Read the Conference Report language
Section 941 of H.R. 6 as passed by Congress September 28, 1998
Faculty Retirement Incentives
SUBTITLE D of TITLE IX of the Higher Education Act of 1998
SEC. 941. Voluntary Incentive Retirement Plans
(a) In General Section 4 of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 623) is amended by adding at the end the following:
'(m) Notwithstanding subsection (f)(2)(B), it shall not be a violation of subsection (a), (b), (c), or (e) solely because a plan of an institution of higher education (as defined in section 101 of the Higher Education Act of 1965) offers employees who are serving under a contract of unlimited tenure (or similar arrangement providing for unlimited tenure) supplemental benefits upon voluntary retirement that are reduced or eliminated on the basis of age, if
'(1) such institution does not implement with respect to such employees any agebased reduction or cessation of benefits that are not such supplemental benefits, except as permitted by other provisions of this Act;
'(2) such supplemental benefits are in addition to any retirement or severance benefits which have been offered generally to employees serving under a contract of unlimited tenure (or similar arrangement providing for unlimited tenure), independent of any early retirement or exitincentive plan, within the preceding 365 days; and
'(3) any employee who attains the minimum age and satisfies all nonagebased conditions for receiving a benefit under the plan has an opportunity lasting not less than 180 days to elect to retire and to receive the maximum benefit that could then be elected by a younger but otherwise similarly situated employee, and the plan does not require retirement to occur sooner than 180 days after such election.'.
(b) Plans Permitted Section 4(i)(6) of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 623(i)(6)) is amended by adding after the word "accruals" the following:
"or it is a plan permitted by subsection (m)."
(c) Construction Nothing in the amendment made by subsection (a) shall affect the application of section 4 of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 623) with respect to
(1) any plan described in subsection (m) of section 4 of such Act (as added by subsection (a)), for any period prior to enactment of such Act;
(2) any plan not described in subsection (m) of section 4 of such Act (as added by subsection (a)); or
(3) any employer other than an institution of higher education (as defined in section 101(a) of the Higher Education Act of 1965).
(d) Effective Date
(1) In General This section shall take effect on the date of
enactment of this Act.
(2) Effect on Causes of Action Existing Before Date of
Enactment The amendment made by subsection (a) shall not
apply with respect to any cause of action arising under the Age
Discrimination in Employment Act of 1967 prior to the date of
enactment of this Act.
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Conference Report Language
Higher Education Amendments of 1998
Title IX Amendments to Other Acts
Part D Voluntary Retirement Incentive Plans
Present Law
Section 4(f)(2)(B)(ii) of the Age Discrimination in Employment Act of 1967 (ADEA) provides that voluntary early retirement incentive plans do not violate the ADEA's prohibition, in Section 4(a)(1), against age discrimination in compensation, terms, conditions, or privileges of employment, provided such plans are otherwise consistent with the relevant purpose or purposes of the Act. The relevant purposes of the Act are set forth in Section 2(b): to promote employment of older persons based upon their ability rather than age; to prohibit arbitrary age discrimination in employment; and to help employers and workers find ways of meeting problems arising from the impact of age on employment.
Under section 4(l)(1)(B) of ADEA, certain agebased early retirement subsidies and social security supplements are permitted in defined benefit pension plans.
House Bill
In general
The House bill adds to the ADEA a `safe harbor' under which institutions of higher education may offer to tenured faculty members, upon their voluntary retirement, supplemental benefits that are reduced or eliminated based upon age, subject to three conditions. First, the institution must not implement any agebased reduction or cessation of benefits other than these supplemental benefits. Second, these supplemental, agebased benefits must be in addition to any retirement or severance benefits that have been available to tenured faculty members generally, independent of any early retirement or exitincentive plan, within the preceding 365 days. Third, any tenured faculty member who attains the minimum age and satisfies all nonagebased conditions for receiving such a supplemental benefit has an opportunity for at least 180 days to elect to retire and receive the maximum supplemental benefit that could then be elected by a younger but otherwise similarly situated employee, and must have the ability to delay retirement for at least 180 days after making that election.
Benefits described in the safe harbor will not be in violation of subsection (a), (b), (c), or (e) of Section 4 of the ADEA. In addition, the bill amends Section 4(i)(6) of the ADEA to exempt such benefits from Section 4(i)(1), which precludes reduction or cessation of retirement plan contributions or benefit accruals based upon age. This relief from Section 4(i)(1) is limited to the supplemental benefits described in the safe harbor, and would not change the prohibition in existing law against agebased reduction or cessation of contributions or benefit accruals under other retirement plans.
Institutions of Higher Education
The safe harbor in the House bill is limited to plans offered by institutions of higher education as defined in Section 1201(a) of the Higher Education Act of 1965 (20 U.S.C. 1141(a)). The term `institution of higher education' had the same meaning under Section 12(d) of the ADEA, as in effect prior to January 1, 1994.
Tenured Employees
A plan covered by the safe harbor may offer benefits only to employees who are serving under a contract of unlimited tenure (or similar arrangement providing for unlimited tenure). This language is intended to have the same meaning as it did in Section 12(d) of the ADEA, as in effect prior to January 1, 1994. Assuming an employee was tenured at the time the retirement incentive was offered, the safe harbor will not fail to apply merely because a tenured employee is no longer tenured at the time benefits are actually provided.
