Headlines about "Severance pay"
Gathered from the web by the editors at BenefitsLink.com.
[Guidance Overview] Court Rejects ERISA Section 510 Interference Claim Because Employee Was Not Entitled to Plan Benefits
Excerpt: "EBIA Comment: The three-stage 'burden shifting' framework that courts often use in analyzing ERISA Section 510 claims requires an employee to first establish a right to benefits. . . . If, as in this case, the plan documents clearly demonstrate that the employee simply wasn't entitled to plan benefits, then the claim will fail at the very first stage. Whether the employee was entitled to benefits under the plan being litigated is, therefore, one of the first things an employer should consider in defending an ERISA Section 510 claim." (Employee Benefits Institute of America)
Los Angeles Weighing Retirement Option for Reducing City's Workforce
Excerpt: "Looking to avoid the need for layoffs and furloughs, Los Angeles Mayor Antonio Villaraigosa and the City Council are weighing a plan to offer early retirement to thousands of city workers, some of whom would receive an incentive of at least $15,000 to leave. As it attempts to close a $530 million budget gap, the mayor's bargaining team hopes to reduce the workforce by 2,400 while giving no pay increases for most civilian employees in the next two years, according to several sources familiar with the confidential salary talks" (Los Angeles Times)
[Guidance Overview] Court Denies Penalties for Document-Request Failure When Participant Not Harmed
Excerpt: "EBIA Comment: It should be noted that courts disagree on whether a participant or beneficiary must show harm from a failure to provide documents in order to be awarded ERISA penalties. Most courts appear to consider the presence of prejudice or bad faith as only one factor in determining whether penalties should be imposed for a failure to produce documents. Although this court emphasized the employee's failure to take follow-up efforts to obtain the requested documents, other courts have reached the opposite conclusion, reasoning that the purpose of these penalties is to punish plan administrators who do not comply with requests for documents." (Employee Benefits Institute of America)
[Guidance Overview] Pfizer Dealt Setback in Severance Benefit Court Battle
Excerpt: "A federal judge in New Jersey ruled against Pfizer in a dispute over severance benefits arising out of the deal for it to acquire rival Pharmacia. U.S. District Judge Stanley R. Chesler of the U.S. District Court for the District of New Jersey asserted that Pfizer improperly denied $158,250 in benefits to former Pharmacia Corp. Director Vasantha Nair when Nair was stripped of her job responsibilities. Chesler rejected Pfizer's argument that Nair maintained the same job title and compensation and did not suffer a demotion as a result of the deal; a demotion is often a triggering event to pay benefits." (PLANSPONSOR.com; free registration required)
Delta Pilots Union OKs Buyout Plan
Excerpt: "Delta Air Lines Inc. and its pilots union have come to a tentative agreement on an early retirement program to eliminate an unspecified number positions. In a Wednesday memo to pilots, Delta pilots union chairman Lee Moak said eligible pilots who elect to retire could receive up to nine month pay and benefits as part of an early-exit program." (Atlanta Business Chronicle via bizjournals.com; free registration required)
Getting it Right in Reductions in Force: How to Minimize Legal Risks (PDF)
8 pages. (Employee Benefit Plan Review via Jones Day)
Chrysler Expands Worker Retirement and Separation Plan
Excerpt: "Chrysler LLC will expand its retirement and separation program for employees at seven facilities it is set to close before December 2010 as part of its restructuring plan. . . . The company will close eight facilities, but employees at its Detroit Axle plant won't get the expanded separation program because they are being transferred to a Marysville, Mich., facility scheduled to open next year. The retirement and separation program window has been extended until May 26, and job cuts will take place a day later." (The Wall Street Journal)
[Guidance Overview] Two More Circuits Change Their Standard of Review Analysis Based on Supreme Court's Glenn Decision
