Age-Based Distinctions in Benefit Plans

Legislation is pending before the U.S. Congress that would overturn the U.S. Supreme Court's decision in Public Employees Retirement System of Ohio v. Betts.

In Betts the Court held that fringe benefits, such as pension plans, severance pay, and health and life insurance, are not subject to the Age Discrimination in Employment Act of 1967 (ADEA) so long as they are not "a subterfuge" for discrimination in other non-benefit aspects of the employment relationship. The Court's 7-2 decision invalidated certain regulations of the Equal Employment Opportunity Commission (EEOC) requiring that age-based distinctions, set by the employer, must be justified on the basis of costs.

In an attempt to overturn the Court's opinion, legislation has been introduced in Congress to codify the substance of the EEOC regulations. These proposals would amend ADEA to state that all employee benefits would fall under the Act and that the employer would have to prove that any age-based distinctions were cost-justified.

Age is an element used in calculating the appropriate amount of employee contributions or employer contributions necessary to provide adequate benefit levels. The Government Finance Officers Association calls upon Congress to delay action until there is thorough study of the issues related to:

• permitting legitimate age-based benefit distinctions,
• establishing a reasonable period of time to make necessary revisions to existing plans, and
• implementing required changes to benefit programs.

• Publication date: May 1990