"Employer" for purposes of determining top hat group

[Christine Roberts]

For purposes of determining the top hat group, is it possible to look only at one branch or division of an employer (for instance, a separate branch doing business under a DBA) for purposes of determining the top hat group, or must all employees of the employer be considered?

For instance if the employer wants to set up a plan for the manager of a branch that is just a DBA, can the manager comprise his own top hat group or must all of the employer's employees be considered?

Any comments would be appreciated

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[pjkoehler]

In Duggan v. Hobbs, 99 F.3d 307 (9th Cir. 1996), the Ninth Circuit held that a plan covering one highly compensated employee, constituting less than 5% of the total workforce, satisfied the ERISA top hat plan "select group" requirement. To determine if this employee was among the class of top hat employees, the court followed the rationale set forth DOL Op. Ltr. 90-14A and DOL Op. Ltr. 92-13A, i.e. the top hat group applies to employees who by virtue of their position or compensation level, have the ability to affect or substantially influence, through negotiation or otherwise, the design and operation of the plan. The facts of this case were such that the participant engaged an attorney to review the draft plan document, proposed changes and enter into negotiations with the employer. The court held that this was sufficient influence to bring this participant within the top hat group and, therefore, the plan was a "top hat" plan, notwithstanding that other similarly situated employees were not covered under this or any other plan. Although the court did not express a view, it implied that had the employer offered the plan on a take-it-or-leave-it basis, it might have come out the other way.