The Fifth Circuit Court of Appeals held that a deferred compensation plan through which key employees received annual bonuses and were able to defer both bonuses and other income was an “employee pension benefit plan” governed by the Employee Retirement Income Security Act of 1974 (ERISA). Although the primary purpose of the plan was to provide bonuses rather than retirement income, the court concluded that the plan was governed by ERISA because it provided for the “systematic deferral” of income “extending to the termination of covered employment or beyond.” Because this plan was limited to a select group of management or highly compensated employees, it was likely eligible for the ERISA “top hat” exemption and the case was remanded for consideration of that issue. However, this case emphasizes the importance of ERISA compliance even by plans which are primarily bonus plans if they provide for the deferral of income for periods extending to termination or beyond.
Plaintiffs are former employees of RBC Capital Markets Corp. (“RBC”) and participants in the RBC wealth accumulation plan (the “Plan”). When plaintiffs left their jobs at RBC, they forfeited part of their Plan accounts. All parties agreed that the forfeitures followed the terms of the Plan, but the plaintiffs argued that the Plan was covered by ERISA and that the forfeitures violated ERISA.
Originally published in WRNewswire – An AALU Washington Report on July 31, 2014.
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Topics: Bonuses, Corporate Bonuses, Corporate Counsel, Employee Benefits, Employer Liability Issues, ERISA, Executive Compensation, Hiring & Firing, Retirement Plan
Published In: Civil Procedure Updates, Finance & Banking Updates, Labor & Employment Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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