SERP Pension--spousal beneficiary requirements

[Guest Elis]

An ERISA plan is required to provide survivor rights to a spouse upon the participant's death. Is a SERP pension plan required to make a similar provision, or because a SERP pension is not subject to ERISA, can a company chose to draft a SERP in a way so as not to make any survivor rights available?

[jpod]

Consider the following points.

1. A SERP plan is subject to ERISA unless it is a church plan, a gov'tal plan or an excess benefit plan as defined in Section 3(36) of ERISA (i.e., it's sole purpose is to provide benefits which can't be provided under a tax-qualified plan due to the Section 415 limitations).

2. Assuming the SERP plan is subject to ERISA, it must, out of necessity (or practicality, take your pick) be designed to qualify as a top-hat plan. A top-hat plan is subject to ERISA, generally, but it is not subject to most of the substantive ERISA requirements, including the J&S/spousal beneficiary requirements or Title I of ERISA.

3. Notwithstanding 2, some/many of us believe that it is a good idea to draft a SERP as if it was subject to the J&S/spousal beneficiary requirements, and to comply operationally with those requirements as if they applied. The reason for this is that if the top-hat status of the SERP is successfully challenged, there will be no issue of past non-compliance with the J&S/spousal beneficiary requirements of Title I of ERISA (e.g., lawsuit by a surviving spouse alleging that a defined benefit-type SERP was not a top hat plan and that the SERP benefits should not have been paid to the participant in a lump sum).

[Guest Elis]

Consider the following points.

1. A SERP plan is subject to ERISA unless it is a church plan, a gov'tal plan or an excess benefit plan as defined in Section 3(36) of ERISA (i.e., it's sole purpose is to provide benefits which can't be provided under a tax-qualified plan due to the Section 415 limitations).

2. Assuming the SERP plan is subject to ERISA, it must, out of necessity (or practicality, take your pick) be designed to qualify as a top-hat plan. A top-hat plan is subject to ERISA, generally, but it is not subject to most of the substantive ERISA requirements, including the J&S/spousal beneficiary requirements or Title I of ERISA.

3. Notwithstanding 2, some/many of us believe that it is a good idea to draft a SERP as if it was subject to the J&S/spousal beneficiary requirements, and to comply operationally with those requirements as if they applied. The reason for this is that if the top-hat status of the SERP is successfully challenged, there will be no issue of past non-compliance with the J&S/spousal beneficiary requirements of Title I of ERISA (e.g., lawsuit by a surviving spouse alleging that a defined benefit-type SERP was not a top hat plan and that the SERP benefits should not have been paid to the participant in a lump sum).

Have you ever seen a company challenged for providing spousal benefits under a SERP, in that it potentially discriminates against highly compensated employees who are not married?

[jpod]

No, but -

1. I would think that any State law claim that might otherwise exist would be preempted by ERISA; and

2. I am not sure that there is any Federal law that prohibits or has been interpreted by courts to prohibit discrimination by private employers based on marital status.