BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 1814
                                                                  Page  1

          Date of Hearing:   April 21, 2010

                                Felipe Fuentes, Chair

                  AB 1814 (Buchanan) - As Amended:  April 13, 2010 

          Policy Committee:                              JudiciaryVote:9-0  

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              


          This bill provides that the age discrimination prohibitions of  
          the Fair Employment and Housing Act do not prohibit an employer  
          from providing health benefits or health care reimbursement  
          plans to retired persons that are altered, reduced, or  
          eliminated when the person becomes eligible for Medicare health  
          benefits.  This is consistent with federal law on this subject.

           FISCAL EFFECT  

          By clarifying state discrimination law in this area and  
          conforming to federal law, some local governments could avoid  
          litigation costs.


           Purpose  .  Many California employers in both the public and  
          private sectors provide some type of continued medical benefits  
          (called "bridge plans") for certain qualified employees who  
          retire before they are eligible to receive Medicare.  Typically,  
          the level of such benefits is reduced once the retiree becomes  
          Medicare-eligible.  In 2007, the federal Equal Employment  
          Opportunity Commission enacted a regulation that specifically  
          permits these "bridge plans" by exempting them from the  
          prohibition of the federal Age Discrimination in Employment Act.  
          This bill clarifies that these bridge plans would also be  
          permitted under California's Fair Employment and Housing Act  

          According to the author, this bill responds to litigation  
          brought by a retiree against a school district in Contra Costa  


                                                                  AB 1814
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          County.  The plaintiff in that case was apparently denied a  
          contractual benefit because she retired after she was eligible  
          for Medicare and the benefit was intended to be a bridge to  
          Medicare. She initiated a law suit against both the school  
          district employer and the employee organization claiming age  
          discrimination. The District subsequently filed a cross  
          complaint for declaratory relief against the employee  
          organization and 24 retirees, threatening to recoup benefits  
          already paid to those retirees and to cease paying future  
          benefits if the collective bargaining agreement that provided  
          the retiree health benefits was found to be illegal. 

          The author argues that if this type of litigation proliferates  
          under the FEHA, California employers will be discouraged from  
          offering these modest retiree health benefits, which currently  
          enable employees to be covered by medical insurance if they  
          choose to retire before they are Medicare eligible.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081