We are continuing our discussion of severance plans. Young or established, growing or contracting -- every business needs to think about severance as a part of its employee benefit package. A good plan can soften the blow of a layoff and can help to avoid issues with employment agreements. A severance plan is not a simple thing, though.

In our last post, we reviewed a few things that business executives or boards of directors should keep in mind as they work on the plan. The most important thing to remember is that the majority of severance plans are governed by the Employee Retirement Income Security Act. The second most important thing to remember is that, yes, your plan is probably governed by ERISA.

ERISA may be the most important, but it is not the only important consideration. Businesses should keep other federal rules in mind when determining the payment amounts, duration of severance and conditions of severance. The U.S. Department of Labor, the Equal Employment Opportunity Commission and the IRS all have regulations that affect severance plans.

Finally, plan for the unusual as well as the usual. Think about exceptions that could come up and that might run counter to the written plan. Decide if it's worth your time or your attorney's time to include the exceptions in the plan.

Some experts say that keeping a severance plan simple is the best way to go. Others would recommend including as much detail as possible. Many of these decisions depend on the size of the business, the type of business and, of course, ERISA.

Source: HR.BLR.com, "6 Tips for Handling Severance Pay Plans," Terry Price, Dec. 1, 2011