Top Hat Claims
What is a Top Hat Claim?
President Ford signed ERISA into law on Labor Day in 1974, and his statements solely discussed ERISA’s goals of protecting American workers by ensuring they receive the benefits they were promised, regardless of whether they leave their positions or their employer fails to provide adequate funding. The Findings and Declaration of Policy section that precedes ERISA make this purpose abundantly clear, as does a review of ERISA’s legislative history.
- “ERISA was enacted ‘to promote the interests of employees and their beneficiaries in employee benefit plans,’ and ‘to protect contractually defined benefits.’”
- “The principal object of the statute is to protect plan participants and beneficiaries.”
- “ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.“
- “Congress wanted to assure that those who participate in the plans actually receive the benefits they are entitled to and do not lose these as a result of unduly restrictive provisions or lack of sufficient funds.”
A “top hat” plan is “a rare subspecies of ERISA plan,” “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. Top Hat plans are excluded from a number of ERISA’s protections on the basic assumption that high-level employees are in a “strong bargaining position relative to their employers and thus do not require the same substantive protections that are necessary for other employees.” To qualify for this narrow exception to ERISA’s basic protections, the Plan must meet all three of the following prerequisites: 1) the plan must be “unfunded,” 2) it must exhibit the required purpose concerning deferred compensation, and 3) it must be limited to a “select group” of employees.
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