Excerpt: "EBIA Comment: The circuit courts continue to adjust their standard of review analysis in response to the Glenn decision. It may be difficult to predict whether the Glenn analysis would change the outcome in a particular case, but it clearly seems to have that potential." (Employee Benefits Institute of America)
Delta Proposes Retirement Incentive Plan to Cut Pilot Staffing
Excerpt: "Delta Air Lines has proposed to cut pilot staffing by offering incentives for pilot retirements, according to a Delta pilots union memo. Delta management proposed the retirement incentive program to the Air Line Pilots Association at Delta to address 'what management perceives to be a pilot staffing overage,' according to the Friday memo. . . . Delta said it is trying to avoid involuntary job cuts resulting from economic conditions and working with the pilots union 'to ensure we have any flexibility needed' while cutting flight capacity to adjust to demand. Under the terms of the proposal, pilots who are eligible would get a severance payment, retiree travel benefits and medical and dental benefits for a limited time. Eligibility would depend on age and length of service." (The Atlanta Journal-Constitution)
[Guidance Overview] Section 510 Claims Defeated by Causation Defense
Excerpt: "Giordano v. Thomson, 2009 U.S. App. LEXIS 8887 (2d Cir. Apr. 27, 2009), which I reviewed today on erisaboard.com, reveals a few interesting points about executive severance compensation disputes. The facts are colorful and the rather short opinion is worth the time it takes to read." (Roy Harmon III via Health Plan Law)
[Guidance Overview] Summary of Recent Federal Employment Discrimination Law Cases Involving Employee Benefit Plans
21 pages, by attorney Andrew Stumpff. Prepared April 2009. Includes cases on age, gender, pregnancy and disability discrimination. Excerpt: "This represents a survey of recent court decisions involving the intersection of employment discrimination law and employee benefit law. Cash balance plan litigation is omitted, as are cases involving only ERISA Section 510. Case summaries are limited to only those parts of the decisions that relate to the interplay of employee benefits and employment discrimination law." (Stevenson Keppelman Associates)
Severance Pay Alive and Well Despite Downturn
Excerpt: "Employers grappling with the pressures of the economic downturn are nontheless paying stepped-up attention to outplacement and severance for departing employees. That was a key takeaway from a new survey by human resources consulting firm Lee Hecht Harrison (LHH) in Woodcliff Lake, New Jersey." (PLANSPONSOR.com; free registration required)
[Guidance Overview] Third Circuit Abandons 'Sliding Scale' Approach in Judicial Review of ERISA Benefit Denials
Excerpt: "In this recent Third Circuit opinion, the Court found that, in light of MetLife v. Glenn, the Court's 'sliding scale' approach was 'no longer valid.' Instead, judicial review of benefit denials under 29 U.S.C. ? 1132(a)(1)(B) requires evaluation applying 'a deferential abuse of discretion standard of review across the board and consider any conflict of interest as one of several factors in considering whether the administrator or the fiduciary abused its discretion." (Roy Harmon III via Health Plan Law)
Layoff Binge Spurs Severance-Policy Flux
Excerpt: "With so many companies laying off workers, revising severance-pay policies is in vogue as well. And while a majority of employers will save money under their new provisions, a sizable minority will not, according to a new survey. Among 180 companies surveyed by Hay Group, a human-resources consultancy, 15% had altered their severance policies in the year before the survey was conducted, around February 1, and an additional 22% said they are considering making changes." (CFO.com)
3M to Offer Early Retirement to 11% of Its U.S. Workforce
Excerpt: "3M Co., the maker of 55,000 items from Post-it Notes to road signs, is offering 3,600 non-union, U.S. employees early retirement to cut costs as the recession reduces profit. . . . Eligible workers include those who are at least age 59, with five or more years of service. Employees age 55 and above, with 30 or more years of service, also qualify, Berry said. As an incentive, 3M said that those who accept the early exit will receive benefits that treat the employee as if he worked a year longer and was one year older at the time of retirement. Pension benefits are determined based on an employee's age and years of service." (Bloomberg L.P.)
