Headlines about "Severance pay"

Gathered from the web by the editors at BenefitsLink.com.
Wisconsin State Worker Severance Packages Scrutinized
"The joint legislative subcommittee hearing follows reports by the Pioneer Press and KSTP-TV in November about $57 million paid out in unused sick time to state employees - a practice largely unheard of in the private sector - and $32 million paid out in unused vacation time between January 2008 and June 30, 2011." (MediaNews Group, Inc.)

[Guidance Overview] Participant's Estoppel Claim Rejected for Failure to Show Pension Calculation Error Was Intentional
"The court also rejected the participant's claim that he'd relied to his detriment on the mistaken calculations when he signed the severance agreement. He undermined this argument by his own admission that he has no current wish to rescind his agreement and renegotiate the terms." (Wolters Kluwer Law & Business / CCH)

Ford Plant Closing Afftects the City
"About two-thirds of the plant's workers can transfer out of state, though the company doesn't yet know how many will do so, said Marcey Evans, a Ford spokeswoman. The buyout packages for those eligible for retirement are a $50,000 bonus for eligible production employees and a $100,000 bonus for skilled trades." (Pioneer Press)

Pros and Cons of Severance Agreements
"Employers who pay out severance to their employees run certain risks that need to be considered beforehand. Some employers have learned the hard way that severance agreements aren't always the best course of action." (Mondaq Ltd. via International Foundation of Employee Benefit Plans)

Severance and Change-in-Control Plans
"[The survey research was] designed to better understand the prevalence and perceptions of severance programs within organizations." (WorldatWork / Innovative Compensation and Benefits Concepts, LLC)

Pros and Cons of Severance Agreements
"[M]ost employers who use severance payouts ask their employees to sign a document essentially releasing the company from any and all legal liability upon acceptance. This way, the relationship can be considered to be completely and forever severed, each party moving on in the world, never again to have to deal with each other." (Fisher & Phillips LLP)

Six Tips for Handling Severance Pay Plans
"How do you put together a severance pay plan that meets your needs and also stays within the bounds of legal requirements for such plans?" (Business & Legal Reports, Inc.)

IRS May Propose New Section 457(f) Vesting, Other Rules in Mid-2012
"No firm deadline exists, but an IRS attorney's recent statements indicate that the agency's current goal is to publish proposals by June 30, 2012." (Mercer LLC)

[Guidance Overview] One-Person Individually-Negotiated Employment Agreement Not an ERISA Plan
"With regard to the employee's demands under the ERISA plans, the Court ruled that the state law remedies would be preempted; however, if the employee's demands were simply for payment of amounts that were pegged to what would have been paid under the ERISA plans, the state law remedies would not be preempted. The case was sent back to the district court for further proceeding in accordance with the Court's decision." (Deloitte via BenefitsLink.com)

Outsize Severance Continues for Executives, Even After Failed Tenures
"A hallmark of the gilded era of just a few short years ago, the eye-popping severance package continues to thrive in spite of the measures put in place in the wake of the financial crisis to crack down on excessive pay." (The New York Times; free registration required)

[Guidance Overview] Court Rejects Payment of Overstated Pension Benefits; Keeps Severance Pact
"Miscalculation of some of the benefit options available under a pension plan was not intentional, said the Seventh Circuit Court of Appeals, and did not warrant payment of the higher amount. This was the decision in Kenneth Pearson v. Voith Paper Rolls, Inc. . . ." (Wolters Kluwer Law & Business / CCH)

[Guidance Overview] Employee Release Provisions Present Section 409A Trap for the Unwary
"If you regularly draft or review employment, change-in-control or severance agreements, you know it is a standard practice to condition payment of severance benefits or other compensation on the employee signing a general release of claims against the employer. What you may not realize is that conditioning benefits on the execution of a release may give rise to tax problems for the employer and the employee under Section 409A of the Internal Revenue Code." (McguireWoods LLP)

