Updated from 12:23 a.m. EST

NEW YORK (

TheStreet

) --

American International Group

(AIG) - Get Report

plans to pay outgoing general counsel Anastasia Kelly several million dollars in severance after she resigned over federal pay curbs, a report says.

AIG determined that Kelly was entitled to the money under the company's severance plan, whose terms say certain executives can resign and collect severance if their pay is reduced significantly, the

Wall Street Journal

reports, citing people familiar with the matter.

Kelly and four other executives notified AIG on Dec. 1 they would resign and collect severance benefits if their pay was cut significantly by the U.S. pay czar. The four others, who work at AIG's insurance and financial-services units, later withdrew their notices. Kelly subsequently told AIG she would resign.

U.S. pay czar Kenneth Feinberg earlier this month capped annual cash salaries for most executives at $500,000, and Kelly's pay was going to be reduced significantly, the

Journal

says, citing people familiar with the matter. Kelly, who has been at AIG since 2006, was appointed vice chairman this year. The company is expected to name a new general counsel soon, the newspaper reports.

The U.S. government owns 80% of AIG after the giant insurance company was rescued last year.

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-- Written by Joseph Woelfel in New York.

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