United States: Department Of Labor To Require Electronic Filing Of Top Hat Plan Notices

The US Department of Labor (DOL) has proposed to require so-called "top hat plan notices" to be filed electronically instead of on paper. In so doing, the DOL would move the mechanics of this often-overlooked task into the 21st century. Unfortunately, the proposal does not address certain ambiguities involving the notice that have persisted for the last 40 years.

Nonqualified plans that are unfunded, that cover a select group of management or highly compensated employees and that defer income to the termination of covered employment or beyond ("top hat plans") are exempt from the participation, benefit accrual, vesting and fiduciary rules under the Employee Retirement Income Security Act (ERISA). For a top hat plan to be exempt from most of ERISA's reporting and disclosure rules, however, the plan administrator must file a simple one-time paper statement ("top hat plan notice") with the DOL and provide plan documents to the DOL in the unlikely event the DOL requests them. Under a newly proposed regulation, the top hat plan notice must now be filed electronically.

Under current regulations, a paper copy of the top hat plan notice must be mailed or personally delivered to the DOL by the plan administrator. The notice is required to include information identifying the employer, the number of top hat plans maintained by the employer and the number of employees in each plan (but no other substantive information, including the name of the plan, needs to be provided). Filing this notice exempts the top hat plan from most reporting and disclosure requirements, such as providing a summary plan description and filing Form 5500. Top hat plans must in any event have a claims procedure and are subject to ERISA's enforcement provisions.

On September 16, 2014, the DOL proposed to amend its regulations to require that top hat plan notices be filed electronically.1 The regulation is effective immediately on a voluntary basis, and becomes mandatorily effective 120 days after publication of the final rule in the Federal Register. The DOL's Employee Benefits Security Administration (EBSA) has launched a web-based filing system for the notices, which provides an instantaneous electronic confirmation that the filing has been received by EBSA. In addition, the electronic notices will be posted on the DOL's website and be available to the public. Further, the web-based electronic form contains blanks to be filled in, so that all the required information is certain to be provided.

Electronic filing of the top hat plan notice should be a welcome update. It is quite common for an employer not to be able to locate a top hat plan notice that was filed on paper, and copies of filed notices are difficult to obtain otherwise. For example, they are not available on any DOL website. Although the filing of a top hat plan notice is not a prerequisite for top hat plan status,2 the question of whether a top hat plan notice was filed is sometimes raised in litigation, either as evidence of whether the employer intended to maintain a top hat plan, or (erroneously) as evidence that the plan is not eligible for exemption from ERISA's substantive requirements. Also, the question of whether or not a top hat plan notice was filed, either for the target company's top hat plans or for plans the target company has acquired over the years, is often a nettlesome issue in merger and acquisition due diligence. Thus, it is beneficial for employers with top hat plans to be able to prove they filed a top hat plan notice. For this reason, some employers have filed under the DOL's Delinquent Filer Voluntary Compliance (DFVC) Program. Under that program, upon payment of a modest fee and partial completion of page one of Form 5500, a plan administrator is deemed to have filed the top hat notice statement late, but going forward is deemed to have complied with the top hat plan notice requirement both retroactively and prospectively. The new proposed electronic filing requirement will obviate the need to keep track of paper notices, although it does not replace the DFVC Program for late filings.3

The preamble to the proposed regulation states that the DOL does not intend to comment on or change the current content requirements for the notice. However, the form of electronic notice on the new website does not entirely match the current content requirements. The electronic top hat plan notice:

  • Requires the name and address (including the email address) of the plan administrator, which is not specified in the current regulation
  • Permits, but does not require, plan names to be stated
  • Does not require an undertaking to provide plan documents on request; the current regulation also does not require such an undertaking, but many, if not most, employers have provided it
  • Requires a box to be checked if it is an amended notice; the current regulation does not require amended or updated top hat plan notices

Top hat plan notices may cover more than one plan, and the existing regulation provides that "[o]nly one statement need be filed for each employer maintaining one or more [top hat] plans." The DOL acknowledges this provision in the Paperwork Reduction Act disclosure portion of the proposed regulations, but not in the preamble or the proposed regulation itself.

There has always been some uncertainty about how the "one-per-employer" rule applies when an employer adopts (or acquires) a new top hat plan after an initial filing. As noted, the new electronic form has a box for checking whether it is an "amended" form. This box raises the question of when an "amended" form would be required, since the existing regulations do not provide for amending the filing. On one hand, it may provide some comfort for an employer to update (amend) a top hat plan notice periodically to be sure it covers all the employer's top hat plans. However, the existence of a box for "amended" filings also raises the question of whether it is necessary to amend the one-per-employer filing to add new plans or to change a plan name, or whether it is necessary periodically to "amend" a top hat plan filing to update the number of participants, and if so, how often. The number of participants in many cases changes each year or even more frequently.

The ambiguity introduced by the requirement to check a box to indicate an amended top hat plan notice may be addressed in comments, and the web-based form may be modified in the final regulation. If an "amended" notice is required, the DOL may be pressured to provide guidance as to the circumstances that would give rise to an amended notice. However, as the goal of the proposed electronic filing requirement is not to comment upon or change the substantive filing requirements, the desired guidance may not be forthcoming.

The proposed regulation is very simple and its promulgation signals an opportunity for employers to review their existing top hat plans, to locate all existing top hat plan notices and to make a permanent record of them. If any are missing, the DFVC Program can be used relatively inexpensively to bring the record up to date, without necessarily admitting that any forms were filed late. Going forward, the need to keep paper records will be obviated, and all parties should welcome the transparency and immediacy of electronic filings.

Footnotes

1. The proposed regulation also requires electronic filing of a similar notice (which since 1980 has been required to be mailed or delivered personally) for welfare benefit plans that provide only apprenticeship or training benefits or both. According to the proposed regulation, the DOL annually receives approximately 120 apprenticeship and training plan notices and approximately 2,000 top hat plan notices. The proposed regulation would revise 29 CFR Sections 2520.104-22 and 2520.104-23.

2. If no top hat plan notice is filed, it does not mean the plan is subject to ERISA's substantive requirements, it merely means the plan has not used the "alternative method of compliance" and is thus technically subject to the reporting and disclosure rules.

3. To be timely, the top hat plan notice must be filed within 120 days after the plan becomes subject to Part 1 of Title I of ERISA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
22 Jan 2019, Seminar, San Francisco, United States

Dentons is pleased to offer a full day of classes, just in time for the California MCLE compliance period deadline of January 31, 2019.*

23 Jan 2019, Seminar, Los Angeles, United States

Dentons is pleased to offer a full day of classes, just in time for the California MCLE compliance period deadline of January 31, 2019.*

24 Jan 2019, Other, New York, United States

Join Dentons’ Health Care Partner Lori Mihalich-Levin and White Collar & Government Investigations Counsel Christine Genaitis as they lead conference sessions at AHLA Academic Medical Centers and Teaching Hospitals Institute.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions