A retiree settlement agreement is a compromise agreement between the employer and the employee. It enables the employer to terminate the employment contract with the employee on the payment of a stipulated sum of money. This is typically done to enable the employees to waive off any potential claims that they may have. A retiree settlement contract typically deals with pensions under settlement agreements. An employee may be a part of a pension plan and may have significant accruals under the same. Settling one’s pension claims is a complex process and hence such a contract is required. A UAW Retiree Settlement Agreement was such a settlement agreement entered into by United Automobiles and its workers.
What is the purpose of A UAW Retiree Settlement Agreement?
A Retiree Settlement agreement prevents the employees from raising potential claims against the employers in return for a settlement amount. This amount is typically more than the severance they are owed. Typically, bankrupt companies enter into such settlement agreements to prevent exposure to further risk on account of litigation claims. Such contracts address pension claims as well. This helps the retirees to get a lump sum as their pension without going into litigation. However, for this agreement to serve its purpose it needs to be just and fair.
Inclusions in A UAW Retiree Settlement Agreement?
A retiree settlement agreement should apart from the references to the company’s pension plan and other operational and commercial terms include standard boilerplate clauses such as effective date, termination, dispute resolution, waiver, notices, remedies, and severability.
Key Terms of A UAW Retiree Settlement Agreement?
Following key terms need to be included:
- Definition of covered persons: Typically all retired employees will be covered. However, who constitutes a retired person in accordance with the applicable law and the company pension plan needs to be mentioned. Also, the surviving spouses of such retirees need to be covered in the agreement as well.
- Type of benefit: This clause classifies the agreement into a defined benefit or a defined contribution arrangement.
- The effective date of the settlement: This clause is required to be included in order to reflect the commencement date of the settlement agreement.
- Purpose of the plan: The purpose of the plan being envisaged under the retiree settlement contract needs to be outlined.
- Contents of the Plan: The plan needs to be explained thoroughly. Classification of benefits
under the same may be done.
Drafting of A UAW Retiree Settlement Agreement?
Following are the guidelines for drafting an effective retiree settlement agreement:
- Purpose of the settlement agreement or the plan thereunder needs to be captured.
- The parties are typically the employer and the employees. These employees would include all retirees or their surviving spouses.
- What the employer is asking in lieu of the settlement agreement needs to be mentioned in the contract as well.
- It is essential to define covered persons in the broadest sense possible.
- A certain duration for acceptance of this agreement also needs to be given.
- The effective date of implementation needs to be mentioned. Please note that the effective date may be different from the date of the agreement.
- References to the existing pension plan, its termination, and exhaustion of entitlements therein needs to be mentioned in the contract.
Benefits of A UAW Retiree Settlement Agreement?
The following are the benefits of a retiree settlement agreement:
- Employer offsets his risk as part of the settlement and escapes legal claims.
- Employees have assured payment of their benefits without going into the hassles of litigating for their claims.
- Having a well-outlined agreement helps in both the parties to realize their intent behind the contract.
Cons of A UAW Retiree Settlement Agreement?
A Retiree settlement agreement has the following cons:
- This may be subject to myriad disputes given the unequal bargaining power.
- A settlement at times may also lead to lesser payouts.
- A narrow scope of `covered persons’ may lead to disputes.
A retiree settlement agreement is a contract which enables pensioners to settle their pension claims directly with the employers on the basis of negotiations. Such contracts owing to the unequal status of parties may be subject to a number of disputes. It is important that their justness and fairness is maintained. Proper remedies and dispute resolution methods should be outlined. Such settlements if unfair can be challenged in a court of law.
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