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The Difference Between Severance Pay and ERISA Disability Benefits

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The Difference Between Severance Pay and ERISA Disability Benefits

When is Severance Not an ERISA Plan?

Severance pay and ERISA disability benefits can often become confused for one another when you have to leave your job. Each type of plan for when employees involuntarily leave work can come with different benefits and requirements. Being aware of the differences can help you better prepare for what plan or benefits you should be receiving. If you have been wrongfully denied benefits, then try asking a Wilmington ERISA lawyer for help.


Severance pay is like a lump sum payment to employees who involuntarily leave their federal employer. This money can greatly benefit those who may struggle financially after losing their main source of income. The amount of severance pay depends on a variety of factors related to:

  • How long you have worked for that employerWhen is Severance Not an ERISA Plan?
  • The contract rules you agreed to when taking the job
  • Your work performance and history

To qualify for severance pay, you also need to meet certain eligibility requirements. Some of these eligibility requirements for severance pay include:

  • Regularly scheduled tour of duty
  • Served under a qualifying appointment
  • Completed 12 months of work with no more than three days in-between
  • Worked part or full-time
  • You were involuntarily separated from your federal job

An involuntary separation from your job could mean you received a notice of this or you resigned. When calculating your severance pay, your employer will consider the contract with your employer and your age.


Not everyone realizes that severance pay and ERISA can overlap. Some severance plans must abide by ERISA rules. While smaller employers use ad hoc severance plans, many larger employers operate with ERISA severance plans. Ad hoc severance may face fewer restrictions compared to ERISA plans since ERISA plans must follow specific ERISA laws.

There are unique situations where severance plans qualify under ERISA plans despite the employer wishing to use an ad hoc severance plan. Different factors will determine this like:

  • If your employer has legal obligations to make a severance payment
  • If the severance is a fund or program
  • Whether the plan involves retiring and paying you for longer than two years

A lump-sum severance payment is usually not considered an ERISA governed plan. Unwritten and informal severance plans may be mistakenly placed in this same category but may still be deemed ERISA plans. A court can examine whether the details of that informal plan apply to and must abide by ERISA laws.

Many of these scenarios can become complicated and confusing. Try contacting a Wilmington ERISA lawyer if you have any questions about your severance plan. You might be eligible for more money than you think.


Finding out your loved one has been abused in the nursing home can be infuriating. Feel free to seek guidance from a Delaware ERISA attorney who can help you figure out your options for benefits. You can call Edelstein Martin & Nelson today at (302) 295-5050 for a free consultation. Our experienced team of lawyers might be able to help you receive the benefits you need after losing your job.

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