ESOP Directed Trustee Advances Fiduciary Breach Claims

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
Dec. 23 — A former vice president at a Pennsylvania nonprofit hit a roadblock in his quest for nearly $60,000 in deferred compensation when a federal judge found that his retirement plan was a top-hat plan exempt from ERISA ( Sikora v. UPMC, 2015 BL 421507, W.D. Pa., No. 2:12-cv-01860-MRH, 12/22/15).

The judge found that the vice president couldn't rely on the protections of the Employee Retirement Income Security Act because the retirement plan in question qualified as a top-hat plan. The judge said that the plan benefited only a select group of highly compensated employees—less than half of a percent of the nonprofit's workers, many of whom made more than $500,000 per year.

In arguing against the plan's top-hat status, the vice president urged the court to adopt “bargaining power” as an essential element of a top-hat plan. Relying on a Department of Labor opinion letter, the vice president argued that a top-hat plan must be one in which the plan participants have the bargaining power to substantially influence the design and operation of the plan.

The court squarely rejected this invitation, saying that “It is plain that there has not been one federal court that has applied ‘bargaining power' as an element in determining whether a deferred compensation plan is a top hat plan that is exempt from ERISA coverage. This Court declines to be the first.”

The Dec. 22 opinion was written by Judge Mark R. Hornak of the U.S. District Court for the Western District of Pennsylvania.

The vice president was represented by Diefenderfer Hoover McKenna & Wood LLP. The nonprofit was represented by Eckert, Seamans, Cherin & Mellott.

To contact the reporter on this story: Jacklyn Wille in Washington at
To contact the editor responsible for this story: Jo-el J. Meyer at

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