Some employers extend benefits—such as health coverage—to retirees. Over time, these retiree benefits may be tweaked to accommodate budgets, eligibility changes, or plan redesign. A recent Supreme Court decision, Stanley v. City of Sanford, has provided more clarity on how far employers can go when adjusting their retiree benefits.

The court ruled in Stanley v. City of Sanford that retirees are not considered “qualified individuals” under the Americans with Disabilities Act (ADA). This means that once employees leave the workforce, they are not protected by the ADA’s anti-discrimination provisions when it comes to post-employment benefits like retiree health insurance.

What did the Supreme Court rule exactly?

For employers, this ruling reduces the risk of ADA claims when making changes to retiree benefits even if those changes affect disabled retirees.

The court held that retirees are no longer considered “qualified individuals” under Title I of the ADA and cannot claim disability discrimination when retiree benefits are altered or discontinued. Only job applicants or currently employed individuals can bring those disability claims.

Justice Neil Gorsuch, writing for the majority (joined by five conservative justices and Justice Kagan), emphasized this. “The statute protects people, not benefits…only qualified individuals or those who hold or seek a job at the time of the alleged discriminatory act are covered.”

What does this mean for employers?

It’s not a free pass to ignore issues with plan design. Other laws, including the Rehabilitation Act, ERISA, and state-specific regulations, still apply protections to those in retirement and limit employer protections. Employers should carefully review changes to benefit plans through a fiduciary lens. However, the ruling also means:

• Greater flexibility: Employers have clearer legal ground to adjust retiree benefit plans, even those affecting disabled retirees.
• Recordkeeping matters on both sides: The Court stressed that ADA plaintiffs must show, at the time of any discrimination, they held or were applying for employment and could perform any essential job duties—with or without accommodation. 

The Stanley decision gives employers greater clarity under the ADA when modifying retiree benefits. As a fiduciary, we still recommend a balanced approach that ensures cost-efficiency and plan flexibility, while remaining mindful of the larger legal landscape and communicating openly with staff–both employed and retired.

Read more about the ruling.