What You Can Offer
Almost all ERIPs come with a blend or all of the following:
Cash Payouts – These are in lieu of wages for retiring early and are not called severance wages. Usually the amount each eligible candidate will receive is based on items such as years of service and if the employee will be 60 years of age within five years of the effective date—not the announcement date. Again, the amounts offered should be analyzed by your comptroller or accountant to determine amounts or percentages. It is prudent, however, to offer a higher percentage to top managers, but again, check with your attorney on what’s legal in your state.
Pension Plans – Because most company pension plans require years of service to be vested, part of your ERIP can include an element such as adding additional years of service to their existing service years upon the effective date, making them vested. Because laws can be sticky or unclear, it’s imperative to ask for help from your retirements benefit administrator if you plan on offering this benefit.
Healthcare – Some ERIPs keep premium payments the same for a specific period of time and the retired employee is covered under the company’s COBRA policy. Others guarantee health and dental care premiums until the day the retiring employee turns 65 years of age. Again, this should be analyzed to determine cost savings.
Life Insurance – Companies that offer life insurance may want to continue to offer certain policies to early retiring employees, but one thing you can’t do is name the company as the beneficiary. If you offer life insurance, nothing in the policy must change including employee participant percentage, employer percentage or the value of the policy.