The DOL believes that the term "primarily" is synonymous with "exclusively" and that a Top-Hat plan may not include anyone who is neither highly compensated, nor in management.
The DOL has not defined the term "highly compensated." Some commentators have suggested that the IRC Section 414(q) qualified plan definition of highly compensated (a 5% or greater owner, or employees with compensation in the previous year of $100,000 in 2007 ($105,000 in 2008, as indexed) should be used for purposes of the Top-Hat exception.
Yet a few men wear Western dress and a top-hat. They are among the dignitaries.
The civilian top-hat had been worn by Jewish men in Western countries during the nineteenth century, and in some British synagogues had an afterlife well into the twentieth, in some ceremonial use.
The top-hat plan exception is the most commonly used method to avoid the ERISA rules.
While the concept of a top-hat plan being unfunded for ERISA purposes generally conforms to the concept of the plan being unfunded for tax purposes (discussed below), which employees constitute a "select group of management or HCEs" is much more vague.
Of the two types of top-hat plans available to tax-exempt associations, those described in Section 457(b) of the tax code provide the more favorable tax treatment.
In addition to these adverse tax consequences, the establishment of a funded deferred compensation plan would defeat the plan's reliance on ERISA's top-hat exemption.
Typically, payments from excess benefit top-hat plans supplement payments from a qualified pension plan.
The so-called top-hat plan benefit supplements the primary benefit calculated under the qualified plan.
(3) The Department of Labor requires a one-time registration statement filing for top-hat
A top-hat plan is a nonqualified deferred compensation plan that lets highly compensated employees defer taxes on pay and any employer-matching funds.
Although Albertson's does not keep the employer whole, it does at least get the employer close enough to justify using nonqualified deferred compensation as either a top-hat plan or in general as an executive perk.
In addition, the Labor Department has indicated publicly that it will rescind its old advisory opinions describing a top-hat plan because they no longer reflect the department's position.
This way, a SERP for more highly paid or senior executives will not be adversely affected if the plan covering questionable employees does not qualify for top-hat status.