Demery v. Extebank Deferred Compensation Plan
United States Court of Appeals for the Second Circuit
216 F.3d 283 (2000)
Patrick Demery and several other former officers (the former officers) (plaintiffs) of Extebank were participants in the Extebank Deferred Compensation Plan (B) (Plan B) (defendant), which let them defer up to 25 percent of their salary and earn a compounded annual rate of return of 20 percent if they remained employed with Extebank until retirement age or 10 percent if they left Extebank before then. Approximately 15.34 percent of Extebank’s employees—most of them senior officers or other key employees—were eligible for Plan B, and approximately 7 to 10 percent participated. The average salary of these participants was more than twice that of all Extebank employees. Although Extebank partially funded its obligations under Plan B by purchasing life-insurance contracts on Plan B participants and kept the contract proceeds in a separately designated account, Plan B’s terms provided that those obligations were unsecured and that benefits would be paid from Extebank’s general assets. All the former officers left Extebank shortly before or soon after Extebank was acquired by North Fork Bank (defendant) in 1996. Nearly all the former officers had not yet reached retirement age and consequently received payouts from Plan B at a reduced rate of return. The former officers sued Plan B and North Fork Bank, seeking additional benefits under the Employee Retirement Income Security Act of 1974 (ERISA), among other claims. The district court granted summary judgment to Plan B and North Fork Bank on the grounds that Plan B was a top-hat plan and thus exempt from the substantive provisions of ERISA. The former officers appealed, arguing that Plan B was not a top-hat plan mainly because (1) Extebank purchased life-insurance contracts on Plan B participants, which rendered Plan B funded for ERISA purposes; and (2) more than 15 percent of Extebank’s employees were eligible to participate in Plan B, including some earning only $30,000 per year, which was too broad for top-hat status.
Rule of Law
Holding and Reasoning (Walker, J.)
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