Headlines about "Severance pay"
Gathered from the web by the editors at BenefitsLink.com.
Life on Severance Pay
Excerpt: "Overall, companies have been eliminating or trimming severance packages. For those who do receive severance, the median pay allotted is 12.5 weeks' salary, down from 21.8 weeks a decade ago, according to outplacement firm Challenger, Gray & Christmas. But this downtown has brought heavy layoffs to the financial and auto industries, two places where generous exit packages remain more common. The dramatic changes in such sectors mean that many of the eliminated jobs will never come back. Some workers may suffer a permanent hit to their standard of living. Those affected often have trouble accepting their diminished prospects. Hefty severance packages, while intended as a safety net, can lull the unemployed into a false sense of security. Some people continue spending as before." (The Wall Street Journal)
[Guidance Overview] Be Careful With Severance Plans; ERISA Reporting and Disclosure Rules Can Apply
Excerpt: "While most employers are well aware of ERISA's application to retirement plans and group health plans, many are surprised to learn that some severance arrangements are considered 'welfare pans' under ERISA and, are therefore, subject to ERISA's reporting and disclosure requirements, as well as the rules for processing and determining claims. Because not every severance arrangement is covered by ERISA, many employers overlook its potential application when they are implementing or designing a severance plan." (Fisher & Phillips)
[Guidance Overview] Perform Year-End Review of Nonqualified Deferred Compensation Plans for 409A Operational Failures
Excerpt: "Employers that maintain nonqualified deferred compensation plans should strongly consider adding a review of operations for Section 409A non-compliance to their end-of-the-year to-do lists. If operational failures are identified and corrected before the year has run out, it may be possible to avoid some or all of the adverse consequences that would otherwise result under 409A by taking advantage of the relief provided under IRS Notice 2008-113." (Faegre & Benson)
[Guidance Overview] Last Chance to Fix Bonus Plans and Severance/Employment Agreements
Excerpt: "For those companies who have not yet revised their bonus plans or severance/employment agreements to comply with the IRS interpretation of Internal Revenue Code (Code) section 162(m) in Rev. Rul. 2008-13, 2008-10 IRB 518, now would be the time to do that in order to avoid a deduction disallowance for the 2010 annual bonus (and for long-term bonuses with a performance period beginning January 1, 2010)." (Miller & Chevalier)
[Guidance Overview] Severance Plans as Regulated by the Internal Revenue Code and ERISA (PDF)
Pages 5- of 10 pages. Excerpt: "Many companies have implemented severanceplans due to the current economic situation. While companies typically consider the employment law implications of severance plans (such as the Age Discrimination in Employment Act), many have not considered how these plans are governed by the Internal Revenue Code of 1986, as amended (the'Code') and the Employee Retirement Income Security Act of 1974, as amended ('ERISA'). This article briefly summarizes how the Code and ERISA govern severance plans." (Trucker Huss)
[Guidance Overview] Employer Practice of Payments in Exchange for Releases Does Not Constitute ERISA Plan
Excerpt: "The Second Circuit recently addressed an important issue that can arise in the context of employment termination. In this case, the plaintiff, on behalf of herself and similarly situated employees, alleged that her employer had an ongoing practice of offering payments in exchange for a release of claims. The key issue: was this practice, in effect, an employee welfare benefit plan? This is a issue frequently overlooked. While an ERISA plan is required to be described in a written document, an ERISA plan can be created through pattern and practice even though not described in a written document. This fact creates substantial risk that a course of payments on termination of employment may give rise to a severance pay plan. That is essentially what the plaintiff alleged in Kawski." (Roy Harmon III via Health Plan Law)
[Official Guidance] DOL Begins to Approve EFAST2 Software Vendors for 2009 Form 5500
ftwilliam.com is the first vendor to obtain EFAST2 approval, for the 2009 Form 5500. Excerpt: "EBSA will list on this Web site the private sector companies who have developed software that has been approved for use in transmitting and/or completing the Form 5500 and Form 5500-SF under the EFAST2 system. . . . Information on these products and their vendors' is provided for the convenience of filers. The U.S. Department of Labor does not endorse or warrant these companies, their products, or their services." (Employee Benefits Security Administration, U.S. Department of Labor)
[Guidance Overview] EEOC's Guidance on Discrimination Waivers and Releases
Excerpt: "Given the recent economy and resultant 'rightsizing' of workforces, many employers are asking employees to sign releases in exchange for severance pay. Various statutes and cases regulate the enforceability of those release agreements. Consequently, employers should take care to assure that their separation agreements comply with the applicable legal requirements." (Briggs and Morgan P.A.)