[Guidance Overview] Individual Employment Agreement Was Not ERISA Plan
"We caution against concluding, based on this opinion, that one-employee arrangements can never be subject to ERISA, particularly for employers outside the Eighth Circuit . . . . Resolution of these cases tends to be highly fact-specific, and a different court could very well reach a different conclusion on similar facts." (Thomson Reuters/EBIA)

The Basics of Garden Leave: Continuing the Employment Relationship for a Transition Period (PDF)
"What is 'garden leave'? A 'garden leave' provision generally takes the form of a 'notice' period -- designated in weeks or months -- during which a terminating employee is paid to remain at home and out of work (tending to the garden), but to be 'on call' to his or her former employer for as-needed transitional services." (The Bureau of National Affairs, Inc. via Paul Hastings)

[Guidance Overview] Relief Granted for Disabled Auto Workers Denied Severance Benefits
"NUMMI employees who meet the following criteria may be eligible to participate in a claims process over the coming months: disabled under state and federal laws, on leave from work due to their own disability at any time between October 1, 2009 and April 1, 2010, and denied all or any part of the NUMMI severance pay." (U.S. Equal Employment Opportunity Commission)

[Guidance Overview] Forum Selection Clause Enforced in ERISA Claim Litigation
"The Plaintiff presented three reasons that the Court should not enforce the forum selection clause: #1 the SPA's forum selection clause is not explicit enough to be enforceable because it was 'buried' in the SPA and does not specifically reference Plaintiff's severance agreement; #2 forum selection clauses are not enforceable under ERISA; and #3 the forum selection clause was unreasonable." (Roy Harmon III / Health Plan Law)

[Guidance Overview] Florida Passes Public Worker Severance Pay Law
"The law provides that effective July 1, 2011, a unit of government that enters into a contract or employment agreement, or renewal or renegotiation of an existing contract or employment agreement, that contains a provision for severance pay with an officer, agent, employee, or contractor must include a requirement that severance pay provided may not exceed an amount greater than 20 weeks of compensation." (PLANSPONSOR.COM)

[Guidance Overview] New Compensation Restrictions Coming for Colleges and Universities (PDF)
"An IRS official recently stated that long-awaited regulations under Section 457 of the Internal Revenue Code, first announced in 2007, are in clearance and may be issued as soon as September 2011. These regulations will require that all exempt organizations, including colleges anduniversities, review and potentially revise their employment, severance and deferred compensation agreements to avoid tax penalties." (Vorys, Sater, Seymour and Pease LLP)

[Guidance Overview] Sixth Circuit Upholds Denial of ERISA-Based Income Protection Benefits; Plan Administrator Need Not Investigate Whether the Employer Violated FMLA
"As demonstrated by the Sixth Circuit's recent decision in Farhner v. United Transportation Union Discipline Income Protection Program, a well-drafted ERISA income protection or severance pay plan should enable the plan administrator to rely on the employer's stated reason for termination of an employee, rather than conducting an independent review of the facts regarding the termination." (Porter Wright Morris & Arthur LLP)

[Guidance Overview] Coverage Contemplated Under Rescinded Severance Agreement Does Not Determine COBRA Notice Period
"Although the magistrate judge noted that this case presented 'rather unique facts,' it does illustrate some of the complexities of coordinating severance agreements and COBRA compliance." (Thomson Reuters/EBIA)

[Guidance Overview] SEC Makes the Advance Approval of Shareholder Say on Parachute Payments Even Less Attractive
"Question 128B.01 . . . provides that, even if a company's shareholders approve a say-on-parachute payments resolution in the 2011 annual meeting proxy, if the company adds a new CEO one month later, it would need to seek shareholders approval again in any future merger proxy." (Michael S. Melbinger via Winston & Strawn LLP)

[Guidance Overview] ERISA Considerations for Severance Pay Policies Checklist (PDF)
"This Checklist outlines the advantages and disadvantages of maintaining aformal severance pay policy and of the policy complying with [ERISA]." (Practical Law Company, Inc.)

