Earlier this week, I blogged on “The Year of Top Hat Plan Litigation” with a promise to follow up the recurrence of litigation by former plan participants who did receive their benefits, but not at the time or in the forms they elected, alleged damages due to adverse tax consequences. However, before I do that, I can’t help noting a recent case with an unexpected result that made me wonder whether a company can restrict top hat plan participation to those employees who actually wear a top hat.

In Wegmann v. Young Adult Inst., Inc. (YAI), the federal district court for the Southern District of New York rejected a former employee’s claim that her employer had amended its deferred compensation plan to make women ineligible.* When the plaintiff began her employment with the not-for-profit YAI in 1986, the entity had in place a “Supplemental Pension Plan for Certain Management Employees” that provided deferred compensation benefits to employees who satisfied the Plan’s eligibility requirements, specifically, “Each Management Employee who shall complete 15 years of service” at YAI. However, in 2008, YAI amended the eligibility requirements of the Plan such that only five senior employees — all of whom are male — were expressly deemed the sole participants in the Plan. When plaintiff resigned from YAI and was denied benefits under the Plan, she sued alleging that the amendment had the dual effect of (i) excluding all females from participation, and (ii) divesting her of benefits to which she was entitled.

The court dismissed plaintiff’s ERISA claim because she had failed to allege that she was in fact a management employee eligible under the Plan. Regarding the Plan amendment, the court observed that ERISA § 510 was designed to protect the employment relationship that gives rise to an individual’s pension or benefit rights. This means that a fundamental prerequisite to a § 510 action is an allegation that the employer-employee relationship, and not merely the pension plan, was changed in some discriminatory or wrongful way. “Plaintiff's allegation that the Plan was amended to deny her benefits on the basis of her sex does not set forth the sort of interference with an employment relationship typically required for claims under § 510.”