Severance Benefits, Plans, and Agreements Toolkit

Resources to assist employers in providing severance benefits to their terminating employees, including guidance regarding the applicable requirements of the Employee Retirement Income Security Act (ERISA).

Practical Law Employee Benefits & Executive Compensation

Although employers are not required to offer severance ( www.practicallaw.com/8-503-1097) benefits to their employees, severance policies are a common feature of employer-provided benefit packages. Severance benefits usually take the form of cash payments to an employee whose employment is involuntarily terminated because of circumstances beyond the employee's control. In spite of their relative simplicity when compared to traditional pension or group health plans, severance plans are one of the most misunderstood and litigation-prone types of employee benefit arrangements.

Plans or arrangements that provide severance benefits to employees may be treated as an employee benefit plan ( www.practicallaw.com/6-502-2678) subject to the Employee Retirement Income Security Act of 1974 ( www.practicallaw.com/0-382-3434) (ERISA). A severance arrangement, depending on a variety of factors, may be treated as:

In light of these possibilities and the legal consequences they may present, employers must carefully evaluate how they will provide these benefits.

The Severance Benefits, Plans, and Agreements Toolkit provides several continuously maintained resources designed to help employers evaluate whether to provide severance benefits to their employees and how best to structure the arrangement.

 

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