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Special analysis: Severance policies may be ERISA plans

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in Office Management,Payroll Management

As if you didn’t have enough to worry about with withholding and reporting taxes, federal appellate courts have recently chimed in on whether and how ERISA, the federal benefits law, applies to severance pay policies.

Three criteria for ERISA coverage. Upon his termination, an employee sued his employer, alleging first that he was entitled to severance benefits under his employer’s severance policy and second, that the policy was an ERISA-covered plan. The policy, dating to 1987 and not changed since 1996, stated that employees terminated without cause qualified for 12 months’ notice of their termination or six months of severance benefits. Employees with at least 15 years of service were entitled to an automatic review of their severance pay.

A federal trial court dismissed his case, ruling that the severance policy wasn’t an ERISA plan. The appeals court reversed. Appeals court: ERISA’s coverage is broad, since it refers t...(register to read more)

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