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Cancelling a SERP and the Limits of Preemption

"The [Sixth Circuit] found that the dispute over the SERPs concerned a decision to cancel them so as to smooth the sailing for a particular corporate acquisition ... [U]nder those circumstances, the executives who were participants in the SERPs could prosecute a state law claim in state court, on the thesis that it does not affect the terms of the SERPs or the duties imposed by it. The Court found that the state law claims did not require interpreting the SERPs or applying duties owed under them, but only required reference to the SERPs for the specific purpose of determining the damages due the executives if the SERPs were, as alleged, canceled in violation of state law." [Gardner v. Heartland, No. 11-2327 (6th Cir. May 10, 2013)]  MORE >>

A Response to 'It's Time to Deep-Six SERPs'

"I happen to think that a properly designed SERP at an employer with a qualified defined benefit pension plan still serves a valid purpose ... However, many corporation have eliminated, or are considering eliminating, their SERP plans. Among the other reasons are the appearance in the Proxy Statement and financial statements, the complexities of Section 409A, the financial cost, and the public/media perception of SERPs."  MORE >>

Pending Divorce Does Not Require Spousal Consent for SERP Payout, According to Ruling (PDF)

Excerpt: Although the SERP was presumably a defined benefit arrangement, the court concluded that ERISA's qualified joint and survivor annuity rules, which require a participant's spouse's consent to the election of a form of benefit other than a QJSA, did not apply. That was because the SERP was a top hat plan, and top hat plans are not subject to ERISA's survivor annuity rules. (The United Way actually denied that a SERP existed and maintained instead that the $2 million was paid pursuant to a separation agreement, but the court assumed for purposes of its ruling that a SERP did exist.)  MORE >>

Ohio Supreme Court: SERP Excluded from Municipal Income Tax

"After years of litigation, a former National City executive has prevailed in a hard fought tax dispute with the city of Cleveland.... The case provides that a Supplemental Executive Retirement Plan (SERP) must be excluded from the Cleveland municipal income tax as a 'pension' benefit. The ruling buttresses a 2014 Franklin County Court of Appeals decision that reached the same result in a dispute between the same taxpayer and the city of Shaker Heights. The cases could have implications for taxpayers with SERP income across the state." [MacDonald v. Cleveland Income Tax Bd. of Review, No. 2016-0778 (Ohio Sept. 26, 2017; unpub.)  MORE >>

Performance-Based SERPs: Changing the Executive Comp Landscape (PDF)

"[T]here is no empirical data linking the use of broad-based, equity-based grants below the top tier of executives to a company's performance.... In the bright light of the new compensation disclosure rules, the traditional reasons for implementing a SERP -- whether based on a defined contribution or defined benefit concept -- lack appeal for compensation committees because of the absence of a relationship between the performance of the company and benefit design to the financial performance of the business unit or company."

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Taking the 'Risk' Out of De-Risking a SERP

"Beyond the financial, legal and accounting factors that arise in de-risking a pension plan, [this article] addresses the potentially overlooked impact that such strategies may have on a company's related supplemental executive retirement plan (SERP). [The authors] provide an overview of the relevant tax rules under Section 409A of the Internal Revenue Code and a summary of Section 409A and other key issues to be considered in connection with de-risking a SERP."

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Retired Executives Win Reinstatement of Terminated SERP Benefits

"[T]he district court sided with the executives, ruling that the company violated the Employee Retirement Income Security Act (ERISA) when it converted the benefits to lump-sum payments and terminated the SERP. Faulting the company for its procedural violations, the court found that the company employees who made the original decision to terminate the plan acted as unauthorized plan fiduciaries by engaging in actions that were discretionary in nature." [Gill v. Bausch & Lomb Supplemental Ret. Income Plan I, No. 6:09-CV-6043 (W.D.N.Y. Mar. 3, 2014)]  MORE >>

Widow Loses SERP Benefits Bid

" 'The definition of 'spouse' contained in the SERP, on a plain reading, does not apply to Plaintiff. She was not married to Mr. Parr at the time of his retirement and is therefore not entitled to the death benefits as a spouse under the terms of the plan,' Oliver declared in the ruling."

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Year End Tax Planning: Consider Accelerated Recognition of Accrued SERP Benefits for FICA Purposes

Excerpt: Under Treas. Reg. ? Reg. ?31.3121(v)(2)-1(e)(4), the plan sponsor/employer under a nonaccount balance plan ? such as a defined benefit SERP ? may delay taking into account for FICA purposes the benefit amounts accrued until the amounts are 'reasonably ascertainable.' An amount deferred under a nonaccount balance plan is not 'reasonably ascertainable' as long as it is necessary to use any assumptions other than interest, mortality, and cost of living assumptions to value the benefit. In practice, this means a defined benefit SERP or excess plan often provides a benefit that does not need to be taken into account until the employee retires. Ordinarily, this is good, as it avoids withholding taxes before earnings are paid to the employee.  MORE >>

SERP Compensation Definition: Counting Severance Pay (PDF)

2 pages. Excerpt: The Ninth Circuit was asked to determine whether severance pay counted as compensation under a SERP. The court concluded that severance pay did not constitute 'earnings' for purposes of calculating an executive's benefit under the particular nonqualified top-hat plan at issue. The case is Gilliam v. Nevada Power Company.  MORE >>