[Guidance Overview] Final Say on Pay Rules from SEC (PDF)
"[T]he early returns from the first spate of 2011 shareholder meetingssuggest that shareholders are not merely rubber-stamping their approval, and that they want annual Say on Pay votes regardless of management proxy statement recommendations." (Paul, Hastings, Janofsky & Walker LLP)

[Guidance Overview] SEC's Final Rules on Shareholder Say on Golden Parachute Pay
"The Rules do not permit companies to exclude de minimis perquisites and other personal benefits from this disclosure." (Michael S. Melbinger via Winston & Strawn LLP)

[Official Guidance] Text of SEC's Final Rule for Shareholder Approval of Executive Compensation and Golden Parachute Compensation (PDF)
"We are adopting amendments to our rules to implement the provisionsof the Dodd-Frank Wall Street Reform and Consumer Protection Act . . . ." (U.S. Securities and Exchange Commission)

[Guidance Overview] Employers Should Review Severance Plans in Light of IRS Guidance
"Severance plans were included in the arrangements requiring consideration under Section 409A, since they provide for post-employment payments that can be paid beyond two-and-a-half months after the end of the calendar year in which an employee leaves." (Employee Benefit News; one-time free registration required)

[Guidance Overview] Final SEC Rules on Say-on-Pay, Say-on-Frequency and Say-on-Parachutes
"The final rules require disclosure of golden parachute compensation arrangements under Item 402(t) for any transaction at which shareholders are asked to approve an acquisition, merger, consolidation or a proposed sale or other disposition of all or substantially all assets of the company, including Rule 13e-3 'going private' transactions and third-party tender offers." (McDermott Will & Emery)

[Guidance Overview] Final SEC Rules Regarding Say-on-Pay and Golden Parachutes (PDF)
"Under the SEC's final rules, companies are required, not less than once every three years, to include in their proxy statements for an annual or other meeting at which directors are elected a vote by the shareholders approving the compensation of a company's named executive officers, as such compensation is disclosed in the proxy statement." (Dow Lohnes PLLC)

[Guidance Overview] Final SEC Rules Implementing Dodd-Frank 'Say on Pay' and 'Say on Golden Parachutes' (PDF)
"The final rules largely followed the Commission's proposed rules issued on October 18, 2010, with a few notable exceptions." (Alston & Bird LLP)

[Guidance Overview] Severance Benefits Receive a Regulatory Facelift
"It is imperative to review employment agreements, offer letters and individual severance agreements to ensure compliance with both the Sections 409A and 105(h)." (Employee Benefit News; one-time free registration required)

Court's Ruling on WARN Act Could Benefit Employers
Excerpt: "In a decision that could be beneficial to employers, the 7th U.S. Circuit Court of Appeals has ruled that DHL Express (USA) Inc. and its German parent company did not violate the federal Worker Adjustment and Retraining Notification Act when it reached severance agreements with hundreds of unionized drivers." (Business Insurance)

[Guidance Overview] Internal Revenue Code Section 409A: Tax Relief for Non-Compliant Separation Pay Arrangements (PDF)
4 pages. Excerpt: "This Alert summarizes guidance set forth in [Notice 2010-6], as modified on November 30, 2010 by Notice 2010-80, for taxpayers who participate in 409A-covered plans conditioning separation payments on employee action and who wish to avoid immediate taxation by voluntarily correcting document failures and/or taking advantage of transition relief." (Schulte Roth & Zabel LLP)

[Guidance Overview] Court Finds Severance Plans Not ERISA Governed
Excerpt: "The employees alleged in their ERISA lawsuit that Alcatel-Lucent breached its ERISA fiduciary duties by not telling them that they would have received a greater amount of [Lucent Career Transition Option Program] benefits if they were involuntarily terminated by the company instead of voluntarily leaving the company." (PLANSPONSOR.COM)

[Guidance Overview] Last Chance to Correct Penalty-Free: Section 409A, Notice 2010-6, and Transition Relief in 2010
Excerpt: "Although the Notice allow correction in subsequent years, the transition relief available in 2010 offers a chance to correct a number of such failures on a penalty-free basis." (Dorsey & Whitney LLP)

