UpFront | Published in July 2012

Hats Off ‘Top-Hat’ Plan

Employer cannot use ERISA to stop deferred compensation benefits

By Rebecca Moore | July 2012
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An employer failed in its attempt to use Employee Retirement Income Security Act (ERISA) provisions to terminate benefit payments under a deferred compensation agreement. The U.S. District Court for the Eastern District of Louisiana found that the evidence presented by Mothe Life Insurance Company would allow “a reasonable trier of fact to find that an ERISA plan did not exist.” The court had previously held that the agreement between Mothe Life Insurance and Emile Mothe III lacked clear procedures, as required by ERISA, for receiving benefits.

However, the company introduced Massachusetts Mutual Life Insurance Company Prototype Flexinvest Profit-Sharing/401(k) Plan into its current motion for summary judgment, saying it supplements the procedures contained within the deferred compensation agreement made with Emile Mothe and that the documents, combined,  reveal sufficient procedures to confirm that an ERISA plan existed.   

The court found that the only mention of the plan is contained in one paragraph and recites as follows:

“Whereas, Mothe [Life] and Emile [Mothe] both want to provide to Emile [Mothe], as additional compensation for his services to Mothe [Life], a postretirement income (or preretirement benefits to his beneficiary) over and above what will be available to him under Mothe [Life’s] regular pension and insurance plan for employees [...]”