Employment-Eighth Circuit Rules That Minnesota Retirement Plan, With Its Age-55 Cliff, Discriminates Against Older Employees In Violation Of The ADEA

In Equal Employment Opportunity Commission v. Minnesota Department of Corrections, No. 10-2699 (8th Cir. 2011), the Minnesota Law Enforcement Association (“MLEA”) was appealing the district court’s grant of summary judgment to the Equal Employment Opportunity Commission (“EEOC”). The district court had concluded that, as a matter of law, MLEA’s retirement plan (the “Plan”) arbitrarily discriminates against older employees on the basis of age, in violation of the Age Discrimination in Employment Act (the “ADEA”).

At issue was the “Early Retirement Incentive Program” (“ERIP”) provision of the Plan. The ERIP provides that a participant who retires during the pay period of his or her 55th birthday, and who is covered by the Plan, is eligible to receive an unreduced continuation of the employer’s contribution toward his or her health- and dental-insurance premiums payable under the Plan, until he or she reaches age 65. Meanwhile, any employee between the ages of 50 and 55 who elects to retire–and who has a certain length of tenure with MLEA –receives an ERIP benefit but less. Finally, any employee between the ages of 55 and 60-60 being the age of mandatory retirement–who chooses to retire receives no continuation of employer contributions. Thus, an employee must retire at 55 or lose the early retirement benefit. An employee hired after age 55 never could obtain the early retirement benefit. The question for the Eighth Circuit Court of Appeals the “Court”): does the ERIP violate the ADEA?

In analyzing the case, the Court said that where, as here, it is undisputed that an employee is ineligible for the early retirement benefit under the ERIP if he or she is over a certain age-here age 55-the ERIP is discriminatory on its face. The ADEA has a safe- harbor provision, which if satisfied will shield the employer from an ADEA violation. This safe-harbor provision states that it shall not be unlawful for an employer to “observe the terms of a bonafide employee benefit plan” that is a “voluntary early retirement incentive plan consistent with the relevant purpose of [the ADEA]”. An arrangement such as the ERIP, which contain adverse changes in employment benefits based solely upon age, is inconsistent with the purposes of the ADEA. These purposes include the prohibition of arbitrary age discrimination, such as the disappearance of a benefit upon the attainment of a certain age. The ERIP has an age 55-cliff, meaning that the early retirement benefit vanishes when an employee attains age 55. This cliff arbitrarily discriminates on the basis of age, and is inconsistent the purposes of ADEA. Thus, the safe-harbor provision is not applicable to the ERIP. The Court concluded that the ERIP violated the ADEA, and affirmed the district court’s judgment.