Golden Parachute Gross-Ups May Be Unnecessary for Many Executives
Excerpt: "Reviewing severance and [change-in-control (CIC)] programs involves a tricky balancing act. On the one hand, the board wants the executive cadre to focus on the best interests of shareholders in evaluating an offer for the company or a proposed merger, without being distracted by the possibility of dismissal. But the board does not want the CIC benefits program to be unnecessarily generous or inappropriate. These programs have traditionally included severance, good-reason termination payments and CIC payments, often supplemented by a tax gross-up to cover any golden parachute excise tax. Boards need to ask: 'Are all these payments necessary to keep executives focused on the task at hand?'" (Watson Wyatt Worldwide)
[Guidance Overview] Informal Discussions with IRS Reveal Favorable Interpretation of Severance Pay Withholding Rules
Excerpt: "Rather than paying lump sums, some employers structure severance payments as salary continuation, often basing the duration of the salary continuation on the individual's length of service. Although this approach has certain advantages, such as spreading the employer's cost over time, many payroll professionals have interpreted the IRS regulations as requiring far greater federal income tax withholding on salary continuation payments than was required when the individual received the same amounts as regular wages. Our informal conversations with the IRS, however, reveal that withholding can continue at the same rate as applied before the employee's termination." (Deloitte via BenefitsLink.com)
Overview of Severance Pay Studies
Excerpt: "[E]ven with today's woeful economic conditions, some recently released studies point out that many employers are resorting to a kinder, gentler strategy when letting employees go. And the experts behind those reports say that such a strategy makes sense because a critical part of the severance process is that, if you do it poorly, the damage could run deep, hurting a company both internally right now, and later externally, when it comes time to restock talent." (Human Resource Executive Online)
[Guidance Overview] Severance Benefits and COBRA: A Follow-Up
Excerpt: "Just to clarify a point from my Sunday blog [http://www.winston.com/index.cfm?contentID=19&itemID=159&itemType=25&postid=181] -- and to be sure that employers don't fall into a trap created by the new law -- it is important to realize that the government subsidizes 65 percent of the actual amount of COBRA premium that the employer requests from an involuntarily terminated participant." (Michael S. Melbinger via Winston & Strawn LLP)
[Guidance Overview] Separation Pay Options Under Code Section 409A
Excerpt: "This article examines methods for providing separation pay consistent with Section 409A, including use of the short-term deferral and safe harbor exceptions, 'stacking,' and integrating a release of claims. The attached chart provides analysis and options under various sets of circumstances related to separation pay under Section 409A." (Faegre & Benson)
[Guidance Overview] Model Notices for New COBRA Rules Issued; Effects on Separation Pay Agreements
Excerpt: "Many separation pay arrangements provide that an employer will pay all or a portion of an employee's COBRA premium. Such arrangements, however, will not permit the employer to claim a tax credit for the 65 percent of the COBRA premium because, as stated above, the employee, or someone acting on the employee's behalf other than the employer, must pay the employee's 35 percent share of the COBRA premium for these new rules to apply. Moreover . . . . " (Buchanan Ingersoll & Rooner)
[Guidance Overview] Employee Benefits Issues to Consider in a Reduction in Force
Excerpt: "As unfortunate as it may be, sometimes the only effective way to increase a company's bottom line during an economic recession is a reduction in force (RIF). The economic analysis should, however, consider much more than just the terminated employees' salaries. Other considerations include nonqualified deferred compensation, stock plans, bonuses, severance pay, retirement plans, health and welfare plans, and FSAs. This article, while not exhaustive, discusses many of the issues an employer may face and thus should consider when performing the economic analysis of a potential RIF." (Deloitte via BenefitsLink.com)
Corporate Cutting Now Extends to Severance Packages
Excerpt: "Concerned about cash flow and future layoffs, companies are shrinking severance packages, which usually include a mix of pay and health benefits. While there are no formal measures for severance packages and their historical trends, news that area firms are paring back such payouts has been gleaned through interviews with industry experts and specific examples of companies that have laid off workers in recent months." (Boston Business Journal via bizjournals.com; free registration required)
Golden Parachute Gross-Ups May Be Unnecessary for Many Executives
Excerpt: "Compensation committees have been reexamining their non-core compensation elements under the brighter light shone by the recent changes to the Securities and Exchange Commission (SEC) proxy disclosure rules. Severance and change-in-control (CIC) benefits seem to be attracting the most criticism these days, so many companies are reevaluating the business purpose and effectiveness of those first." (Watson Wyatt Worldwide)
Yahoo Wins Severance-Plan Approval That May Aid Buyout Offers
Excerpt: "The Detroit pension funds argued in the Delaware suits that Yang used Yahoo's severance plan to thwart Microsoft by giving employees incentives to quit rather than work for a buyer. The plan, approved by Yahoo's board in the wake of Microsoft's bid, served as a 'quasi-poison pill,' investor advisory firm Glass Lewis Inc. said. A poison pill is a type of corporate-takeover defense. The severance plan required that workers be paid if their jobs were eliminated or altered after a change in control of Yahoo. The company said the policy was aimed at retaining employees. Investors complained that it made Yahoo more expensive to acquire." (Bloomberg L.P.)
