Sorry, I couldn’t resist that relatively timely, but already essentially clichéd headline. That said, its still an interesting way to consider the question of top-hat plans, and their status under ERISA. In particular, there is an open question in most jurisdictions with regard to whether a claim for benefits owed under such a plan proceeds in much the same way, and with the same protections for the participants, as does any other claim for benefits under any other type of ERISA governed plan (i.e., one that, unlike a top-hat plan, does not provide significant deferred compensation for senior executives). There is a significant argument that, as a general rule, the same obligations that ERISA and the Department of Labor impose on administrators in any other circumstance also apply in the circumstance of top-hat plans, with the only exception being areas where the statute or the Department’s regulations expressly exempt top-hat plans.
In this regard, I wanted to pass along this very good synopsis of a recent decision from the United States District Court for the District of Massachusetts in which the court took that exact approach. You can find the case itself here. When the decision was issued in December, I decided not to comment on it because I was litigating a similar top-hat plan dispute at that time, and felt the decision was a little too on-point to a case I was handling for me to comment on, for a number of reasons, running from not wanting to tip my hand to the other side to being a little too close to the issue to be completely objective on the ruling. That case has since resolved, so I thought I would now use the opportunity of the publication of the synopsis to pass it along.
There is also an important trap for the unwary lawyer reflected in the decision and the synopsis, which is the impact of ERISA rights and remedies, as well as procedures and procedural protections, on what are in essence employment agreements, if they are deemed ERISA governed top-hat plans. If a particular agreement might be a top-hat plan, it is important to recognize that at the outset and litigate any dispute over it accordingly. As the synopsis and the decision show, the application of ERISA based rules will dictate the outcome, and failing to know that a particular agreement is a top-hat plan and will be governed by such rules at the outset of handling a dispute is a recipe for disaster, or at least for losing; one has to be aware right at the outset that the dispute cannot be litigated as a traditional contract or employment dispute, but instead as an ERISA dispute. Otherwise, you are bringing a knife to a gunfight, to borrow a favored cliché.
The court’s decision itself, by the way, is a terrific road map through the current state of the law on benefit litigation under ERISA, particularly in the First Circuit, for both top-hat and regular old employee benefit claims.