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Minnesota state agency to pay $53,000 in damages plus insurance coverage to resolve final case of “Age 55 Cliff” discriminatory early retirement plans

The EEOC announced on May 2, 2012, that a federal judge has approved a consent decree requiring the Minnesota Board of Public Defense (BOPD) to make restitution to settle an EEOC age discrimination lawsuit. The BOPD must pay $53,000 to four former employees who were denied employer contri¬bu¬tions for retiree health and dental insurance because they were older than age 55 at the time that they retired. The BOPD must also to offer to pay future premium costs for one of the employees who would still be entitled to receive them but for the unlawful early retirement provision.

This decree, entered by federal Judge Richard Kyle, resolves the last in a series of cases brought by the EEOC against Minnesota state agencies regarding early retirement incentive plans contained in collective bargaining agreements for certain employees. The incentive plans provided that the employee had to retire by age 55 to obtain the incentive, and would lose it if he or she worked longer, according to an EEOC statement.

For an employee who did retire by age 55, the employer continued to pay the employer’s share of the insurance premiums which generally ranged from 85 percent to 100 percent of the total amount of the premium—and continued to do so until the retiree reached age 65. For an employee who retired after age 55, the employer paid nothing, and the cost of retiree insurance fell entirely on the retired employee.

Thus, explained EEOC Senior Trial Attorney Laurie Vasichek, who led the litigation team on the cases, “Not retiring by age 55 was like stepping off a cliff as far retiree medical insurance was concerned, and the parties to the collective bargaining agreements referred to this provision as the ‘Age 55 Cliff.’”

The EEOC contended that the “Age 55 Cliff” violated the ADEA. Courts agreed, with the U.S. Eighth Circuit Court of Appeals affirming a judgment by U.S. District Court Judge Paul A. Magnuson, which held that the early retirement incentives were arbitrary age discrimination.

The agency believes that the settlement with the BOPD resolves the final case in which the “Age 55 Cliff” was challenged. The EEOC brought cases against six different state agencies in all. In total, the EEOC obtained, through court judgments and consent decrees, just under $2 million in lost premium contributions, which were distributed to approximately 85 people. The state also paid the employers’ share of health and dental insurance to those claimants who were eligible for it but for their age.

“As the courts recognized, it is arbitrary and unlawful for employers to maintain incentive plans that explicitly reduce benefits as people grow older,” said EEOC Regional Attorney John Hendrickson. “Paying benefits for younger retirees while not paying the same benefits for other retirees — merely because the latter were older at the time of retirement — is pure and simple age discrimination, and it is unlawful. But the situation has now been corrected, and we commend the state of Minnesota for working with the EEOC to resolve these cases.”

In addition to Hendrickson and Vasichek, the EEOC’s litigation team included Associate Regional Attorney Jean Kamp as well as Nicholas Pladson and Jessica Palmer-Denig, trial attorneys in the EEOC’s Minneapolis office.