In other words, when faced with the prospect of equalizing benefits, many employers were choosing not to increase benefits for Medicare-eligible retirees, but instead to reduce benefits for younger retirees or to eliminate retiree benefits altogether. In AARP v. EEOC , the court first ordered a permanent injunction against enforcing the rule, finding that it "is contrary to congressional intent and the plain language of the Age Discrimination in Employment Act." Finding that the retiree health benefit rule was a reasonable, necessary, and proper exercise of the EEOC's exemption authority under the ADEA, the court upheld the rule and lifted the injunction, allowing the final regulations to become effective on December 26, 2007, when the EEOC published them in the Federal Register . The EEOC's Final Rule

The EEOC's final rule contains a narrowly drawn exemption from the ADEA to permit the practice of coordinating employer-provided retiree health coverage with eligibility for Medicare. Specifically, employers may, without violating the ADEA, alter, reduce, or eliminate health benefits for retirees when the participant becomes eligible for Medicare or comparable state health benefits. The EEOC emphasizes that the rule is not intended to encourage employers to eliminate any retiree health benefits they may currently provide.
Under the Age Discrimination in Employment Act (ADEA), the Equal Employment Opportunity Commission (EEOC) has the authority to issue reasonable exemptions the Commission finds to be in the public interest. In 2004, the EEOC approved a narrowly drawn exemption to permit the practice of coordinating employer-provided retiree health coverage with eligibility for Medicare. However, the proposed regulation was challenged in court, and a permanent injunction blocking its implementation remained in effect for several years while the courts considered the issue. Recently, a federal appeals court upheld the EEOC's promulgation of the proposed rule and lifted the injunction, allowing the EEOC to publish the final rule, which became effective in December 2007. The final rule states that it is not a violation of the ADEA to alter, reduce, or eliminate health benefits for retirees when the participant becomes eligible for Medicare or comparable state health benefits. According to the EEOC, if employers were required to provide equal health benefits to both younger and older retirees, employers would be more likely to reduce benefits for younger retirees or eliminate benefits for all retirees than to increase benefits for older, Medicare-eligible retirees. Thus, the ADEA exemption is designed to eliminate any incentive for employers to cut retiree health benefits.