Retirement Health Benefits
A number of large companies, including some in our area, have reduced retirees' health benefits in order to cut costs and increase profits. I strongly believe this practice should be illegal. The decision to retire is based on an estimate of what your income and expenses will be after you stop working. It's impossible arrive at a realistic estimate if companies are allowed to change the rules after you've already retired. That is why I am an original cosponsor of the Emergency Retiree Health Benefits Protection Act (H.R. 1322). This bill would protect retirees in employer-provided health plans from having their benefits eliminated or cut back. It would also obligate employers to restore previous health benefits taken away after an employee's retirement unless the employer can demonstrate substantial business hardship. I will continue to pressure the House leadership to bring this critical legislation up for a vote this year.
Recent EEOC Decision
I strongly oppose the recent ruling by the Equal Employment Opportunity Commission that exempts retiree health plans from federal age discrimination laws. This ruling would allow employers to reduce or eliminate benefits for retired employees once they turn 65. I joined a group of my colleagues in the House in advocating against a similar Senate provision in the Medicare law last year. Our efforts were successful: it was dropped from the final version of the bill.
The EEOC's April 30 decision, however, achieves the same result. The goal of the ruling, its supporters say, was to give more flexibility to employers who offer benefits to early retirees. Under current law, employers fear that they could be sued for age discrimination because they scale back their retiree health plans when retirees turn 65 and become eligible for Medicare. It is my concern that the employers who support this provision are really just looking for a way to cut back benefits for retirees.
Ensuring that early retirees have access to health care is an important issue, one that deserves immediate attention from Congress. I have supported legislation to allow early retirees to purchase Medicare at a special premium until they are eligible for traditional Medicare at 65. I am also open to other suggestions for ensuring that health care is affordable for people who are able to or are forced to retire before they are old enough for Medicare.
The EEOC ruling does not address any alternative proposals; instead, it changes federal law to favor early retirees at the expense of people over 65. In my view, the agency completely overstepped its boundaries by instituting a major shift in federal health policy as well as civil rights law. Although I firmly believe that the Republican leadership of the Congress has shirked its responsibility to tackle serious health care issues, it is nonetheless the responsibility of Congress, not the EEOC, to consider such sweeping changes in health care policy.
The impact of this decision could be devastating. Corporations would be free to cancel retirement health benefits completely for the 12 million Americans over 65 who currently receive health care coverage through a former employer.
Because the EEOC ruling has not been finalized yet, I have joined a group of my colleagues in a letter to EEOC Chairperson Cari Dominguez, expressing our outrage at the ruling and urging the commission to halt its implementation of the rule. If that effort is not successful, I will be working for a legislative override of the agency's decision.
Protecting Pensions
Hundreds of companies across the country, including IBM and other large employers in the Southern Tier and Hudson Valley regions, have converted their traditional defined benefit pension plans to cash-balance plans. While the switch to cash-balance pension plans is probably a good deal for younger workers who want flexibility and portability in their benefits, these plans are often structured in such a way that older workers lose a significant amount of their final benefits after conversion. In a traditional defined benefit plan, contributions rise exponentially the closer workers are to retirement, while under a cash-balance plan, the rate of accrual remains basically constant throughout an employee's tenure.
Since IBM announced its intention to switch to a cash-balance plan in 1999, I have called for strong federal protections for workers whose benefits would be decreased by the conversion. I have also sponsored legislation that would give employees a choice between the two types of pension plans when a conversion is proposed.
In July, a U.S. District Court ruled that cash-balance formulas inherently violate federal pensions laws against age discrimination.
Specifically, the court found that "the rate of benefit accrual decreases because of the attainment of a certain age." Despite this ruling, the Treasury Department is continuing to pursue regulations it proposed last year that would allow cash-balance plans. I am pleased to report that in September, the House of Representatives passed the Sanders-Gutknecht-Miller-Hinchey-Emanuel Pension Amendment, which would prevent Treasury from working to overturn the court ruling. Whether this measure will remain in the final legislation is not yet known.