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Benefits Law Journal

Are the "Top-Hat" Plan Participation and Reporting Rules Still a Good Fit?

Last year began and ended with the release of reports analyzing the current state of the participation and reporting requirements for unfunded, nonqualified deferred compensation plans ("NDCPs") covering a "select group of management or highly-compensated employees" (commonly referred to as "top-hat" plans) and providing the Internal Revenue Service ("IRS") and Department of Labor ("DOL") with recommendations for consideration. In response to a request from three senators, January 2020 saw the U.S. Government Accountability Office ("GAO") publish a report on top-hat plans titled "Private Pensions: IRS and DOL Should Strengthen Oversight of Executive Retirement Plans"1 (the "GAO Report").

Then in December 2020, the Advisory Council on Employee Welfare and Pension Benefit Plans, usually referred to as the ERISA Advisory Council (the "Council"), followed up with its own report2 (the "Council Report") examining issues arising in connection with top-hat plans.

This column will first review the current state of the top-hat participation and reporting rules to illustrate the concerns and perceived shortfalls that led to the preparation of these two reports. It then will summarize and analyze the top-hat-related findings as well as review the recommendations of each report along with the respective reactions and anticipated, if any, responses that may be taken by the IRS and DOL.

Based on such review, this column will provide NDCP sponsors with a proactive best practice guide for addressing the various potential issues that may arise in this area.

 

Download the full article 'Are the "Top-Hat" Plan Participation and Reporting Rules Still a Good Fit?' PDF.

 

1. Private Pensions: IRS and DOL Should Strengthen Oversight of Executive Retirement Plans, GAO-20-70 (Jan. 2020).
2. 2020 Advisory Council on Employee Welfare and Pension Benefit Plans. Examining Top Hat Plan Participation and Reporting (Dec. 2020) (the "Council Report").

 

Reprinted from Benefits Law Journal, Summer 2021, Volume 34, Number 2, pages 68–91, with permission from Wolters Kluwer.

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