Contemplating a Severance Plan? Consider ERISA

Matthew P. Chiarello • June 8, 2017

A severance plan may be subject to the requirements of ERISA as an employee welfare benefit plan. The determination of whether a severance plan is subject to ERISA depends in large part on whether the plan is part of an “ongoing administrative scheme.”

Severance plans subject to ERISA have certain requirements, such as the obligation to file annual Forms 5500, to follow ERISA’s formal claims procedure, and to provide a summary plan description (“SPD”), a summary annual report (“SAR”), and any required summaries of material modification (“SMM”) to participants.

For a severance plan subject to ERISA, failure to comply with these requirements can carry a hefty fee – up to $110 per day for failure to provide required documents to participants on request and up to $1,100 per day for failure to file a Form 5500. Note that these penalties may be softened by using delinquent filer voluntary correction programs.

However, there may be certain advantages to maintaining an ERISA severance plan. ERISA’s preemption provisions may ensure that all state law claims related to severance pay are preempted.  Further, claims against an ERISA severance plan must be tried in federal court rather than state court.  A plaintiff cannot recover punitive damages, and jury trials are not available.  Finally, if the plan document provides for it, claim determinations by the plan administrator may be reviewed under a more favorable judicial standard.

While there are certain legal and administrative procedures employers must follow when operating an ERISA severance plan, having an ERISA plan in place may provide clarity, uniformity, and some peace of mind when providing severance benefits.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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