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WASHINGTON – CUNA also recommended expanding severance plans exceptions. Plans which are amended on or before December 31, 2005 to conform to the provisions of Section 49A are exempt from the requirements of 409A during the calendar year 2005 with respect to such severance pay benefits as long as the plan is “either a collectively bargained plan or covers no service providers who are key employees.” “Section 409A should not apply to typical severance arrangements,” Orr wrote. “Severance pay is designed to provide a temporary source of income to employees who are involuntarily terminated. This directly contradicts the purpose of severance pay.”

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