[Official Guidance] Notice of Hearings: Reasonable Contracts or Arrangements for Welfare Benefit Plans (PDF)
2 pages. Excerpt: "Notice is hereby given that the [EBSA] will hold a hearing to consider issues relating to the disclosure of fee, conflict of interest and other information by service providers to group health, disability, severance and other employee welfare benefit plans under section 408(b)(2) of [ERISA]." (U.S. Employee Benefits Security Administration)

[Guidance Overview] In 2010 Employers Should Respond to New Developments for Existing and Future Separation Arrangements
Excerpt: "Among the many tax issues implicated by separation arrangements are two relatively new developments that may require special attention when drafting offer letters, severance plans, release agreements, change in control arrangements and similar separation arrangements. Employers should review their separation arrangements by year-end to address these new developments." (Perkins Coie LLP)

[Guidance Overview] Why No Severance Package for Laid-Off Worker?
Excerpt: "A New Jersey consultant's employer offered him and his colleagues 'displacement benefits' when it sold the company they worked for -- so long as they weren't hired by the buyer. He and some of his co-workers were hired by the buyer -- but for only 10 hours. Denied benefits, he sued." (Business & Legal Reports, Inc.)

FDIC Guidance on the Payment of Severance by 'Troubled' Institutions and Covered Companies
Excerpt: "The bottom line is that the new guidance prohibits a troubled institution from making, or agreeing to make, any severance payments unless the payments fall within one of the three permissible payments that a troubled entity may make ? and even then, the institution must receive prior supervisory approval to make the payments." (Michael S. Melbinger via Winston & Strawn LLP)

[Guidance Overview] Sixth Circuit Rules Union's Release of Claims Is Valid: Plaintiffs' Claim for Severance Pay Is Denied
Excerpt: "The issue was whether the Release barred the plaintiffs' ERISA claim for severance pay. The plaintiffs first argued that a union may not waive ERISA claims as a matter of law. However, the Court would not entertain this argument, because it was not raised in the district court. The plaintiffs next argued that the Release did not clearly state whether it binds only the Union, or both the Union and its members." (Stanley D. Baum of Fellheimer & Eichen LLP)

Health Care Reform Could Impact Your Employment and Severance Agreements
Excerpt: "Many employment and severance/separation agreements provide that the company will pay all or a portion of health care premiums (including COBRA premiums) for a former or current executive that is more favorable than the level provided to other employees. If your agreements make this promise, this could be dangerous." (McKenna Long & Aldridge LLP)

[Guidance Overview] Third Circuit Upholds Lower Court Decision Granting Benefits Under a Program Providing Separation Benefits
Excerpt: "The Business Exception to coverage under the Displacement Program has two primary requirements: (1) the contract of sale must provide for employment of the employee by another employer, and (2) MFC must determine that the position to be provided to the affected employee is comparable to the position the employee held before the sale, and in particular, that it 'initially' provides base salary and incentive compensation opportunities which, in the aggregate, are reasonably similar to those that were provided by the MFC subsidiary." (Stanley D. Baum of Fellheimer & Eichen LLP)

[Opinion] Last Chance to Correct for 409A
Excerpt: "I cannot overemphasize how important it is for every employer in America with non-qualified deferred compensation plans or employment, severance or change in control agreements that are subject to Code Sec. 409A (which includes just about all of them) to review its compliance with 409A one more time before December 31, 2010. This is because the IRS has given us one last chance to correct drafting issues in compensation plan documents and agreements that are subject to 409A, without penalty, under Notice 2010-6." (Michael Melbinger via Winston & Strawn LLP)

[Guidance Overview] Court Affirms Rulling that Denial of Severance Benefits Was Abuse of Discretion: Employee Was Constructively Terminated
Excerpt: "The court also rejected the administrator's contention that the employee was required to waive all claims against the company and sign a confidentiality agreement before he could even be considered for severance benefits. Again, that's a misreading of the plan, the district court explained. Signing the waiver of claims and confidentiality agreement are conditions precedent only to the receipt of benefits, not eligibility for benefits." (Wolters Kluwer)