[Guidance Overview] EEOC's Guidance on Discrimination Waivers and Releases
Excerpt: "Given the recent economy and resultant 'rightsizing' of workforces, many employers are asking employees to sign releases in exchange for severance pay. Various statutes and cases regulate the enforceability of those release agreements. Consequently, employers should take care to assure that their separation agreements comply with the applicable legal requirements." (Briggs and Morgan P.A.)
[Guidance Overview] EEOC Technical Assistance Regarding Waivers and Releases of Discrimination Claims in Severance Agreements (PDF)
Pages 3-4 of 6 pages. Excerpt: "Can an employer validly require an employee to sign an agreement waiving his or her right to sue the employer under federal employment discrimination laws in exchange for severance benefits? Technical guidance issued by the Equal Employment Opportunity Commission ('EEOC') on July 15, 2009 timely answers this question -- with a qualified 'yes' -- and discusses the legal requirements governing release agreements for terminated employees. Laid out in an employee-friendly question and answer format and containing a checklist and a sample release, the technical guidance highlights essential elements of valid waivers while clarifying for employees their rights under federal employment law." (Trucker Huss)
Buyouts Lure 9,000 State Workers into Retirement in Six States
Excerpt: "Looking to shield their work forces from tumultuous cutbacks, at least six cash-strapped states have decided this year to spend millions on incentives to encourage government employees to retire. As the job security traditionally associated with state employment becomes increasingly uncertain in the face of large-scale layoffs and furloughs, these buyouts give states the chance to tighten their belts without fracturing morale." (StateLine.org)
[Guidance Overview] Focus on Employee Benefits Newsletter, August 5, 2009 (PDF)
6 pages. This edition covers the following issues: Play or Pay Proposals in Health Reform Legislation, Maintaining Plan Administrative Documents, Tax Treatment of Employment Settlements, and Discounted Options and Section 162(m). (Miller & Chevalier Chartered)
After 6,000 Take Buyouts, G.M. to Lay Off Thousands
Excerpt: "Workers who agreed to leave their job received cash payments of $20,000 to $115,000, with the largest amount going to those who gave up retirement benefits other than their pensions. Departing workers also received a voucher worth $25,000 toward a new-vehicle purchase." (The New York Times; free registration required)
Making the Best of Your Severance Package
Excerpt: "The intricacies linked with parting packages vary from the financially significant (CEOs have sued former firms for hefty unpaid bonuses) to the more common (laid-off friends and family berate themselves for not asking for more money, a reference -- or even that e-mail contact list -- before signing off on a termination agreement). Like estate planning, severance is a topic few want to think about. But layoffs and buyouts abound these days, so it's vitally important to devise severance-talk tactics." (USA Today)
[Guidance Overview] EEOC's New Guidance on Severance Agreements
Excerpt: "This policy document is not an EEOC regulation or even an enforcement guidance, but it summarizes, from the EEOC's perspective, existing legal requirements for severance agreements under the Americans with Disabilities Act (ADA), Title VII, the Equal Pay Act (EPA), and, in particular, the Age Discrimination in Employment Act (ADEA). The publication does not appear to be intended to change existing regulations, but employers should anticipate that the EEOC will refer to the document when investigating charges or pursuing lawsuits that involve releases." (Littler Mendelson P.C.)
