In a dispute over severance benefits under an employment agreement, the U.S. Court of Appeals for the Eighth Circuit recently held that an ?ãindividual contract providing severance benefits to a single executive employee?ÃÂ¥?ácould not be a?áwelfare plan subject to ERISA.?á Dakota, Minnesota & Eastern Railroad Corp. v. Schieffer, No. 10-2484 (8th Cir. Aug. 11, 2011).?á The court reasoned that the use of plural?áwords in ERISA?ÃÃs definition of ?ãemployee welfare benefit plan?ÃÂ¥ indicated that Congress intended ?ãthat a covered ?Ãÿplan?Ãà is one that provides welfare benefits to more than one person.?ÃÂ¥?á It is unclear whether the Eighth Circuit would apply the same ?ãplural words?ÃÂ¥ reasoning to the definition of ?ãemployee pension benefit plan?ÃÂ¥ under ERISA.?á
The Eighth Circuit?ÃÃs decision is surprising because it appears to conflict with long-standing decisions by the Fourth, Seventh, and Eleventh Circuits.?á See, e.g., Biggers v. Wittek Indus., 4 F.3d 291, 297 (4th Cir. 1993) (holding that an individual severance arrangement was subject to ERISA and noting that the court was?á?ãnot aware of any requirement that a plan must cover more than one employee in order to be controlled by ERISA.?ÃÂ¥).?á Those courts looked to the general rule under Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) for determining whether a plan exists, focusing on whether the arrangement necessitated an ?ãadministrative scheme?ÃÂ¥ (for example, ongoing payments as opposed to a lump sum).?á Whether a severance arrangement is subject to ERISA could affect,?áamong other things, jurisdiction, applicable law, the standard of review for a denial of benefits, and the employee?ÃÃs right to a jury trial.
Blogs -
Practical Benefits Lawyer
Eighth Circuit Holds One-Person Severance Agreement Cannot be ERISA Plan
Media Contacts
- Jacob Bourne
- Director of Media Relations