Reduction in Workforce/Layoff/Termination - Which applies

The company merged two divisions into one. When doing so, only one of two managers were assigned the additional division. The selection process was by appointment to, say Manager A because at the time the manager B's, doctor submitted in writing that manager B was not able to perform the essential duties of the job. At that time, we informed manager B that we would try to find another area to place him/her in. It has been over six months and we have not been successful in finding an area for him/her. Due to budget restraints, our corporate office has instructed us to eliminate areas/individuals that are not needed. Since manager B is not technically performing a job and we do not technically have performance measures for him/her, we would like to eliminate his/her position. The manager was a good hard working employee prior to becoming ill and does not have any true performance or behaviorial problems/issues. We do not want to cause unnecessary hardship on this individual. And anything that is a win-win situation is preferable.
By what means could we legally terminate him/her without any legal ramifications and that would present a win-win situation for both manager B and our organization?
By what means could we legally terminate him/her without any legal ramifications and that would present a win-win situation for both manager B and our organization?
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