Statement of Administration Policy: S. 1511 - Older Workers Benefit Protection Act

(Senate)
(Pryor(D) Ar and 42 others)

S. 1511 purports to overturn the Supreme Court decision in Public Employees Retirement System of Ohio vs. Betts. The Administration agrees that the particular situation presented by the Betts case should be addressed; however, radically restructuring the way employers provide benefits to employees is unnecessary.

Instead of a narrow and carefully crafted response to the Betts decision, So 1511 makes wholesale changes in the Age Discrimination in Employment Act (ADEA). If the bill were presented to the President in its current form, his senior advisers would recommend that he veto it? The Administration's specific concerns are as follows:

Inconsistency with Requirements on the Federal Government. By statute, Federal workers who lose their jobs are ineligible for severance pay if they are eligible for Federal retirement benefits. In contrast, s. 1511 would prohibit private employers from using an identical plan for their employees who are separated from service. The potential costs of these provisions to private employers are high. Applying the same standard to the Federal Government could cost up to $515 million in outlays over four years (not including military retirees) unless compliance is attained by reducing the level of benefits currently available to workers who are not yet eligible for Federal retirement.

Integration or Coordination of Benefits. S. 1511 would impose complicated and unworkable rules on employers who seek to offer benefit packages tailored to meet company and employee needs. The bill would generally prohibit employers from coordinating disability benefits with other benefits. Employers would only be allowed to coordinate severance benefits with certain retiree health benefits and with certain pension subsidies. This would be particularly difficult for small employers, which often do not offer retiree health benefits.

Retroactivity. S. 1511 would apply to all employee benefit plans regardless of the dates of adoption. A significant number of public and private plans would have to be re-drawn to comply with changes to the law under S. 1511. Further, the legislation would apply to cases pending on the date of the Betts decision, June 23, 1989. This would affect judgments which have been rendered since that date. Thus. S. 1511 would create new legal rights and apply them in legal actions that have already been decided, raising substantial constitutional questions.

Waiver of Rights under the Age Discrimination in Employment Act. Under current law, employers may offer exit incentives in exchange for an employee release or waiver of claims under the ADEA. S. 1511 would impose additional costly requirements on employers which would reduce their willingness to offer such bonuses and deprive employees of the opportunity to choose these valuable benefits.

Effect on Pension Plans of Additional Requirements. S. 1511 would increase the complexity of an already complicated pension and welfare benefit system.

Effect on State and Local Governments. S. 1511 will call into question most State and local public employee retirement systems. The cost of complying with S. 1511 would be enormous, with some of the larger State plans estimating that the cost of compliance would exceed $100 million.