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Does your company’s long-term disability plan terminate benefits for all employees at age 65? If so, your benefit plan may violate the Age Discrimination in Employment Act.

On October 3, 2000, the U.S. Equal Employment Opportunity Commission issued its Enforcement Guidance on Employee Benefits (“Enforcement Guidance”). In this Enforcement Guidance, the EEOC explains how companies may violate the Age Discrimination in Employment Act (“ADEA”), the Americans with Disabilities Act (“ADA”), or Title VII of the Civil Rights Act of 1964 (“Title VII”) [including the Pregnancy Discrimination Act] through their fringe benefit plans, including health insurance, short-term and long-term disability insurance, and life insurance. Discrimination in benefits may occur when an employee either receives lower benefits or is denied benefits based on a protected classification, such as age, gender, disability, or race.

Age Discrimination in Employment Act

Fringe benefit plans, if offered by an employer, must be offered without regard to the employee’s age. An employer may not defend against a charge of age discrimination by asserting the plan complies with ERISA or with the Internal Revenue Code.

In determining whether a benefit plan discriminates against older employees, the EEOC looks to see if all employees receive the same or “equal” benefits. In other words, do older employees receive the same types of benefits, the same payment options, and the same amount of benefits? Plans do not provide equal benefits when benefits are reduced or eliminated based on an employee’s age. Nonetheless, plans may provide better benefits for older employees than younger employees without running afoul of the ADEA.

If older employees do not receive equal or better benefits, an employer can defeat a charge of age discrimination by showing either it pays the same amount for each employee’s benefits or there is a legally-authorized “offset” to an employee’s benefits.


Offsets are available to reduce benefits paid to older employees, such as retiree health benefits, by amounts they receive from other sources, such as Social Security or Medicare. However, in order to be lawful, the offset must be specifically authorized by the ADEA. Additionally, offsets cannot be used to reduce the total benefits provided to the older employee. In other words, older employees must be eligible to receive benefits that are “no less favorable” than those provided to younger employees.

Equal Cost

Employers may be able to take advantage of the so-called “equal cost” defense, which provides that employers who “spend the same amount of money, or incur the same cost, on behalf of older workers as on behalf of younger workers may – if specified conditions are met – provide certain fringe benefits to older workers in smaller amounts or for shorter time periods than it provides to younger workers.” However, this defense only applies to disability insurance, health insurance, and life insurance benefits because these benefits typically get more expensive as the employee gets older.

In order to satisfy this defense, the employer must show that the costs incurred or the payments made on behalf of the older employee are no less than those incurred or made on behalf of younger employees.

Additionally, the benefits may not be reduced more than necessary to achieve “approximate equivalency” of cost for all employees. Finally, the benefit must become more expensive as the employee ages and be part of a bona fide benefit plan which requires older employees receive a lower level of benefits. Special rules apply when an employee pays all or some of the premiums.

Safe Harbor

EOC regulations provide a “safe harbor” provision which allows employers to place limitations on how long employees may be paid long-term disability benefits. The purpose of this safe harbor is to protect employees who become disabled after the age of sixty.

To take advantage of the safe harbor and, thereby, avoid liability for age discrimination, employers which provide long-term disability coverage for its employees must provide, (1) benefits until age 65 for employees who become disabled on or before their sixtieth birthday and (2) five years of disability benefits for employees who become disabled after their sixtieth birthday.

Americans with Disabilities Act

Equal benefits” under the ADA requires a benefit plan provide for the same premiums, deductibles, coverage caps, and waiting periods of all similarly situated employees. A benefit plan may violate the ADA if it provides different coverage for a group of disabilities (i.e., cancers), a particular disability (i.e., major depression), or disabilities in general. Nonetheless, an employer may offer different coverage for mental conditions than for physical conditions because mental conditions may affect both the disabled (i.e., those seeking treatment for major depression) and the non-disabled (i.e., those seeking treatment for grief counseling). If a plan provides for different levels of coverage for different ailments, an employer may avoid liability under the ADA if it is able to prove the plan is not a “subterfuge to evade the purposes of the ADA.” For example, if excluding or limiting treatment for a particular condition is necessary to maintain the solvency of the plan or is justified based on actuarial data, the plan may not violate the ADA, regardless of the effect on covered disabled employees.

Title VII

If your company offers a defined benefit pension plan, benefits cannot differ for men and women even though women typically have a longer life expectancy. Similarly, health plans must provide equivalent coverage for men and women for conditions which affect both genders. Further, coverage for pregnancy and pregnancy-related conditions must be subject to the same levels of coinsurance, deductibles, basis for reimbursement, and choices of doctors as coverage for non-pregnancy-related conditions.


Employers should review their benefit plans to ensure they do not discriminate against employees based on a protected classification. The Enforcement Guidance contains examples to help employers determine if changes need to made to their benefit plans and can be found at This article does not attempt to cover all of the situations in which an employer may violate federal discrimination law in its employee benefits offerings.

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