Magazine article Personnel Journal
Payer Beware: Your Severance Package May Be Covered under ERISA
You could be in violation of ERISA without even knowing it. Your severance plan may qualify as an employee benefit plan--and as such would be subject to the Employee Retirement Income Security Act of 1974 (ERISA). Yet many employers don't know whether their plan qualifies or not, simply due to a lack of understanding on the subject. "Most employers know their pension plans are subject to ERISA. They know their health and welfare plans are subject to ERISA," says Neal Schelberg, a partner at New York City-based Proskauer Rose Goetz & Mendelsohn LLP who specializes in employee benefits law. "But they're surprised to learn that their severance plans are."
Companies with severance plans covered by ERISA generally must meet all of the act's provisions, including providing the Department of Labor with an annual report, summary plan descriptions and all other reporting forms traditionally associated with employee-benefit plans. Yet a large number of companies aren't doing so. "What's happened in the employee benefits world is that severance-pay plans have tended to be overlooked as far as reporting and disclosure because they weren't traditionally considered employee-benefit plans in the full sense," explains Mitchell Langbert, a frequent author on benefits issues. …