In general, a deferral arrangement which is in the nature of a bonus or incentive plan and makes no reference to retirement or to the deferral of income to termination of employment will not be subject to ERISA. However, the DOL takes the position that an arrangement which defers compensation for a specified period may be subject to ERISA if the facts and circumstances indicate that the arrangement:. The DOL and the courts uniformly have held that severance pay benefits are covered by ERISA if the severance benefits are provided pursuant to a "plan, fund or program" — severance plans are not considered to be "payroll practices.
The Supreme Court has added the requirement that a severance pay plan will not be subject to ERISA unless it is necessary to establish an "administrative scheme" to provide the benefits. For example, ERISA does not apply to a one-time severance payment — such as one dictated by a state plant-closing law — that is triggered by an external event and requires no administration or administrative interpretation to make payments.
Understandably, court decisions have been unpredictable in determining whether an employer has established an "administrative scheme" to provide benefits in situations which fall between one-time corporate events and ongoing benefit payments.
This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient.
Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome. Focused on labor and employment law since , Jackson Lewis P. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans. Compliance Assistance Provides publications and other materials to assist employers and employee benefit plan practitioners in understanding and complying with the requirements of ERISA as it applies to the administration of employee retirement and welfare benefit plans.
FAQ Contact Us. Breadcrumb Home Health Plans and Benefits. The biggest mistake small employers make is not providing this SPD to their employees. Many businesses confuse the insurance certificate or benefit summary from their carrier or broker as this disclosure, but it is not.
Disclaimer: Please note that this is not all-inclusive. Our guidance is designed only to give general information on the issues actually covered.
It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding the specific application of the information to your own plan. Steve is a graduate of Taylor University. Sign up for PrimePay blog updates! Luckily, for emerging businesses, there is an easy way to comply.
First, some background. Primary responsibilities for employers to comply with ERISA include three important items: Detailed disclosure to covered individuals plan participants and beneficiaries.
A strict fiduciary code of conduct for plan sponsors. Detailed reporting through Form , as applicable. What are some common penalties for noncompliance for small businesses?
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