Focusing on the definition of an “employee welfare benefit plan” in the Employee Retirement Income Security Act (ERISA), the U.S. Court of Appeals for the Eighth Circuit recently ruled that an employment agreement providing severance benefits for a single employee is not an ERISA welfare plan. The court noted that although severance benefits may be provided under an ERISA welfare benefit plan, the definition under the statute “strongly implies benefits that an employer provides to a class of employees,” rather than to a single individual. References in the statute to “participants or their beneficiaries” reinforce the notion that Congress intended a covered plan to be one that provides benefits to more than one person.
Although it upheld the result of a district court finding that the agreement is not an ERISA employee benefit plan, the appeals court concluded that the lower court unnecessarily engaged in an analysis of whether the plan requires an ongoing administrative program to meet the employer’s obligation to pay severance. The appeals court cut off the analysis at an earlier point, determining that a one-person plan simply cannot be an ERISA welfare benefit plan within the meaning of the statute. The court did not rule out the possibility, however, that federal jurisdiction may exist over portions of the complaint, to the extent that certain demands under the employment agreement relate to payment obligations provided under other plans governed by ERISA. (Dakota, Minnesota & Eastern Railroad Corp. v. Schieffer, 8th Cir. 2011)