[Guidance Overview] EEOC's Guidance on Waivers of Discrimination Claims
Excerpt: "The technical assistance document is directed primarily toward employees and includes a checklist of steps employees should take when they are offered severance benefits in exchange for a waiver of claims. It states that in order for a waiver of discrimination claims to be valid, it must: Be knowingly and voluntarily signed by the employee; Provide consideration, such as additional compensation, in exchange for the waiver; Not require the employee to waive rights that may arise after the date the waiver is signed; Not require the employee to waive other claims that may not be waived as a matter of law, such as claims for unemployment compensation, workers' compensation benefits, claims for health insurance benefits under COBRA, or claims with regard to vested benefits under a retirement plan governed by ERISA; Otherwise comply with applicable state and federal laws[.]" (Faegre & Benson)
[Guidance Overview] EEOC's Employee-Friendly Guidance on Separation Agreements
Excerpt: "Most U.S. employers continue to offer downsized employees severance benefits in exchange for a release of claims. Recognizing this, the U.S. Equal Employment Opportunity Commission (EEOC) issued new guidance on July 15, 2009 titled Understanding Waivers of Discrimination Claims in Employee Severance Agreements. In form, EEOC's new Severance Agreement guidance is unusual in that it is directed to employees in a Q&A format." (Seyfarth Shaw LLP)
[Guidance Overview] EEOC's New Guidance on Discrimination Waivers and Releases
Excerpt: "On July 15, the Equal Employment Opportunity Commission (EEOC) issued a new guidance document concerning discrimination waivers and releases contained in employee severance agreements. The full text of the guidance, titled 'Understanding Waivers of Discrimination Claims in Employee Severance Agreements' (EEOC Guidance), is available online at www.eeoc.gov/policy/docs/qanda_severance-agreements.html. The EEOC Guidance does not dramatically change the EEOC's detailed regulations concerning age discrimination waivers and releases, which center around the complex requirements imposed under the Older Workers Benefit Protection Act of 1990 (OWBPA). However, the new EEOC Guidance is important in several respects . . . ." (Morgan, Lewis & Bockius LLP)
[Guidance Overview] EEOC Issues Employee Guidance on Waivers in Severence Agreements
Excerpt: "[M]ost important for the EEOC and for employers, the guidance explains in several parts that these waivers do not bind the EEOC, that they cannot be used to limit employees from filing charges even if the waivers are enforceable against the employees in court proceedings, and that any effort to do so or recover the consideration (usually severence) could be considered retaliation, which the waiver won't cover." (Workplace Prof Blog)
[Guidance Overview] Understanding Waivers of Discrimination Claims in Employee Severance Agreements
Excerpt: "To minimize the risk of potential litigation, many employers offer departing employees money or benefits in exchange for a release (or 'waiver') of liability for all claims connected with the employment relationship, including discrimination claims under the civil rights laws enforced by the Equal Employment Opportunity Commission (EEOC) -- the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA).[2] While it is common for senior-level executives to negotiate severance provisions when initially hired, other employees typically are offered severance agreements and asked to sign a waiver at the time of termination. When presented with a severance agreement, many employees wonder: Is this legal? Should I sign it? This document answers questions that you may have if you are offered a severance agreement in exchange for a waiver of your actual or potential discrimination claims." (U.S. Equal Employment Opportunity Commission)
[Guidance Overview] Severance Plan Is Subject to ERISA When Employer Discretion and Ongoing Demands on Employer's Assets Are Present
Excerpt: "EBIA Comment: Depending on the nature of plan administration, a severance plan may or may not qualify as an ERISA welfare benefit plan. However, the state of the law is not clear, and the many court cases on this issue have created a range of fine distinctions on which the determination turns. In general, courts will determine that a severance plan is subject to ERISA where the plan requires both an administrative scheme and sufficient employer discretion (e.g., to determine when severance benefits are payable or in identifying eligible employees)." (Employee Benefits Institute of America)
A Review of Judge Sotomayor's Second Circuit ERISA Cases
Excerpt: "Five of the Second Circuit opinions authored by Judge Sonia Sotomayor deal with the Employee Retirement Income Security Act (ERISA). ERISA cases aren't considered as sexy as a lot of employment law cases, but the number of such cases is growing. The U.S. Supreme Court is occasionally asked to consider a case filed under this complicated statute. Getting a sense for how Sotomayor approaches ERISA is, therefore, useful." (M.Lee Smith Publishers)
[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)
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