question was under review.

In her March 30 decision, Judge Brody acknowledged that the Commission argued “persuasively” that without the exemption, employers would reduce or eliminate health benefits for all employees. She added, however, that the Third Circuit “already ruled that allowing employers to give retirees 65 or older health benefits that are inferior to the health benefits given to retirees who are younger than 65 is illegal under the ADEA ruling.”

“And the Third Circuit has already decided that Congress intended for the provisions of the ADEA to apply when an employer reduces health benefits based on Medicare eligibility…an administrative agency, including the EEOC, may not issue regulations, rules or exemptions that go against the intent of Congress.”

“While EEOC has the power to issue rules, regulations and exemptions within these explicit or implicit gaps that Congress left in the ADEA, in this case the Third Circuit held that Congress did not allow for ambiguity with regard to the applicability of the ADEA to retiree health benefits.”

CONCLUSION:

For the reasons stated above, the AARP’s motion for summary judgment is granted and the EEOC’s motion for summary judgment is denied. The challenged regulation, originally published at 68 Fed. Reg. 41542, is contrary to law and violates the clear intent of Congress in passing and amending the ADEA as articulated in Erie County, 220F.3d 193. The EEOC will be permanently enjoined from publishing or otherwise implementing the challenged regulation.

Anita B. Brody, J.

To Our Membership:

In my judgment, AARP has won the first round in this critical issue, but the battle is far from won. All retirees over the age of 65 must remain vigilant as this ruling continues to wind its way through the courts and Congress.

This would be a propitious time to write your Congressional representatives and to encourage their support of this federal judicial decision!

Sumner K. Emery, President