BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 1814 (Buchanan)
As Amended April 13, 2010
Hearing Date: June 10, 2010
Fiscal: Yes
Urgency: No
KB:jd
SUBJECT
Discrimination in Employment
DESCRIPTION
This bill, sponsored by the California Teachers Association,
would provide 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.
BACKGROUND
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
(EEOC) enacted a regulation that specifically permits these
"bridge plans" by exempting them from the prohibition of the
federal Age Discrimination in Employment Act (ADEA). This bill
would specify that these "bridge plans" are also permissible
under California's Fair Employment and Housing Act (FEHA).
CHANGES TO EXISTING LAW
Existing state law , the Fair Employment and Housing Act,
generally prohibits discrimination in employment on the basis of
age with respect to persons aged 40 years and older. (Gov. Code
Sec. 12940.)
(more)
AB 1814 (Buchanan)
Page 2 of ?
Existing federal law , the Age Discrimination in Employment Act,
likewise generally prohibits discrimination in employment on the
basis of age with respect to persons aged 40 years and older.
(29 U.S.C. Sec. 621 et seq.)
Existing federal law contains an exemption from the prohibition
against age discrimination for the provision of health benefits
for retired participants that are altered, reduced, or
eliminated when the participant is eligible for Medicare health
benefits whether or not the participant actually enrolls in the
other benefit program. (29 C.F.R. Sec. 1625.32.)
This bill would provide that the prohibition on age
discrimination provided for in the Fair Employment and Housing
Act does 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.
COMMENT
1. Stated need for the bill
According to the author, this bill responds to litigation
brought by a retiree against a school district in Contra Costa
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 under the FEHA. 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.
In support of this bill, the California Teachers Association
writes:
AB 1814 (Buchanan)
Page 3 of ?
The importance of having access to health care is paramount
for a teacher moving into retirement, particularly as more and
more school districts are no longer offering retiree health
benefits (over 70 percent offer no retiree health benefits).
AB 1814 simply codifies what is already permissible at the
federal level to ensure local entities clearly understand that
a "bridge" to retiree health benefits is permissible.
2. Federal regulations already permit "bridge" plans
As previously stated, the EEOC enacted a regulation to
specifically exempt "bridge" retiree health benefits from the
provisions of the Age Discrimination in Employment Act. (29
C.F.R. Sec. 1625.32.) According to the appendix of Section
1625.32, the exemption was issued in recognition that some
employers choose to offer retiree health benefits in order to
maintain a competitive advantage in the marketplace, and these
benefits clearly benefit workers by allowing them to acquire
affordable health insurance coverage at a time when private
health insurance coverage might otherwise be cost prohibitive.
The Appendix further states that the exemption is a narrow one
which only applies to retiree health benefits, and not to health
benefits that are provided to current employees.
This bill would create a similar exemption in the Fair
Employment and Housing Act. Specifically, this bill would
provide that the age discrimination provisions of the FEHA 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. Thus, employers could offer
"bridge plans" to retirees who are not yet eligible to receive
Medicare health benefits, and subsequently reduce or eliminate
those benefits once the retiree become eligible for Medicare and
not be in violation of the FEHA. As noted in the Appendix, such
an exemption is arguably beneficial to both employers and
employees because it enables employers to offer competitive
benefits and allows employees to retain health coverage during a
time when they would otherwise not be able to secure it in the
private market.
3. Bill would not impact pending litigation
Should this bill be enacted, it would only apply to retiree
health benefit plans and contractual provisions or practices
concerning retiree health benefits and health care reimbursement
AB 1814 (Buchanan)
Page 4 of ?
plans in effect on or after January 1, 2011. Because the bill
would only be applied prospectively, it would not impact pending
litigation.
Support : League of California Cities
Opposition : None Known
HISTORY
Source : California Teachers Association
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote :
Assembly Judiciary Committee (Ayes 9, Noes 0)
Assembly Appropriations Committee (Ayes 17, Noes 0)
Assembly Floor (Ayes 74, Noes 0)
**************