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​​​ERISA Preemption and Executive Compensation
(For stock award and other non-ERISA cases involving forfeitures-for-competition, see Forfeitures)


ERISA Preemption and Forfeitures-for-Competition 

  • Colorado law applies, not ERISA, with respect to claims under an individual salary continuation agreement, in part due to the employer's failure to establish that 27 similar agreements constituted an ERISA plan. Hoffner v. Bank of Choice (D.Co. 6/2011), with the following nonitalicized text being direct quotations:
    • ​​Nature of Contract Right: [The salary continuation agreement] specifically provides a deferred compensation benefit to Plaintiff – in the amount of $50,000 per year for ten years – upon reaching age 65. However, if Plaintiff voluntarily terminates his employment prior to reaching age 65, as occurred here, the Agreement provides that the deferred compensation benefit would terminate. Instead, Plaintiff would be provided “severance compensation,” which would equal “the balance in the accrued liability retirement account at the date of termination inone (1) lump sum” at age 65.
    • Holding: Under these circumstances, the Bank has not demonstrated that the Agreement at issue is a “plan” governed by ERISA. In so deciding, I note that the Bank has not shown that a reasonable person could ascertain the intended benefit of the Agreement. While the source of financing is the “liability reserve account,” that account is not further defined in the materialsprovided. More importantly, the Agreement does not benefit a “class of beneficiaries,” but rather constitutes an employment benefit to a single employee. I am not persuaded by the Bank’s unsupported claim that other employees are likewise provided with this benefit – via “similar” agreements – and thus it is a “plan” with an ascertainable class of beneficiaries.  In addition, I agree with Plaintiff that the Agreement does not constitute a “plan” in that it does not create a benefit which requires an ongoing administrative program. See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987)(ruling that a lump-sum severance payment to employees, as required by state statute, was not preempted by ERISA plan in that employers were not required to establish “an ongoing administrative program” that might be subject to conflicting state regulations or to administer funds that might be subject to abuse or misappropriation).
  • Pennsylvania - See Sikora v. UPMC (WD Penn, 1/10/2017) for a comprehensive discussion of (1) the standard of review for litigation involving nonqualified plans, and (2) a decision enforcing a forfeiture of top hat benefits due to executive's refusal to execute a post-termination non-competiition agreement; see this 2015 decision in Sikorav v. UPMC for a review of case law relating to ERISA's top hat plan exemption, and the percentage of a workforce that may participate without destroying top hat status.

General Preemption Rules 

  • Discussed re top hat plans - Loffredo v. Daimler, 2011.June.6 (E.D.MI 2011).
  • 3d Cir. Unfunded welfare plan for paying severance was subject to federal common law re forfeitures, per Koenig v. Automatic Data Processing, Bigda v Fishbach, 898 FSupp 1004, 1015 (SDNY 1995).
  • 4th Cir. See Alfa Laval v Nichols, 2007 WL 984111 (ED VA 2007), allowing top hat litigation to proceed in state court. 
  • 5th Cir.  Capital Accumulation Plan Held Subject to ERISA. Bloomberg reported on 7/15/2014 that "An administrative assistant seeking $27,000 under her company's wealth accumulation plan won her appeal by convincing the U.S. Court of Appeals for the Fifth Circuit that the plan was governed by federal benefits law (Tolbert v. RBC Capital Mkts. Corp., 2014 BL 194586, 5th Cir., No. 13-20213, 7/14/14). 
  • 6th Circuit: ERISA top hat rules detailed as follows in Daft v. Advest (2011.Sept.23):
    • In Bakri v. Venture Mfg. Co., 473 F.3d 677 (6th Cir. 2007), this court listed the qualitative and quantitative factors to consider when determining whether a plan qualified as a top-hat plan under ERISA section 201(2): “(1) the percentage of the total workforce invited to join the plan (quantitative), (2) the nature of their employment duties (qualitative), (3) the compensation disparity between top hat plan members and non-members (qualitative), and (4) the actual language of the plan agreement (qualitative),” id. at 678.  As the district court pointed out, the Committee considered only the fourth factor, basing its decision on the stated purpose of the AE Plan, the AE Plan’s eligibility requirements, and the fact that Advest administered the AE Plan as a top-hat plan.  The Committee’s failure to consider the other factors spelled out in Bakri makes its decision incorrect as a matter of law.4 ...  Nevertheless, the district court erred in considering the top-hat question itself without first remanding Plaintiffs’ claims to the Committee.
  • 9th Circuit: ERISA plan upheld re benefit forfeitures for violation of non-compete: Clark v Lauren Young Tire, 9th Cir.1987
  • 2009.July.30  Notice of Award under ERISA Plan results in ERISA Preemption -- see Corbisiero v Bank of America (N.D.IL) (holding that "The Notification Letter goes hand in hand with the CIP, which is an ERISA plan and is merely part of the annual process anticipated by the CIP. Based on the above, the Notification Letter clearly relates to the CIP, which is an ERISA plan and therefore, the breach of contract claims based on the Notification Letter are preempted by ERISA").


Forfeiture for Misconduct NOT Implied. 

  • Foley v. American Electric Power, 425 F. Supp. 2d 863 (S.D. Ohio 2006).


Retirement Stock Awards

  • Claims under ERISA may Proceed -- see England v. Marriott Int'l (D.MD 2/14/2011).


Standard of Review 

  • Deferential.  "When a federal statute such as ERISA does not specify a rule of decision, contracts govern -- especially so when no fiduciary duty is in play. [citations omitted] ... That is why in Olander v Bucyrus-Erie Co., 187 F.3d 599, 607 (7th Cir. 1999), we applied deferential review to a decision under a top-hat plan that provided its administrator with interpretive discretion. ... We use deferential review today." Comrie v. IPSCO, 7th Cir. (2011.Feb.18).
  • Remand to Committee to Make Proper Decision: see Daft v. Advest (2011.Sept.23) "we hold that the district court erred by refusing to remand Plaintiffs’ claims to the AE Plan Committee after determining that their legal reasoning on the tophat issue was flawed."  

Severance Plans

  • ​2016.07.08  ERISA Covers Severance Plan Paying Lump Sum.  See Severance Agreements for discussion of Gomez v. Ericsson 828 F.3d 367, 369 (5th Cir. 2016) in which the 5th Circuit made a detailed discussion of the Supreme Court's seminal Fort Halifax decision, and held that a lump sum payment plan was subject to ERISA.