Top-Hat Status of Plan to Be Determined at Trial.


The U.S. District Court for the Western District of Washington grants in part and denies in part the motion for summary judgment by the defendant bank regarding fiduciary duty violations of a deferred compensation plan.

The plaintiffs are former employees of a bank who were hired as financial consultants. The defendant is the bank as employer and sponsor of a wealth accumulation plan.

The plaintiffs argue that the defendant violated the Employee Retirement Income Security Act of 1974 (ERISA) by improperly forfeiting millions of dollars of deferred, unvested compensation that the plaintiffs claim they earned by participating in the plan. They seek summary judgment on their claim that the plan applied to too many employees (including some who were neither select nor highly compensated) to qualify for the top-hat exemption. The plaintiffs believe the plan is therefore subject to ERISA and seek a determination that the defendant bank violated ERISA when it forfeited their deferred compensation.

In contrast, the defendant seeks summary judgment on three bases: (1) ERISA cannot provide the relief the plaintiffs seek because they do not claim that the defendant bank violated the plan, the plaintiffs have not identified a breach of fiduciary duty, and the plaintiffs are not entitled to equitable relief; (2) the plaintiffs' claims are untimely because they knew of and enjoyed the provisions of the plan for years before filing suit; and (3) the plan is a top-hat plan exempt from most of the substantive provisions of ERISA because it is an unfunded plan maintained for the benefit of a select group of highly compensated employees.

The first issue is whether the plan is a top-hat plan. The defendant bank emphasizes that the plan is intended to be a top-hat plan. An ERISA top-hat plan is a plan that 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. Top-hat plans generally are exempt from ERISA. The plaintiffs argue that the plan was overly inclusive, with as much as 22% of the defendant's U.S. workforce eligible for inclusion in 2008, including some who were neither management nor highly compensated in comparison with others. The plaintiffs further argue that the plan was not selective enough to be a top-hat plan and that it fatally allowed nonmanagers, including financial consultants like the plaintiffs, to participate.

The defendant...

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