Employee Benefits and the 101st Congress

• Publication year: 1990
• Pages: 1825

19 Colo.Law. 1825 Colorado Lawyer 1990.

1990, September, Pg. 1825. Employee Benefits and the 101st Congress

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1825

Vol. 19, No. 9, Pg.1825

Employee Benefits and the 101st Congress

by Raymond W. Martin and David H. Jett

A number of bills have been introduced in the current session of Congress that, if enacted, will significantly affect the structure and administration of employee benefit programs. This article evaluates the major bills currently pending in Congress,(fn1) including legislation introduced in response to the U.S. Supreme Court's decision in Public Employees Retirement System v. Betts.(fn2) Other topics discussed include (1) parental leave legislation vetoed by President Bush on June 29, 1990, (2) the Act for Better Child Care Services of 1989, (3) the Basic Health Benefits for All Americans Act and (4) the new minimum wage law.

The Betts Decision

In Betts, the Supreme Court addressed application of § 4(f)(2) of the Age Discrimination in Employment Act(fn3) ("ADEA") to employee benefit programs containing age-based distinctions. At the age of 61, the plaintiff retired from a county government position because of poor health. The plaintiff was eligible for normal retirement benefits. However, she was not eligible for disability retirement benefits, which were available only to persons younger than 60. The normal retirement benefit amounted to approximately one-half the amount the plaintiff would have received if she had been eligible for disability retirement. The plaintiff brought an action in the United States District Court for the District of Ohio, claiming that the county's refusal to grant her disability benefits on the basis of age violated the ADEA.

The decision in Betts hinged on the interpretation of § 4(f)(2)'s exemption of "bona fide employee benefit plans" from coverage under the ADEA. Equal Employment Opportunity Commission regulations and several lower court decisions had concluded that benefit plans which included age-based distinctions were not exempt under § 4(f)(2) unless the employer affirmatively established that the use of age as an eligibility factor was justified by age-related costs. This required the employer to prove that, if benefits provided to older employees were less than those provided to younger employees, the actual amount the employer paid to fund the program for the older workers was no less than the amount paid for younger employees.(fn4)

In its decision, the Supreme Court rejected this "cost-based justification" rule, concluding that Congress had intended § 4(f)(2) to have significantly broader effect.(fn5) The Court decided that § 4(f)(2) exempted "bona fide"(fn6) employee benefit plans from coverage under the ADEA unless the plaintiff established that the plan was used as a subterfuge for age discrimination in a non-fringe-benefit aspect of the employee relationship.(fn7) The Court defined "subterfuge" as a scheme, plan, stratagem or artifice of evasion. In order to prevail on an ADEA claim based on an age-based distinction in a bona fide employee benefit plan, a plaintiff must establish that the employer intended to violate the ADEA in some respect other than the administration of the fringe benefit program by including the age-based distinction in the plan.(fn8) The Court also concluded that the employee bears the burden of proving that the discriminatory plan provision actually was intended to serve the purpose of discriminating in some non-fringe-benefit aspect of the employment relation.(fn9)

Accordingly, § 4(f)(2) is no longer an affirmative defense Finally, the decision affirmed lower court decisions holding that benefit plans established prior to the enactment of the ADEA were automatically exempted from coverage under the Act by § 4(f)(2).(fn10)

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