Early Retirement

PMI

A couple situations came up recently at my company that caused us to think about offering an early retirement option. The first (eerily like Junebug's post on this subject) involves a salesperson, now in his sixties, who has not been meeting production quotas. The department manager doesn't want to address the performance issue directly because the employee has been with us since 1965 and is truly loved by fellow employees, sr. management, & customers. The second situation involves a vice president, also in her low sixties, who to put it bluntly, obtained her title and salary simply because she has been the president's office assistant for many years--every few years she'd get a new, fancier title, higher salary grade, but never any increase to job responsibilities. In the past few years technology advances and other streamlining measures have made her job obsolete. So here she sits, sorting mail, collecting bi-weekly time sheets, fetching stuff off the fax machine, and not doing much else, all for $65K per year. Which brings me to my questions for you retirement benefit experts out there:

1) Is it true that while it is permissable to offer early retirement packages to employees, or even groups of employees (ie, one department or location), it is not permissable to offer such an incentive to isolated employees (ie, just the ones you want to leave)? Can anyone tell me where I can find the laws or regulations that address this issue?

2) Does anyone know whether providing a non-qualified lump sum pension distribution to the employee is a way to skirt legal or regulatory issues related to question #1 (we're talking about a defined benefit pension plan). My boss, the CFO, believes we can do that. I don't. We have a box of Munchkins riding on this one.

3) Are there any 401k administrative problems I should be aware of? For instance, if we offered early retirement, could we make a lump sum employer contribution to make up for the future employer contributions they'll miss out on by retiring early?

4) Finally, is it permissible for an employer to continue to pay the ER portion of health insurance premiums, say from the early retirement date until the normal retirement date, and retain the retired employee in the group (as if they never terminated)? That way the retiree wouldn't lose Cobra after 18 months. We don't offer retiree health benefits, so I suspect that this could create problems with a few employees who retired early (without any incentive), and are now paying the full health ins premium under Cobra. Doesn't seem very fair to me...

Thanks in advance for your guidance, as well as advice on how best to design an early retirement package.

System

Before you even mention the word "retirement" to these employees, I hope their supervisors have used your progressive discipline system to address their serious performance problems (the salesman's quotas and the VP's lack of skills). And I hope the employees have had an opportunity to correct these problems (through training or trying harder).

If not, then trying to force them into retirement is like dishing up an age discrimination lawsuit on a silver platter. Even if they sign a waiver agreeing not to sue your company for age discrimination, it's pretty easy for them to keep the severance package and sue anyway. You probably need a lawyer. If you don't have one, you could consider the ones who write Connecticut Employment Law Letter at [url]http://www.hrhero.com/findanattorney.shtml[/url]

James Sokolowski
Senior Editor
M. Lee Smith Publishers

Gillian

Ditto the above. From an HR person who has been an expert witness in discrimination cases a bunch of times, the fact that the issues have not been dealt with directly with the employees in order to give them an opportunity to improve would do you in when you go to court. I would testify that that it is good HR practice, and your obligation given the years of experience they have to give them those opportunities. Collect your munchkins!