Supplemental Benefits
The safe harbor encompasses only supplemental retirement benefitsi.e., benefits that are in addition to those already available to tenured faculty members under other plans. Thus, the safe harbor would not apply to a plan under which tenured faculty members, because they did not retire before a given age, ceased to receive benefits (other than the supplemental retirement benefits themselves) that were available to other tenured faculty members. However, the bill provides that any reduction or cessation of benefits that is permitted by other provisions of the ADEA would not prevent the safe harbor from applying. This would include, for example, any general change in postretirement benefits, such as a change in or elimination of retiree health benefits, that applies without regard to age, or any change or cessation of coverage resulting from Medicare eligibility.
In addition, an institution may not cease offering a retirement or severance benefit that has been generally available to tenured faculty members and, within 365 days thereafter, begin offering that benefit solely to faculty members who retire under the supplemental, agebased retirement plan permitted by the safe harbor. The House bill would not, however, preclude an institution from discontinuing benefits under an existing early retirement or exitincentive plan and substituting, within 365 days thereafter, a supplemental agebased retirement plan described in the safe harbor. Similarly, the bill would not preclude an institution from offering benefits under such a plan that had been offered within the preceding 365 days under individually negotiated retirement or exitincentive arrangements with selected faculty members. In addition, a plan does not fall outside the safe harbor merely because it restates or incorporates benefits that are also available on the same terms under other plans or policies to tenured faculty generally.
One Hundred and Eighty Day Opportunity
To satisfy the safe harbor, a plan must not preclude an eligible employee who has attained too high an age for the maximum benefit otherwise available under the applicable formula from having an opportunity of at least 180 days' duration to elect to retire and receive that maximum benefit. In determining that maximum benefit, the employee will be assumed to retire at the age which, under the applicable formula, results in the largest benefit. If more than one benefit is offered, or noncash benefits are provided, or benefits are provided over a period of time, the employee will be assumed to retire at the age which, under the applicable formula or formulas, results in benefits with the largest combined present value. In determining the benefits actually payable to the employee, all relevant factors other than age, such as salary or years of service, will be determined as of the employee's actual retirement.
This 180 day opportunity must be offered not only to faculty members who have attained the minimum age, are in an eligible classification, and satisfy the other eligibility requirements at the time the plan is established, but also to faculty members who satisfy all of these conditions at some later time while the plan remains in effect. The maximum benefit available to such a faculty member will be determined in the manner described above as of the time of the faculty member's retirement, based on benefits available at that time under the plan.
The House bill also provides that a plan within the safe harbor may not require retirement to occur sooner than 180 days after the election to retire. As a practical matter, this means that the plan must begin the 180day election period at least 360 days before the intended retirement date, so that a faculty member who makes the election at the end of that 180day period will still have 180 days to plan for retirement. The bill is not, however, intended to preclude a faculty member from choosing to retire sooner, if the plan allows the faculty member to do so.
Examples
Under the bill, a college or university plan would not violate the ADEA, for example, by offering to tenured faculty members who voluntarily retire between ages 65 and 70 a monthly bridge benefit, payable until age 70, equal to 50 percent of their final monthly salary, with the expectation that the faculty members would wait until age 70 to commence their regular retirement benefits. The bridge benefit could be made available between other ages, such as 60 and 65, or 62 and 69, could involve a different or varying percentage of pay, and could be subject to other conditions, such as a minimum service requirement for eligibility, or limitation of the plan to one or more schools, departments, or other classifications of tenured faculty. Similarly, under the bill, a plan could, consistent with the ADEA, provide lump sum retirement incentives that are reduced based upon age at retirement and eliminated at a specified upper age (e.g., 65 or 70). The ADEA would also not be violated by a voluntary phased, planned or similar retirement program for eligible tenured faculty members under which the retirement incentive takes the form of subsidized pay or benefits for parttime work or decreased duties, and the amount of the subsidy or duration of the parttime work or decreased duties, or both, is reduced or eliminated based upon age.
In each case, the agebased benefits provided would be in addition to, and not in lieu of, any retirement or severance benefits available within the preceding 365 days to tenured faculty members generally (other than benefits under a prior early retirement or exitincentive plan).
Also, in each of the above examples, a faculty member who would otherwise be prevented by attainment of too high an age from receiving the maximum benefit under the applicable formula would be given an opportunity of at least 180 days' duration to elect to retire and receive that maximum benefit, determined as described above, and would have the right to take at least 180 days after the election to plan for retirement. For example, if the plan offered decreasing lump sum benefits to all tenured faculty members retiring between ages 65 and 70, inclusive, with 15 or more years of service, all tenured faculty members with 15 or more years of service who were older than age 65 when the plan was first implemented would have a 180day period in which they could elect to retire and receive the highest lump sum benefit (the benefit that would otherwise be available only to 65yearold retirees). A similar 180day opportunity would be offered to tenured faculty members who completed 15 years of service at an age higher than 65; they could elect the highest benefit then available to a younger (but otherwise similarly situated) faculty member.
Effect on Procedural Obligations
Enactment of the safe harbor is not intended to diminish any other rights or obligations, such as collective bargaining obligations under federal or state law, that tenured faculty members or institutions of higher education may have regarding the processes to be followed in establishing a plan described in the safe harbor.
Effect on Application of the ADEA to Other Plans or Employers
The House bill provides that the enactment of this safe harbor does not affect the application of the ADEA to plans or employers outside the safe harbor. Also, enactment of the safe harbor does not affect the application of the ADEA to any plan at any time prior to the bill's enactment, whether or not the plan is described in the safe harbor.
Effective Date
Title X of the House bill is effective on the date of enactment of this Act, and shall not apply with respect to any cause of action arising under the ADEA prior to that date.
The Senate bill did not contain a similar provision.
Conference Agreement
The conference agreement follows the House bill.
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