[Guidance Overview] Law Firms Navigating A Minefield Through Reductions In Force
Excerpt: "The Editor interviews Robert M. Projansky, Partner, and Marc Mandelman, Senior Counsel, who are Co-chairs of Proskauer Rose LLP's Managing Change/Reductions in Force Practice Group. . . . Editor: We're seeing a number of RIFs as a result of the current economic crisis. Section 409A of the IRS Code has various proscriptive measures regarding severance. How are employers able to sidestep the requirements of Section 409A of the IRS code when structuring a RIF?" (The Metropolitan Corporate Counsel, Inc.)
[Guidance Overview] FAQs on the 415 Amendment: What If I Haven't Adopted It Yet?
Excerpt: "Numerous individuals have called SunGard recently stating that they, or the employers they served, have not yet adopted an amendment to comply with the final 415 regulations. These FAQs are designed as a resource to those individuals and their advisors." (SunGard)
[Guidance Overview] All Employers' Severance Plans and Agreements Affected by ARRA
Excerpt: "The key provision that may benefit both employees and employers is as follows: Individuals who have or will become eligible for COBRA due to an involuntary termination of employment during the period from September 1, 2008 through December 31, 2009, are generally eligible to receive a COBRA subsidy for up to nine months, under which they are only required to pay 35 percent of the COBRA premium. The employer subsidizes the other 65 percent of the premium, which the employer then may recoup by claiming a credit against its required payroll taxes. The subsidy is subject to phase-outs and recapture for individuals above certain income thresholds. An employer that already subsidized COBRA coverage to some employees under a severance benefit plan or other negotiated severance can shift the cost of this subsidy to the government. An employer that does not provide a subsidy for COBRA coverage now has an opportunity to do something very positive for its employees/former employees without increasing its costs." (Michael S. Melbinger via Winston & Strawn LLP)
Stingier Severance Pay Adds to Workers' Woes
Excerpt: "With layoffs on the rise, companies are looking to cut the cost of firing workers. Some, like Tribune Co., are reducing their formulas for calculating severance pay, offering one week of compensation for each year of service instead of two. Others, including J. P. Morgan Chase & Co., are cutting the total amount of severance pay a worker can receive. Human resources consultants expect cuts in outplacement services and health insurance for laid-off workers next." (Crain Communications, Inc.)
