Traps for the Unwary: Is your Company’s Severance Arrangement Subject to ERISA?

Severance arrangements generally provide for cash payments to an employee whose employment is involuntarily terminated and may include certain benefits, such as subsidized medical coverage and outplacement assistance.

Severance arrangements take a variety of forms. Formal severance plans often are used as a retention tool for employees across the board with no individual negotiations. In our experience, companies with formal severance plans typically treat them as ERISA plans.

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