The U.S. Equal Employment Opportunity Commission

EEOC NOTICE
Number 915.002 
Date 5/11/95

1.     SUBJECT: Questions and Answers About Disability and Service Retirement Plans Under the ADA

2.     PURPOSE: EEOC has received a large number of   discrimination charges and many informal inquiries concerning the application of the Americans with Disabilities Act (ADA) to disability and service retirement plans.  The following questions and answers provide guidance to EEOC field offices on some issues that have been raised in this area.

3.     EFFECTIVE DATE: Upon issuance.

4.     EXPIRATION DATE: As an exception to EEOC Order 205.001, Appendix B, Attachment 4, § a(5), this Notice will remain in effect until rescinded or superseded.

5.     ORIGINATOR: ADEA Division, Office of Legal Counsel.

6.     INSTRUCTIONS: File after "Definition of Disability," in the 900 Series of Volume II of the Compliance Manual.

7.     QUESTIONS AND ANSWERS

     A.  

Q.   What is the difference between a disability retirement plan and a service retirement plan?

A. A disability retirement plan provides a lifetime income for an employee who becomes unable to work because of illness or injury, without regard to the employee's age.  A service retirement plan provides a lifetime income to employees who have reached a minimum age stated in the plan (most commonly age 60 or age65) and/or who have completed specified years of service with the employer.

     B.  

Q.   Is it a violation of the ADA if an employer offers only a service retirement plan and does not offer a disability retirement plan?

A. Nothing in the ADA requires an employer to provide a disability retirement plan, whether or not the employer offers a service retirement plan.  Where an employer offers only a service retirement plan, there is no ADA violation as long as the service retirement plan treats persons who are covered by the ADA the same as other employees. 

     C.  

Q. If an employer provides a disability retirement plan, is it permissible under the ADA for that plan to provide lower levels of benefits than the same employer's service retirement plan?  Lower benefit levels may take different forms. 

For example: 

• a service retirement plan might enable any employee with 20 or more years of service to retire with an annuity equal to 50% of the individual's highest annual compensation.  But, the disability retirement plan, payable when illness or injury prevents the individual from continuing work, might provide an annuity equal only to 45% of the individual's highest annual compensation; 
• service retirees might receive periodic increases (for example, based on inflation or an increased return on invested pension funds) while disability retirees remain at a fixed benefit level; 
• a service retirement plan might disregard outside earnings while a disability retirement plan contains an outside earnings offset provision.

A. None of these examples would violate the ADA under any theory of discrimination.  The ADA does not require that service retirement plans and disability retirement plans provide the same level of benefits, because they are two separate benefits which serve different purposes.

     D.  

Q. Why don't differences in the plans cited above constitute discrimination against a qualified individual with a disability?

A. There is no disability discrimination because none of the plans make distinctions based on whether or not an individual is covered under the ADA.  Thus, in the first example, the service retirement plan is available to all employees who have attained 20 or more years of service, without regard to the presence or absence of a disability.  A qualified individual with a disability who works 20 or more years receives the same service retirement benefit as a person not covered by the ADA who works 20 or more years.  Similarly, the disability retirement plan is available to everyone who becomes unable to work because of illness or injury.  Therefore, the employer does not violate the ADA simply by providing different benefits under service and disability retirement plans.

     E.  

Q. What types of plans offering disability retirement or service retirement benefits would violate the ADA?

A. Violations will occur under either type of plan when the employer treats a qualified individual with a disability less favorably because of that individual's disability or when an employer denies persons covered by the ADA access to a plan which would be available to persons not covered by the ADA.  Some examples are:

• persons covered by the ADA who qualify for both a service retirement and disability retirement plan are required to take a disability benefit which is less advantageous; 
• an employer requires persons covered by the ADA to serve 25 years to obtain a service retirement benefit, while persons not covered by the ADA are eligible for service retirement after 20 years;
• persons covered by the ADA when hired are eligible for disability retirement protection after 5 years on the job, while persons not covered by the ADA when hired are eligible for disability retirement protection after 1 year on the job;
• persons covered by the ADA who take disability retirement are provided a benefit equal to 33% of their highest annual compensation, while all others are eligible for a disability retirement benefit equal to 50% of their highest annual compensation;
• persons covered by the ADA who earn a service retirement benefit are given a cost of living increase every third year of retirement, while all other service retirees receive an annual cost of living increase;
• an employer excludes from the disability retirement plan an employee who otherwise meets the plan's criteria but who has a particular disability (such as insulin-dependent diabetes or paraplegia.)

When the Commission is confronted with such disability discrimination, it will seek relief for the aggrieved persons unless the employer shows that it did not act on the basis of disability or proves that the plan is sheltered by the ADA's defense for certain bona fide employee benefit plans.  See § 501(c) of the ADA. The reach of that defense is beyond the scope of these questions and answers.

For additional guidance on these issues, contact the Office of Legal Counsel's Attorney-of-the-Day at 202-663-4691.

_______________________       ______________________________________

Date                                                     Gilbert F. Casellas
                                                              Chairman
 This page was last modified on July 6, 2000.

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