GM and Chrysler Offer New Retirement, Buyout Packages
Excerpt: "General Motors Corp. and Chrysler LLC are offering blue-collar employees another round of buyout and early retirement offers as the automakers try to cut their work forces and reduce expenses, union officials said." (AP via The New York Times; free registration required)
Bankrupt WorldCom wants court to let it make enhanced payouts to 19 top officials who had been terminated
Excerpt: "WorldCom Inc. is seeking bankruptcy court approval to pay remaining severance benefits to employees it laid off or gave notice before it filed for bankruptcy. The company had sought authority to pay severance obligations only up to $4,650 per dismissed employee, according to a motion filed late Tuesday. The U.S. Bankruptcy Court in Manhattan on July 22 authorized the company to pay about $22 million. WorldCom, based in Clinton, Miss., now owes roughly $36 million in severance payments to about 4,143 dismissed employees, the filing said." (AP via The Baltimore Sun)
Employers Reviewing Severance Plans
Excerpt: "As the recession continues to grip the nation, more employers are laying off -- or making plans to lay off -- employees. The coming year will bring more of the same, experts say, so it's a good time now for HR leaders to scrutinize their severance policies." (Human Resource Executive Online)
Severance Includes Outplacement and Financial Planning, According to Survey Results
Excerpt: "Employers participating in a recent severance package benchmarking survey offer both outplacement services and financial planning to their laid-off employees. The poll by HR consultant Right Management of HR executives and other senior managers responsible for severance issues found that 81% of the 399 U.S. executives questioned provide outplacement services (61% of the 1,227 surveyed worldwide)." (PLANSPONSOR.com; free registration required)
[Guidance Overview] The Role of Severance in Today's Employment Environment (PDF)
4 page. Excerpt: "How companies respond to the business imperative of downsizing and layoffs, as well as how employers 'take care' of terminated workers, is a critical element of business policy that affects both their business culture and, ultimately, the national economy. Traditionally, companies have extended severance benefits to employees who become unemployed for reasons other than 'cause.' Over the years, severance payments have become as standard as salary earned for time worked. (See Severance: A Benefit Essentially Unchanged Throughout Changing Times in the right column [on target page].) This InsightOut addresses three issues related to severance benefits . . . ." (Buck Consultants)
French Legislation May Impact Payouts for Retirement Indemnities
Excerpt: "Legislation adopted by lawmakers in France could lead to an increase in the minimum indemnities payable upon voluntary retirement, although the original intent was apparently to target only severance payments. The legislation was intended to make it more difficult for employers to carry out involuntary retirements. However, the text was vaguely written, leading some companies and industries to take the view that the higher severance indemnities are required for voluntary retirements as well." (Towers Perrin)
Yahoo Changes Severance Plan in Settling Lawsuit
Excerpt: "Yahoo Inc on Wednesday revised an expensive employee and executive severance plan it had adopted following a takeover bid by Microsoft Corp, settling a lawsuit brought by shareholders. The new terms cut the potential costs to an acquirer and make clear that the sale of Yahoo's search business -- which Microsoft still covets -- would not invoke severance benefits." (Reuters via The New York Times; free registration required)
CitiGroup Eliminates Additional Employee Severance Payments
Excerpt: "The new chief of human resources at Citigroup, in one of his first official duties since ascending to the position last week, announced in an internal memo Monday, December 1, that the firm would eliminate certain forms of severance pay for U.S. workers. The memo, sent to U.S. employees by HR head Paul McKinnon, who replaced 30-year company veteran John Donnelly last week, said Citigroup would no longer provide additional weeks of base pay beyond its standard severance formula to employees who have 10 or more years of service." (Workforce Management; free registration required)
U.S. Employers Offer Lower Severance Pay
Excerpt: "A new global study has found that employees laid off in the United States earn the least amount of severance pay worldwide -- no matter what level of employee or amount of tenure with the organization. A Right Management news release about its severance pay study found US-based employees consistently earn less severance per year of service than colleagues around the world." (PLANSPONSOR.com; free registration required)
[Guidance Overview] In France, Legislation May Impact Payouts for Retirement Indemnities (PDF)
1 page. Excerpt: "Recent legislative changes in France could lead to an increase in the minimum indemnities payable upon voluntary retirement, although the original intent of lawmakers was apparently to target only severance payments. The revised approach would also have an accounting impact on company financial statements. The changes were intended to make it more difficult for employers to carry out involuntary retirements. However, the text of the latest revisions was vaguely written, leading some companies and industries to take the view that the higher severance indemnities are required for voluntary retirements as well." (Towers Perrin)
Pension Benefit Guaranty Corporation Concerned About Detroit 3 Buyout Costs
Excerpt: "The federal corporation that insures retirement plans sent letters this week to General Motors Corp., Ford Motor Co. and Chrysler LLC, raising concerns about using pension funds to buy out employees. The Pension Benefit Guaranty Corp. warned that recent buyout and employee-reduction programs were not accounted for when the automakers estimated how much money would be needed to pay future pensions and that they 'may undermine the state of the plans.' In his letters to the automakers Wednesday, PBGC Director Charles E.F. Millard asked for a breakdown of the costs of each employee-reduction program." (Detroit Free Press)
Cracks in the Pension Safety Net System?
