View From McDermott: Conflicting Review Standards in Executive Retirement Plan Benefit Claims—Is There Really a Difference?


Under the Employee Retirement Income Security Act, retirement plans generally come in two flavors – (i) retirement plans qualified under Section 401 of the Internal Revenue Code (the Code) and (ii) executive retirement plans, called ‘‘top hat’’ plans, which aren’t Code-qualified. What does that mean? While qualified retirement plans are subject to all of ERISA’s funding, participation and fiduciary provisions, top hat plans aren’t and may offer benefits exceeding those allowed under Code-qualified plans. Simply put, top hat plans are unique animals under ERISA.

ERISA defines a top hat plan as one ‘‘which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.’’ ERISA treats top hat plans differently in several ways. First, ERISA explicitly exempts top hat plans from its fiduciary requirements. In addition, ERISA doesn’t require top hat plans to satisfy participation, funding and vesting requirements that are applicable to other ERISA-governed retirement plans. Moreover, the Department of Labor allows top hat plans an exemption from disclosure requirements. So, in essence, top hat plans are only subject to ERISA’s civil enforcement remedies and administrative claims procedures. As a result, ERISA affords top hat plan participants and beneficiaries their sole remedies for recovering benefits or enforcing plan terms. Put another way, while top hat plan participants may not sue for breaches of fiduciary duty or illegal benefit cutbacks under ERISA, they may challenge benefit determinations, but must do so only under ERISA Section 502(a)(1)(B) and only after exhausting their administrative claim remedies.

Originally published in Pension & Benefits Daily on February 6, 2014.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

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.

© McDermott Will & Emery | Attorney Advertising

Written by:


McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.