Court Rules Terminated Employee to Receive $3M in Benefits After Company Refused Him Severance
Excerpt: "[The former employee] will get benefits he should have received since 2005, like early retirement, which includes a pension and lifelong health benefits. That's over $3 million in damages, including attorney's fees." (New Jersey On-Line LLC)

Former Employees of New United Motor Manufacturing Co. Sued It and Toyota Motor Corp. Over Severance Packages
Excerpt: "They seek a revised severance agreement, restitution, lost compensation, other employee benefits and monetary damages in the suit filed in U.S. District Court in Oakland." (San Jose Business Journal)

U.S. Supreme Court to Consider Remedy for Deficient SPD
Excerpt: "To recover benefits based on an inconsistency between an ERISA plan document and summary plan description (SPD), must participants show reliance on the SPD? Is it sufficient to show 'likely harm'? Or can participants prevail without any showing of harm? The US Supreme Court will tackle these questions . . . ." (Mercer)

[Official Guidance] IRS Publishes Interim Report on Colleges and Universities Compliance Project; Useful Compensation Data (PDF)
79 pages. Part VI of the report contains charts showing the distribution of specific types of benefits provided to one or more of the organization's 6 highest-paid officers, directors, trustees or key employees, including life, disability, long-term care contributions; split-dollar life insurance; loans/credit extension (forgiveness of debt/interest); severance or change of control payments; personal use of organization vehicles; and expense reimbursement (non-accountable plan). Also shows participation in specific types of deferred compensation plans, and describes general compensation policies. (Internal Revenue Service)

[Guidance Overview] Past Layoffs Could Provide Tax Refund for Companies
Excerpt: "A recent court ruling suggests that companies may be able to recover FICA taxes linked to severance pay. But to take full advantage of the first refund year, they'll have to file before April 15." (CFO.com)

[Guidance Overview] Quality Stores Puts FICA Refund Opportunity for Severance Pay Back on the Table
Excerpt: "Quality Stores presents an opportunity to claim refunds for FICA taxes previously paid as well as for reevaluating tax positions going forward. Employers who have made severance payments to employees in calendar year 2006 or later may wish to file protective claims for refund of the employer's and the employees' portion of the FICA tax, based on the rationale of Quality Stores. The deadline for filing a claim for refund with respect to payments made in 2006 is April 15, 2010, so taxpayers must move quickly if they want to take advantage of this opportunity." (Jones Day)

[Guidance Overview] Another Court Rules That Severance Pay is Not FICA Wages (PDF)
2 pages. Excerpt: "The IRS has the stronger position to treat severance payments as FICA wages, and at this point employers should continue to withhold applicable FICA taxes. However, to preserve a future refund claim, an employer can file protective claims based on the court's decision." (Groom Law Group)

[Guidance Overview] Employers Should Consider Filing Protective FICA Refund Claims Related to Certain 2006 Severance Payments
Excerpt: "Consider whether to file protective refund claims by April 15, 2010. As an initial step, employers should determine if any FICA taxes have been paid on SUB pay during open tax years (generally 2006 or later) and whether to file a protective refund claim. Refund claims for FICA payments made on SUB pay during the 2006 calendar year are generally due by April 15, 2010." (Perkins Coie LLP)

[Guidance Overview] Employers Should Be Cautious of New Decision Holding that Severance is Not 'Wages' Subject to FICA
Excerpt: "In United States v. Quality Stores, Inc.,1 a federal district court in Michigan held that severance payments were not wages subject to Social Security and Medicare taxes ('FICA' taxes). This decision appears to conflict with a decision of the Court of Appeals for the Federal Circuit. It also is likely to be challenged by the Internal Revenue Service (IRS)." (Littler Mendelson P.C.)

