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ERISA-Bubs

Top Hat Filing for Phantom Stock Plans

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We have a Phantom Stock plan.  It is essentially deferred compensation, however it doesn't specifically limit participation to a Top Hat group.  Do we need to do a top hat filing?  If not, do we need to comply with ERISA rules?

To make things a bit more complicated, how do we handle omnibus equity plans?  They offer some types of awards that are exempt from 409A, such as stock options, but they also allow for phantom stock, which is deferred compensation.  Do we need to do a Top Hat filing for an omnibus plan?  And, again, how does it factor in that participation is not limited to a top hat group?  If not a Top Hat filing, is there something else?

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This is serious, complex stuff, including the possible application of federal and state securities law.  The employer needs to engage competent legal advisers.

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Agree with QDRO, although on the ERISA "top hat" question I will say that whether a top hat notice, and a limitation to a top hat group, are required will be dependent upon whether the plan or arrangement meets the definition of "pension plan" under Section 3(2) of ERISA.  Your average securities lawyer, no matter how excellent, is not likely to be trained in such matters. 

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ERISA-Bubs, usually the sorts of plans you are describing have provisions for vesting and payment within a span of a few years, while the covered employee stands a good chance of still being employed, and therefore are not ERISA-covered plans. See the requirement in Section 3(2) of ERISA that to be covered as a "pension plan," the plan must provide retirement income or defer comp to termination of employment. Again, these sorts of plans usually don't do that and are considered non-ERISA arrangements for incentive pay or bonuses over a multi-year period. Of course, each situation is unique.

If one component of the plan, e.g. the phantom stock portion, did provide for payment only at termination of employment, then you could have ERISA filing requirements, most likely just for that part of the plan, and could have considerable legal difficulties if you don't restrict to a good top-hat group.

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