Excerpt: "According to two separate news accounts, cracks may be appearing in the pension back-up systems for the United States and UK, respectively. Already jittery taxpayers may look at these warnings with heightened alarm. In 'Pension Agency Sounds Alarm on Big Three,' Wall Street Journal reporter John D. Stoll (November 28, 2008) writes that the Pension Benefit Guaranty Corporation ('PBGC') is worried that large automakers may offer early retirement or buyout deals to some plan participants, at the expense of those who remain. . . . In 'Pension lifeboat may be sunk by wave of firms being liquidated' (November 28, 2008), Phillip Inman and Simon Bowers - reporters for The Guardian - write that 'The Pension Protection Fund (PPF), which has already rescued more than 66 retirement schemes, may be forced to increase its levy on profitable companies to boost its finances or risk a government bail-out if more companies go bust.'" (Pension Risk Matters)
Pension Benefit Guaranty Corporation Asks Carmakers for Buyout Details
Excerpt: "Federal pension regulators expressed concern the big three U.S. automakers' cost-cutting efforts may harm their retirement programs and come back to haunt taxpayers should the companies default on the plans. The director of the Pension Benefit Guaranty Corp. sent letters this week to General Motors Corp., Ford Motor Co. and Chrysler LLC asking for information about their buyout and other employee-attrition programs. Such programs could drain money from pension plans by accelerating retirement-related costs that otherwise wouldn't come due for years." (Bloomberg L.P.)
Latest Chrysler Buyout Offer Lures Quarter of Salaried Staff
Excerpt: "The historic downsizing of the Detroit automakers has already eliminated more than 100,000 factory jobs over the last three years. But at Chrysler, the day before Thanksgiving was the moment of reckoning for endangered members of its white-collar work force. Like General Motors and the Ford Motor Company, Chrysler is cutting deep into its white-collar ranks by offering buyouts or early retirement deals to managers, engineers, financial analysts and secretaries. The company is committed to reducing its salaried staff by 25 percent, or about 5,000 employees, by the end of the year." (The New York Times; free registration required)
[Guidance Overview] New Minnesota Tax on Deferred Compensation Paid to Former Residents (PDF)
6 pages. Excerpt: "Though the new Minnesota tax targets deferred compensation, it does not impact 'retirement income' paid to nonresidents. Retirement income generally includes: . . . The three categories of remaining sources of deferred income that are affected by the new Minnesota tax are: severance pay; equity based awards; and other non-statutory deferred compensation." (Kelly, Hannaford & Battles P.A.)
