Compliance June 10, 2003

Severance Agreement Voids ERISA Plan Claims

October 18, 2002 (PLANSPONSOR.COM) - The Fifth Circuit Court upheld a lower court's ruling in its opinion that employees are not entitled to benefits in an ERISA plan, even if that plan was not specifically mentioned in a severance package.
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The case centered on severance agreements signed by employees being laid off by NationsCredit during a corporate reorganization.   The severance agreement released any and all claims against the employer in exchange for an agreed-upon severance package.  

The terminated employees later learned of an ERISA plan that had been maintained by the employer, and sought compensation for these benefits.   

In the ruling, the Court stated that a general release of “any and all” claims from an employment relationship includes benefit claims under ERISA.   Pointing to ERISA, the Court did not find any provisions included for such claims, even if these plans are not specifically mentioned in the severance agreement.  

By signing the severance agreement the employees “surrendered their disputed right to a larger payment for a certain right to a smaller payment, which is to say, they received adequate consideration for the releases” the court went on to say.

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