Employers and Senior Benefits
In 1967, the Age Discrimination in Employment Act (ADEA) was passed. This law requires that all employee benefits be provided in a non-discriminatory manner “unless a statutory exception provides otherwise,” as stated in the Compliance Manual Overview on Employee Benefits found at the U.S. Equal Employment Opportunity Commission. In essence, the ADEA provides employers with a guideline regarding their responsibility to comply with the ADEA law. The ADEA addresses mainly unique issues between employer and employees of varying ages. Some of these issues include, but are not limited to:
- Life and health insurance benefits
- Long and short term disability
- Disability and service retirement benefits
According to the terms of the ADEA, an employer must “do so without regard to an employee’s age.” Also according to ADEA, an employer may “provide lower benefits to older than to younger workers in limited circumstances.” Differences in benefits to senior employees are determined by the ADEA. In certain circumstances, employers find their senior employees over the age of 65 receive medical coverage from Medicare. Benefits outlined under the ADEA are subject to the “Equal Cost Defense.” That is that the employer must take into consideration the costs of benefits for both younger and older workers and determine them to be equal.
Determination of Equal Cost of Benefits
The cost of benefits is also determined by the percentage of contribution paid by the employer vs. the individual employee. However, there are certain allowable offsets such as the company’s retirement and pension policies. Employers can only offer different benefits to senior employees if the cost of those benefits is equal to the cost of benefits for younger employees. For example, a senior employee may retire with a company retirement plan or opt out of the plan to take advantage of retirement healthcare benefits. The other factor involved in whether or not to offer senior employees different benefits is employee status. Company policies may allow senior employees to work past the company’s set retirement age.
Another example is if retirees receive health benefit coverage and the benefits are comparable to Medicare benefits, the senior employee may receive employer benefits to a fourth of the value of Medicare when retirees are 65 years old or older. An employer can offer to pay senior employees’ ages 55 to 65, Social Security supplements as it would apply to early retirement incentive plans. However, upon reaching age of eligibility for Social Security, the employer is no longer responsible to provide this benefit. Employers should avoid any arbitrary age discrimination in the offering of employee benefits.
The Basics of Determining Different Benefits
For most employers, employee benefits are clearly outlined in the company policy. This document should be provided at time of hire to the newly hired employees. This will help avoid any misunderstandings of which benefits employees are entitled to. Benefits may include cost of higher education. An equal cost benefit to senior employees for higher education applies. Investment and stock options may also be offered as part of employee benefit packages. Senior dental plans are another benefit offering that must be equal to the cost of younger employee dental benefits. Each employer must thoroughly examine the company benefit package to ensure there is no discrimination based on the ages of employees. Generally, there are professional consultants who can assist with issues related to employee benefits or this may be the duty of Human Resources personnel.
The best way to maintain ADEA compliance is to offer employee benefits that allow employees to choose benefits they feel are compatible with their age and their employment longevity. For example, offer healthcare plans that include physicians specializing in geriatric medicine as well as general primary care physicians for younger employees and pediatricians for their children. Giving employees more choice in the matter of their quality of life and healthcare avoids age discrimination and places responsibility in the hands of employees rather than the employer.
Robert Cordray is a freelance writer for Income.com and expert in business and finances. With over 20 years of business experience, Robert is now retired and hopes others can benefit from his writing.