Seeking Benefits Owed Under an ERISA Top-Hat Plan: A Primer for Litigators
Michael C. Rakower and Melissa Yang write: Not all benefit plans are treated equally under ERISA. Some are regulated less closely than others, such as "top-hat plans," unfunded employee benefit plans established principally to provide deferred compensation for "a select group of management or highly compensated employees." Although excluded from some requirements, top-hat plans are subject to ERISA's civil enforcement provisions.
July 03, 2017 at 02:01 PM
26 minute read
Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA) to protect the interests of participants and their beneficiaries in employee benefit plans by setting forth certain disclosure and reporting requirements, establishing fiduciary standards of care, and providing for appropriate remedies and sanctions exclusively through the federal courts.1 However, not all benefit plans are treated equally under ERISA. Some are regulated less closely than others.2 One such plan is a “top-hat plan,” an unfunded employee benefit plan established principally to provide deferred compensation for “a select group of management or highly compensated employees.”3
Recognizing that participants in top-hat plans possess sufficient influence to negotiate the design and operation of their deferred compensation plan, Congress excluded top-hat plans from ERISA's participation and vesting requirements under 29 U.S.C. §§1051-1061, funding provisions under 29 U.S.C. §§1081-1086, and fiduciary responsibility provisions under 29 U.S.C. §§1101-1114.4 Yet, top-hat plans are subject to ERISA's civil enforcement provisions. If an employer reneges on its obligation to provide benefits under a top-hat plan, a participant or beneficiary may commence an action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan” under 29 U.S.C. §1132(a)(1)(B).5 This article explores fundamental issues litigants must address in any litigation over top-hat benefits.
Determining Statute of Limitations. ERISA does not identify a statute of limitations period for actions brought under 29 U.S.C. §1132(a)(1)(B). Courts in New York have looked to the statute of limitations period for breach of contract, reasoning that a breach claim is the most analogous to a claim for benefits under 29 U.S.C. §1132(a)(1)(B), and have held that a six-year statute of limitations period applies.6
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