Compliance July 21, 2009

Abuse of Discretion Named Top Hat Dispute Standard

July 21, 2009 (PLANSPONSOR.com) - A federal appellate court has ruled that a benefits decision by an administrator of a top hat non-qualified deferred compensation plan should be scrutinized on appeal for any potential abuse of discretion.
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The decision by the 9 th U.S. Circuit Court of Appeals came in a dispute between the prior and current wives of a participant over who would be named by the plan as the designated surviving spouse beneficiary for Robert Sznewajs, a former U.S. Bancorp executive.

The appellate court said that the U.S. Bancorp Amended and Restated Supplemental Benefits Plan concluded that Robert Sznewajs’s second wife, Virginia, should be treated as his survivor beneficiary. The lower court had thrown out that plan decision, but the appellate panel threw out that ruling.

Even though other courts have ruled that top hat plan disputes should be treated on appeal with a “de novo” review standard, the 9 th Circuit decided that was not necessary.

“We conclude that importing ‘de novo’ language into the standard of review simply because the plan involved is a top hat plan would create unnecessary confusion,” the appellate panel asserted. “We will therefore continue to adhere to the framework established by the Supreme Court for all covered plans, top hat or otherwise. Where, as here, there was no conflict of interest that tainted the plan’s determination, the plan’s decision should be upheld unless it constituted an abuse of discretion.”

The ruling is available  here .

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