Computer Sciences Corp. Wins Executive Pay Spat in 4th Cir.

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Computer Sciences Corp. is once again free from a proposed class action challenging changes the company made to its deferred compensation plan for highly paid executives.

The U.S. Court of Appeals for the Fourth Circuit on Nov. 8 affirmed the company’s decision to change the plan’s crediting rates, saying the decision was authorized by the terms of the plan and didn’t decrease the value of any executive’s account. Because the plan never made any promises about the crediting rate or its level or risk and volatility, no promises were broken when the rate was changed, the court said ( Plotnick v. Comp. Scis. Corp. Deferred Compensation Plan for Key Executives , 4th Cir., No. 16-1606, affirming decision favoring defendant 11/8/17 ).

In so ruling, the Fourth Circuit side-stepped a question that’s caused division among the circuit courts: are top-hat plans, which provide deferred compensation benefits to highly paid key employees, subject to the same judicial review standards as benefit plans that cover a company’s broader workforce? The Third and Eighth circuits have treated top-hat plans differently, applying heightened judicial review to decisions made by plan administrators regardless of what the plan says. The Seventh and Ninth circuits have treated top-hat plans the same as other plans governed by the Employee Retirement Income Security Act.

The Fourth Circuit declined to take a side, instead finding that in this case, the two approaches presented a “distinction without a difference.” That’s because the Computer Sciences plan amendment was reasonable, no matter what standard of judicial review applied, the Fourth Circuit said. The First and Second circuits have issued similar rulings.

The lawsuit was filed by two retired Computer Sciences executives who each had more than $3 million in their plan accounts. They brought proposed class action claims—which is unusual in the world of executive compensation—challenging the plan’s adoption of new crediting rates, which can affect the amount of money participants receive each year. In addition to rejecting the executives’ claims on the merits, a district judge held in 2016 that they couldn’t bring their lawsuit as a class action, because some executives likely benefited from the changed crediting rate.

The Fourth Circuit didn’t address whether the executives had presented valid class action claims.

Judge Allyson K. Duncan wrote the decision, which was joined by Judges Diana Gribbon Motz and James A. Wynn Jr.

The executives were variously represented by Block & Leviton LLP, Gupta Wessler PLLC, and Cohen Milstein Sellers & Toll PLLC. Computer Sciences was represented by Morgan Lewis & Bockius LLP.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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