National Retiree Legislative Network Would OK Proposed Delay in PPA Funding Rules If Accompanied by New Pension Protections
Excerpt: "Given the dire financial circumstances our country is experiencing, the NRLN's legislative team has concluded that we could accept a temporary delay in the implementation of pension funding and accounting requirements if Congress will include in any ERISA relief legislation the NRLN's proposals to protect pension assets. The measures we want included are: (1) Protect pension plan assets by preventing companies from using assets for restructuring expenses, such as paying lump-sum severance or layoff payments. (2) Prevent the purchase of pension plans by third parties, such as financial firms. (3) Prevent the use of pension plan assets to enhance deferred compensation of executives." (National Retiree Legislative Network)
Know Your Severance Rights and Risks
Excerpt: "[Don't have an employment agreement specifying severance terms.] Don't assume you will get anything, employment attorneys say. That is not to say it's impossible; in some cases even if there is no preexisting agreement, the company might offer severance to restrict the employee from competing with it for a period of time, notes Kenneth Raskin, a compensation and employment partner at White & Case. But the employer, not the employee, owns that right. Merely asking the firm to provide you with a guarantee of severance in the event of termination without cause is very unlikely to work." (CFO.com)
Paper Company Executive Loses Severance Benefit Fight
Excerpt: "A federal appellate court has cleared a paper company of wrongdoing in denying severance benefits of about $300,000 from a top hat plan to its former president over allegations he was disloyal to the firm during a business deal. The 6th U.S. Circuit Court of Appeals upheld a lower court decision against plaintiff Richard Whitescarver who was fired in 2003 'for cause' -- a determination Sabin Robbins Paper Co. said precluded him from receiving benefits from its Supplemental Executive Retirement Plan." (PLANSPONSOR.com; free registration required)
[Guidance Overview] Employment Law Risks in the Current Financial Crisis
Excerpt: "The current economic crisis may lead employers to consider reductions in force. Employers that are considering reductions in force and providing severance payments to laid-off employees may wish to consider establishing a severance plan governed by the Employee Retirement Income Security Act (ERISA). One advantage in having an ERISA-governed severance plan is that it provides many protections to employers who are sued by employees in connection with severance benefits." (Littler Mendelson P.C.)
[Guidance Overview] Employment Law Risks in the Current Financial Crisis
Excerpt: "There are several, critical employment law issues that must be taken into account in any organization's plan to address the new economic realities especially if reductions in force are a part of the organization's strategy. . . . Employers that are considering reductions in force and providing severance payments to laid-off employees may wish to consider establishing a severance plan governed by the Employee Retirement Income Security Act (ERISA). . . . As the economic noose tightens, employers are bound to consider cutbacks in benefits and impose greater cost sharing with employees. In the health plan arena, employers have, for years, been passing along a greater share of the costs to employees." (Mondaq; free registration required)
Banks' Bailout Unlikely to Crimp Executive Pay
Excerpt: "The Treasury's plan seeks to take aim at the eight-figure pay packages given to Wall Street executives that have enraged so many Americans in the wake of the country's financial collapse. Banks that get an equity infusion from the government will have to follow some general rules on paying their top five executives. They will be restricted from offering golden parachutes, as rich severance packages are called, and they will have to pay more taxes if an individual's compensation exceeds $500,000." (The New York Times; free registration required)
[Official Guidance] Text of IRS Notice 2008-94: Executive Comp Provisions of Emergency Economic Stabilization Act (PDF)
29 pages. Excerpt: "New §§ 162(m)(5) and 280G(e) provide additional limitations on the deductibility of compensation paid to certain executives by employers who sell 'troubled assets' in the 'troubled assets relief program' included in EESA. Section 162(m)(5) generally reduces the $1 million deduction limitation to $500,000 for certain taxable years . . . . Section 280G(e) generally expands the definition of a parachute payment to include certain payments made contingent on severance from employment." (Internal Revenue Service)
By Rejecting Severance, AIG's Ex-CEO Shines a Light on Executive Pay Debate
Excerpt: "The government's role in saving AIG from bankruptcy last week may have put pressure on Willumstad to forgo the severance, some observers say, especially since he served as CEO for only three months. But his action has brought more attention to the heated debate over the appropriate level of compensation for CEOs of failing companies." (Workforce Management; free registration required)
