I have blogged several times about the difficulties of preserving non-qualified plan benefits, particularly when the plan sponsor goes bankrupt. At the time of a bankruptcy, the company's non-qualified plan becomes nothing more than an unfunded promise to pay benefits and participants usually have to get in line with the company's other creditors. The recent decision in Tate v. General Motors LLC (56 EBC 1363, 6th Cir. 2013) caught my eye. The bad news for the GM retirees is that they lost this case to have a plan amendment adopted as part of the bankruptcy process interpreted more favorably to them.

The Retirees are participants in and/or beneficiaries of GM's ERP. The ERP is an unfunded, non-qualified, retirement benefit plan that provides deferred compensation for a select group of management or highly compensated employees. In 2008, as a condition of its bankruptcy and its subsequent purchase by the United States Treasury, GM was required to cut certain retirement benefits, including two-thirds of particular ERP benefits exceeding $100,000. The calculation of the ERP reduction is the source of controversy in this lawsuit. The key provision, Article IV Section II (g) of the Plan, reads:

For executive retirees who have a combined tax-qualified SRP plus non-qualified benefit under this Plan (Executive Retirement Plan) in excess of $100,000 per annum, on a life annuity basis, the amount of benefits under this Plan over the combined $100,000 per annum threshold shall be reduced by 2/3.

Frankly, the participants' claim was a reach. The good news that I want to highlight in this blog, however, is that the plan participants retained any non-qualified benefit at all following the bankruptcy.