Age, Sex and Disability Discrimination in Employee Benefit
Plans
By William J. Flanagan,
Esq.
Crowell & Moring LLP, Washington, DC
The diversification of the American workplace presents special
issues in the field of employee benefits. Employers that in the past
had to worry primarily about the application of the Internal Revenue
Code (the “Code”) and the Employee Retirement Income
Security Act of 1974 (ERISA) now must also be concerned with
compliance with the many state and federal laws prohibiting
discrimination on the basis of age, sex and disability. Failure to
comply with these anti-discrimination statutes can result not only in
significant potential liability for employers, but may also cause the
employee benefit plans in question to lose some of their advantages
under both ERISA and the Code.
The current legal landscape presents a number of particularly
challenging issues for employers and their benefit plans. These
include:
• Health Benefits for Retirees and Older Workers. The
status of Medicare offsets for retiree health programs appears close
to resolution through the decision in AARP v. EEOC and new EEOC
regulation. Still unresolved, however, is the treatment accorded
Medicare-eligible active employees, although the Medicare Secondary
Payor Regulations do provide some guidance and restrictions on plan
design. Further, retiree health programs continue to pose significant
financial challenges to employers, who must resolve these difficulties
in ways that do not discriminate against older workers.
• Gender Discrimination. Issues that appeared well-settled
several years ago are now reemerging in connection with the varying
state treatment of domestic partnerships, “same-sex”
marriage and gender-identity litigation. Employers seeking to
accommodate these new legal rights must be careful to analyze their
effectiveness (or lack thereof) under federal marriage and sex
discrimination statutes. The matter is complicated by the fact that
ERISA preemption does not always apply to state laws that address
family leave or require that substituted leave be given.
•
Changing Pension Benefit Landscape. The proliferation of
defined contribution plans generally and cash-balance plans in
particular require new analyses of existing Code and ERISA benefit
accrual provisions. Legislative changes in this area (primarily the
Pension Protection Act of 2006) have not totally resolved issues
regarding such plans. The recent changes could encourage more of the
plan conversions that typically do not favor older workers.
•
Mental Health Parity. Disability benefits in many plans
continue to vary based on whether the disability is viewed as
physically or mentally based. The status of such distinctions depends
not only on an analysis of existing law, but also consideration of
current legislative and regulatory initiatives.
At the federal level, the primary statutes addressing issues such
as these are the Age Discrimination in Employment Act (ADEA), the
Americans With Disabilities Act (ADA) and Title VII of the Civil
Rights Act of 1964. Understanding these statutes is, therefore,
crucial for an employer maintaining employee benefit plans today.
For more information, in the Tax Management Portfolios, see
Flanagan, 363 T.M., Age, Sex and Disability Discrimination in
Employee Benefit Plans, and in Tax Practice Series, see ¶5450,
Age and Sex Discrimination.
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