ERISA Severance Plans: Trick or Treat?

By Michael S. Beaver and Emily Hobbs-Wright

Holland & Hart LLP

An employer forecasts an economic downturn in business and the probability of having to lay off employees in several waves of workforce reductions. The well-intentioned employer is particularly concerned about the impact on employees who have worked for the company for many years, so it decides to adopt a program to pay one week of severance for each year worked to terminated employees with five or more years of service. It publishes a policy outlining eligibility requirements and payment schedules. Among other things, the policy states that if an employee accepts employment during the severance payout period, he forfeits the balance of the severance payment.