Shell Oil severance program reporting duties

                                                                      ,


                     U.S DEPARTMENT OF LABOR
                   Pension and Welfare Benefit Programs
                         Washington, D.C. 20216




MAR 11 1977                                         OPINION 77-27 A

                                                     3(1)
                                                     3(2)

Mr. H. T. Egliht, Manager
Personnel Department
Shell Oil Company
[Recipient address omitted]

Dear Mr. Egliht:

This is in reply to your letter concerning the Employee Retire-
ment Income Security Act of 1974 (ERISA). We regret that the
volume of correspondence has resulted in a delay in responding.

You stated that Shell Oil Company (the Company) has had various
severance arrangements in effect for many years. The present
severance program (the Plan) became effective June 1, 1976,
and will terminate December 31, 1976. In accordance with the
Plan’s provisions, payments are made in a lump sum from the
general assets of the Company and will not exceed two years
final annual compensation due an employee. You question
whether the Plan is required to file a plan description on a
Form EBS-1 and an annual report on a Form 5500.

The Department of Labor has adopted an advisory opinion proce-
dure (ERISA Procedure 76-1, copy enclosed) which describes the
general procedures for issuing information letters and advisory
opinions under ERISA. Pursuant to ERISA Procedure 76-1, this
letter is to have the effect of an advisory opinion.

Section 3(2) of ERISA defines the term “pension plan” to
include any program maintained by an employer to the extent
that it provides retirement income or results in a deferral
of income to periods extending to the termination of covered
employment or beyond. Section 4(a) indicates that such plans
are subject to the provision of Title I of ERISA.

                                            OPINION 77-27 A

Mr. H. T. Egliht, Manager                                - 2

Section 2510.3-2 of regulations issued by the Department on
August 15, 1975 (copy enclosed) clarifies the definition of
the term “pension plan” for the purposes of Title I. As
indicated in section 2510.3-2(b), severance pay plans meeting
the qualifications specified therein will not be deemed pen-
sion plans within the meaning of section 3(2).

On April 26, 1976, the Department issued a press release (copy
enclosed) announcing its intention to expand the definition of
severance pay to include payments upon separation from service
which do not exceed two years final annual compensation, or
extend for a period of more than 12 months beyond normal retire-
ment age or the effective date of elected early retirement.
These payments will be permissible if they come from the employ-
er’s general assets and are clearly defined as severance pay
rather than a pension. Although revised regulations covering
severance pay plans have not yet been issued, employers are
entitled to rely on the information contained in the press
release.

Based on the information supplied, it would appear that the
Plan would be deemed a severance play plan, rather than a pension
plan, pursuant to section 2510.3-2(b) and the April 26, 1976
press release. Your inquiry, however, relates to the reporting
and disclosure obligations of the Plan.

Section 3(1) of ERISA defines the term “welfare plan” to include
any program established or maintained by an employer to the
extent that it provides any benefit described in section 302(c)
of the Labor-Management Relations Act of 1947 (LMRA). Section
302(c) of the LMRA includes severance benefits. Therefore, as
indicated in section 2510.3-1 of the August 15, 1975 regulations
the term “welfare plan” includes programs which provide severanc
benefits.

The Plan you describe is, therefore, a welfare plan within the
meaning of section 3(1) of ERISA. As such, it is subject to
Parts 1, 4, and 5 of Title I which contain the reporting and
disclosure, fiduciary responsibility, and enforcement provisions
respectively. In accordance with the provisions of Part 1, the
Plan will be required to file, among other reports, a plan
description on a Form EBS-1 and an annual report on a Form 5500.

Sincerely,

Fred W. Stuckwisch,
Director
Office of Regulatory Standards
  and Exceptions