Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA) to protect the interests of participants and their beneficiaries in employee benefit plans by setting forth certain disclosure and reporting requirements, establishing fiduciary standards of care, and providing for appropriate remedies and sanctions exclusively through the federal courts.1 However, not all benefit plans are treated equally under ERISA. Some are regulated less closely than others.2 One such plan is a “top-hat plan,” an unfunded employee benefit plan established principally to provide deferred compensation for “a select group of management or highly compensated employees.”3

Recognizing that participants in top-hat plans possess sufficient influence to negotiate the design and operation of their deferred compensation plan, Congress excluded top-hat plans from ERISA’s participation and vesting requirements under 29 U.S.C. §§1051-1061, funding provisions under 29 U.S.C. §§1081-1086, and fiduciary responsibility provisions under 29 U.S.C. §§1101-1114.4 Yet, top-hat plans are subject to ERISA’s civil enforcement provisions. If an employer reneges on its obligation to provide benefits under a top-hat plan, a participant or beneficiary may commence an action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan” under 29 U.S.C. §1132(a)(1)(B).5 This article explores fundamental issues litigants must address in any litigation over top-hat benefits.

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