[Guidance Overview] New Case Revives Hopes for Refunds of FICA Tax on RIF Severance Pay
Excerpt: "Employers who have made involuntary termination severance payments pursuant to a plan should consider filing protective refund claims. Time is of the essence for refunds of FICA taxes paid in 2006 because, in general, such claims must be filed no later than April 15, 2010. It should be noted, however, that the decision to file a claim may not be as clear cut as it was following the CSX trial court decision." (Faegre & Benson)

[Guidance Overview] Some Severance Held Exempt from FICA Again: Consider Filing Protective Refund Claims (PDF)
1 page. Excerpt: "A Federal District Court in Michigan, in a case involving the bankruptcy of the Quality Stores discount chain, has held that some types of severance pay are exempt from social security taxation under the Federal Insurance Contributions Act (FICA), and that the employer was entitled to a refund of FICA tax that it had previously paid on the severance. While the decision is certain to be appealed by the IRS, employers who have made significant severance payments in open tax years (generally 2006 or later) may want to consider filing protective claims for refund of FICA payments until the matter is resolved." (Seyfarth Shaw LLP)

[Guidance Overview] One-Time Severance Payment Was Not Subject to ERISA, According to Court
Excerpt: "EBIA Comment: The 'ongoing administrative program' standard for determining whether a severance benefit is subject to ERISA is easier to state than to apply. The simplicity of the arrangement in this case appears to have made the trial court's determination easy. However, small variations in the facts can affect the outcome, so employers should tread carefully in this area." (Employee Benefits Institute of America)

[Guidance Overview] FICA Tax on Severance Payments Questioned
Excerpt: "Certain severance benefits may not be subject to taxation under the Federal Insurance Contributions Act (FICA), according to a recent district court decision. In United States v. Quality Stores, Inc., No. 1:09-cv-44 (W.D. Mich. Feb. 23, 2010), a decision affirming a bankruptcy court decision, the U.S. District Court for the Western District of Michigan highlighted the historical uncertainty regarding whether certain severance payments made to employees are subject to taxation under FICA. In this episode, the court held that such payments were not subject to FICA, as they did not constitute 'wages.'" (McGuireWoods LLP)

[Guidance Overview] IRS Section 409A Notice Requires Review of Compensation Agreements That Condition Payments Upon Signing Releases
Excerpt: "Not all severance or employee payment plans are subject to Section 409A. If all payments under an agreement are made by March 15 of the calendar year following the year in which the right to the payment vests, then the payment is considered a 'short-term deferral' and exempt from Section 409A. For example, many separation agreements that are created at the time of separation with a prompt lump sum payout may not present a problem." (Nixon Peabody LLP)

[Guidance Overview] Quality Stores Decision Muddies the Waters on the FICA Tax Treatment of Severance Pay
Excerpt: "After nearly two years of believing the issue was settled, on February 23, 2010, taxpayers were startled to learn that the U.S. District Court for the Western District of Michigan [affirmed a bankruptcy court decision that had ruled] that severance payments made to employees pursuant to an involuntary reduction in force were not 'wages' for FICA tax purposes. . . . The U.S. District Court's decision . . . will cause many employers to consider once again whether refund claims should be filed as a protective measure." (Miller & Chevalier)

IRS Set To Begin Comprehensive Employment Tax Audits
Excerpt: "This month, the IRS will launch a new employment tax National Research Program . . . . [T]he IRS will randomly select 6,000 taxpayers (2,000 taxpayers in 2010 for the 2008 tax year and 2,000 taxpayers each in 2011 and 2012 for the 2009 and 2010 tax years, respectively) and conduct in-depth audits of those taxpayers' employment tax issues . . . . In addition to identifying organizations that fail to file employment tax returns at all, the comprehensive audits will focus on at least four major employment tax issues: * Classification of workers as employees or independent contractors; * Reasonableness of executive compensation; * Tax treatment and reporting of fringe benefits as tax-free or as taxable compensation; and * Tax treatment and reporting of employee reimbursements." (Ballard Spahr)

What To Expect from the IRS 'NRP' Fringe Benefits Audit Initiative
Excerpt: "[A]s of December 2009, the IRS was targeting a much narrower (but still fairly broad) list of the more generic broad-based employee fringes including the following: * Employer-provided automobiles; * De minimis fringe awards such as gift cards; * Discounted property or services; * Education assistance offered as (1) educational assistance plans, (2) working condition fringes and (3) scholarships; * Meal reimbursements and travel per diem plans . . . ." (Employer's Guide to Fringe Benefit Rules, published by Thompson)

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