Severance plans as ERISA welfare plans

P/OPINION 76-107

                                                 3(1)


                     September 27, 1976


 Dear          :

 Thank you for your letter requesting clarification of the
 coverage of severance pay plans and the definition of the
 term "employee's normal compensation" under the Employee
 Retirement Income Security Act of 1974 (ERISA). I am
 sorry we could not reply sooner.

 You describe two severance pay plans that are not pension
 plans pursuant to section 2510.3-2(b) of the regulation
 issued August 15, 1975, and wish to know if they are
 "welfare plans." The answer is yes. Section 3(1) of the
 ERISA defines an employee welfare benefit plan, in part,
 as "any plan, fund, or program which was heretofore or is
 hereafter established or maintained by an employer or by
 an employee organization, or by both, to the extent that
 such plan, fund, or program was established or is main-
 tained for the purpose of providing for its participants
 or their beneficiaries, through the purchase of insurance
 or otherwise, any benefit described in section 302(c) of
 the Labor Management Relations Act, 1947 (other than
 pensions on retirement or death, and insurance to provide
 such pensions)."

 As you are aware, one of the benefits described in section
 302(c) of the Labor Management Relations Act, 1947, is
 severance pay. Although, as you are aware, section 302(c)
 refers to money paid into a trust fund, section 3(1) of
 the ERISA does not require any special type of funding.
 Any severance pay plan that is not an employee pension
 benefit plan would be considered an employee welfare
 benefit plan under Title I of the ERISA provided it meets
 with the other requirements of section 4(a).

 In answer to your second question, "employee's normal
 compensation" means the employee's regular rate of pay.

 Sincerely,