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Portfolio > Asset Managers

Ruling Covers Controlled Group Top-Hat Plan Filings

By Staff Writer

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An Employee Benefits Security Administration official has issued an advisory opinion that could affect administration of executive benefits plans.

A “top hat” plan that covers managers or highly compensated employees who work for separate corporations that belong to the same “controlled group of corporations” may be able to file a single registration statement with the U.S. Labor Department, according to Lisa Alexander, a divisional chief at EBSA.

EBSA is an arm of the Labor Department.

Alexander discusses top hat plans in EBSA Advisory Opinion 2008-08A, in response to a query from a lawyer representing Empresas Fonalledas Inc., San Juan, Puerto Rico.

The lawyer asks “whether, in the case of a plan covering a ‘controlled group of corporations’ or a ‘group of trades or businesses under common control’ … filing a single registration statement for the plan will satisfy” the filing rules for top hat plans, Alexander writes.

Top hat plans can handle filing requirements by sending statements to the U.S. secretary of Labor.

Alexander notes that the simplified filing method is available only to plans that exist mainly to provide deferred compensation to a select group of managers or highly compensated employees and are funded either with the employer’s general assets or with insurance contracts or policies bought with the employer’s general assets.

“In the [Labor] Department’s view, there are circumstances under which companies in a controlled group will be treated as maintaining ‘separate plans’ and circumstances under which a ‘single plan’ will be found to exist with respect to the controlled group as a whole,” Alexander writes.

Alexander says past advisory opinions state that the department would look at the following factors:

- Who established and maintains the plans.

- The process and purposes of plan formation, the rights and privileges of plan participants.

- The presence of any risk pooling.

Past advisory opinions have not described a procedure controlled groups can follow when filing registration statements for top hat plans, Alexander writes.

The plan administrator could comply with Labor Department filing requirements by identifying each employer maintaining the plan, identifying the employer that serves as the plan administrator by name, employer identification number and address.

If a participating employer is an authorized person from whom the department can request plan documents, the statement could identify that authorized employer as the “employer,” Alexander writes.

“In cases where only one participating employer is identified as the ‘employer,’ the registration statement should include some general identifying information regarding the group of participating employers that maintain the plan,” Alexander writes.

Deciding whether the employers in a group are really members of a controlled group of corporations or of a group of trades or businesses under common control falls under the jurisdiction of the U.S. Department of the Treasury/Internal Revenue Service, Alexander writes.

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