severance payments on retirement - defined benefit plan?

[EGB]

Employer, pursuant to a collective bargaining agreement, agrees to pay each employee who terminates employment on or after age 65, $250 per month in cash. The reason this was implemented was to give the retiree cash to help pay for health insurance premiums, though there is no requirement that the cash be used for such purpose.

It seems to me that this may well be an ERISA pension plan as it is a program that provides retirement income to employees and does not meet the safe harbor exceptions under DOL Reg. 2510.3-2(B). Does the character of this arrangement as a pension plan change if the employer requires the payments to be used for the payment of individual health insurance premiums? I don' think this changes the character as a pension plan, but I could be missing something.

If it is a pension plan, could we add these payments to their existing defined benefit plan by amending said plan and stating that each retiree will receive, in addition the the regular pension benefit, an additional $250 per month as a severance type benefit? If we can/should put this in the pension plan, I assume that we cannot require the $250 to be paid in a lump sum and that we would have to annuitize the payments, with an option to waive the annuity and take a lump sum.

Any comments would be greatly appreciated.

[Kirk Maldonado]

The rules for determining whether a severance pay plan will be treated as a pension or a welfare benefit plan for purposes of ERISA is found at 29 CFR 2510.3-2(B).

[Ron Snyder]

beau-

I responded to you on the other thread that you should consider modifying the arrangement to a "health reimbursement arrangement".