Los Angeles Times Reporters Suing Chief of the Newspaper's Parent, the Tribune Company
Excerpt: "Mr. Zell, the chairman and chief executive of Tribune, took control in December in an $8.2 billion deal that took the company private . . . . Since then, the company has eliminated more than 1,000 jobs, and sold assets to raise capital and meet debt payments. . . . The unusual takeover turned Tribune's stock over to an employee stock ownership plan, or ESOP, so the employees technically became the owners. . . . 'By orchestrating what was clearly an imprudent transaction,' the lawsuit states, Mr. Zell and the former Tribune management 'breached their fiduciary duties to the employee-owners.' It adds that Mr. Zell and his aides have compounded that breach in the way they have run the company, and by using money from the employees' pension fund to pay for buyouts and severance." (The New York Times; free registration required)
No Golden Parachutes for Fannie, Freddie CEOs
Excerpt: "The Federal Housing Finance Agency announced Sunday that the former CEOs of Fannie Mae and Freddie Mac will not walk away with golden parachutes. The agency that regulates -- and now manages -- the two mortgage giants said it will not allow the former executives to walk away with multimillion-dollar severance packages." (Morning Edition via National Public Radio)
Bankrupt Worldcom Wants Court to Let It Make Enhanced Payouts to 19 Top Officials Who Had Been Terminated
Excerpt: "WorldCom Inc. is seeking bankruptcy court approval to pay remaining severance benefits to employees it laid off or gave notice before it filed for bankruptcy. The company had sought authority to pay severance obligations only up to $4,650 per dismissed employee, according to a motion filed late Tuesday." (AP via The Baltimore Sun)
International and Cross-Border Retirement and Fringe Benefit Plans: IRS Advisory Committee Survey Seeks Opinions of Employers, Administrators, Practitioners, Consultants
2-page Word survey questionnaire; September 30 deadline. Excerpt: "The IRS Advisory Committee on Tax Exempt and Government Entities (TE/GE) (the 'ACT') is undertaking a study to identify international and cross-border activities, issues, challenges, impediments and barriers in connection with the design, coverage, portability, and tax administration of US employee retirement (qualified and non-qualified) and fringe benefit plans. . . [T]he ACT is particularly interested in the views of stakeholders, such as employers, administrators, trustees, custodians, practitioners and consultants regarding these issues [and asks for your views on or before September 30, 2008]." (IRS Advisory Committee on Tax Exempt and Government Entities)
Reduced Exit Packages Urged for Ousted Fannie Mae and Freddie Mac Executives
Excerpt: "Senator Barack Obama and two other prominent Democrats urged federal housing regulators on Tuesday to cut the golden parachutes of the ousted leaders of Fannie Mae and Freddie Mac, another sign that the government bailout of those mortgage giants could reverberate through the presidential campaign." (The New York Times; free registration required)
[Guidance Overview] No Severance Pay for Constructive Termination
Excerpt: "A federal appeals court has concluded that executives were not entitled to severance pay because they were not involuntarily terminated, but were instead, at least arguably, constructively discharged. The case is Mallon v. Trust Co. of New Jersey Severance Pay Plan, 2008 WL 2553027 (3d Cir. 2008)." (National Association of Stock Plan Professionals via Utz, Miller, Kuhn & Eickman, LLC)
GM Offers More Buyouts - Extends Deal to 9,000 Salaried Workers
Excerpt: "About 9,000 workers have been offered the deal, according to a source familiar with the plan. If they all accepted, it would trim about 28 percent of GM's salaried work force and shave about 20 percent of its white-collar costs. The voluntary offers, which GM started making in recent weeks, come a month after GM said it wanted to trim its salaried work force expenses by more than 20 percent in the U.S. and Canada. That includes ending its salaried retirement health coverage for employees over 65 starting Jan. 1 and eliminating salaried raises through the end of 2009." (AP via The Detroit News)
[Guidance Overview] Employer Did Not Violate State Law or Employment Agreement When It Withheld COBRA Premiums from Severance Pay
Excerpt: "EBIA Comment: Addressing COBRA obligations in severance arrangements can be complicated. This case illustrates the need for clear language regarding the employer's COBRA payment obligations. In addition, although ERISA's preemption provision arguably blocks enforcement of state wage-withholding laws against ERISA plans, employers should nevertheless keep an eye out for the possible application of state restrictions when they withhold COBRA premiums from severance payments." (Employee Benefits Institute of America)
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