Part 26 · Chapter 1

Severance Plan Status, Window Programs, and Design

Law stated as of October 3, 2026 · Severance, WARN, and Workforce Restructuring

Scope and status

This chapter covers the two status questions every severance arrangement raises — is it an ERISA plan at all (the Fort Halifax ongoing-administrative-scheme test), and if it is, is it a welfare plan or has it fallen into pension plan status under 29 C.F.R. §2510.3-2(b) — together with window programs (both severance windows and qualified-plan early retirement windows), severance plan documentation and administration, amendment and §510 exposure, and the release that severance is almost always conditioned on (OWBPA and what cannot be waived). Related questions are treated elsewhere: WARN Act and state mini-WARN analysis in The WARN Act and State Mini-WARN Laws; §409A separation-pay exemptions, §457(e)(11), and severance taxation in Severance under §409A and §457, and Severance Taxation; the benefit-plan consequences of the reduction in force itself in Workforce Restructuring: Benefit Plan Consequences; partial termination and §411(d)(6) in Part 2 (Plan Documents, Amendments, Mergers, and Terminations); and litigation posture and §502 remedies in Part 23 (ERISA Disputes, Enforcement, Preemption, and Remedies).

Sections

Part A is shown in full. The other sections are listed by title; their text is available to subscribers.

Part A — Is the Arrangement an ERISA Plan?

A1.Why the answer matters, and which way it usually cuts

Part 26, ch. 1, § A1

ERISA status determines the forum (removal to federal court), the standard of review (deferential, where the plan confers discretion), whether the claimant must exhaust an internal appeal before suing, whether state-law claims for breach of contract, promissory estoppel, and misrepresentation are preempted under ERISA §514, and whether extracontractual and punitive damages are available (they are not). Statute: ERISA §§502, 514; Case law: Supreme Court — Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (deferential review where the plan grants discretion); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) (preemption of state-law claims for improperly processed benefit claims). ERISA status also brings obligations: a plan document, an SPD, a §503 claims procedure, fiduciary duties, and Form 5500 unless an exemption applies.

A2.The controlling test — an ongoing administrative scheme

Part 26, ch. 1, § A2

A severance arrangement is an ERISA plan only if it requires an ongoing administrative scheme to administer. A statute requiring a one-time, lump-sum payment triggered by a single event — there, a plant closing — creates no ongoing scheme and is therefore not an ERISA plan; the employer need only "write a check." Case law: Supreme Court — Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987). The Court applied the same reasoning two years later to hold that ordinary vacation pay from an employer's general assets is a payroll practice, not an ERISA plan. Case law: Supreme Court — Massachusetts v. Morash, 490 U.S. 107 (1989); Final reg: 29 C.F.R. §2510.3-1(b).

A3.The factors courts actually apply

Part 26, ch. 1, § A3

Applying Fort Halifax, courts examine whether the employer must exercise discretion in determining eligibility or amount (case-by-case eligibility judgments, "cause" determinations, individually negotiated offsets, non-compete or release conditions requiring evaluation); whether benefits are paid over time rather than in a single lump sum; whether the employer must maintain records, track continued eligibility, or coordinate benefits (continued medical coverage, outplacement, offset against later re-employment earnings); and whether the arrangement is reasonably expected to operate on an ongoing basis rather than as a one-off response to a discrete event. Case law: Circuit — applying the Fort Halifax factors; Practitioner consensus. The formulations differ by circuit, and the same facts can produce different answers in different courts.

A4.Do not litigate the question — draft it

Part 26, ch. 1, § A4

Because the factors are indeterminate and circuit-specific, the reliable answer is to decide the status deliberately and draft for it. To secure ERISA coverage: adopt a written plan document identifying itself as an ERISA welfare benefit plan, name a plan administrator and grant that administrator discretionary authority to construe the plan and determine eligibility (the Firestone trigger), incorporate an ERISA §503 claims and appeals procedure, issue an SPD, and file Form 5500 unless exempt. Statute: ERISA §§102, 402, 503; Final reg: 29 C.F.R. §2560.503-1; Practitioner consensus.

A5.Individually negotiated agreements

Part 26, ch. 1, § A5

A one-off negotiated separation agreement with a single executive is generally not an ERISA plan — there is no scheme, ongoing or otherwise. Case law: Circuit — applying Fort Halifax; Practitioner consensus. But an employer that enters into a series of substantially identical individual agreements pursuant to an internal policy may have created a de facto plan, and a single agreement that promises continuing, discretion-laden benefits (continued medical coverage, benefit continuation, offset against later earnings) can itself require an ongoing scheme.

The first Part of each chapter is open to everyone. The remaining sections, with their authority and practice points, are available to subscribers and to clients of ERISA Benefits Law Group, PLLC whose engagement includes access.