Retirement-eligible severance payments as welfare benefits

P/OPINION 76-106
                                                     3(2)


                    September 21, 1976


Dear          :

Thank you for your letter dated January 28, 1976,
regarding the exclusion of certain severance payments to
retired employees from coverage under the Employee
Retirement Income Security Act of 1974 (ERISA). I am
sorry we could not reply sooner. (Named) Corporation
intends to offer these severance payments to employees who
are eligible for retirement in order to reduce the
workforce. You raise a number of questions about these
payments.

According to the draft of the program, payments will be
limited to a maximum of one year's compensation based on
the January 1, 1976 rate, payments will be limited to
certain types of employees, and all payments must be paid
within one year of the employee's termination date.

Section 2510.3-2(b) of the regulation published August 15,
1975, provides that the term "employee pension benefit
plan" shall not include "a plan, fund, or program under
which payments are made on account of an employee's
separation from the service of an employer other than on
account of retirement if (i) all such payments are made to
any participant are completed within one year after the
participant's separation from service, and (ii) the total
of all payments made within such year to any participant
cannot exceed the participant's annual compensation level
...", A News Release issued April 26, 1976, announced that
the Department intends to expand the definition of
severance pay to include payments upon separation of
service which do not exceed two years' final annual
compensation, or extend to a period of more than twelve
months beyond normal retirement age or the effective date
of elected early retirement. The proposed severance
payments, therefore, would not constitute an employee
pension benefit plan. However, the plan does meet the
definition of an employee welfare benefit plan within
                            - 2 -


P/OPINION 76-106


the meaning of section 3(1) of the ERISA since severance
pay is one of the benefits described in section 302(c) of
the Labor Management Relations Act, 1947. The plan would
be subject to the reporting and disclosure and the
fiduciary requirements of Title I, but not the partici-
pation, vesting, benefit accrual or funding requirements.

Your last four questions are not covered under Title I of
the ERISA and the Department would have no jurisdiction in
these areas.

Sincerely,




Enclosure