Third Circuit Deepens Circuit Split Over Test For "Top Hat" Status Under ERISA

A Third Circuit decision, Sikora v. UPMC, 876 F.3d 110 (3d Cir. 2017), deepens a circuit split over whether a participant's bargaining power is relevant to determining whether a plan qualifies for "top hat" status under ERISA.

Plans that qualify for "top hat" status are exempt from ERISA's eligibility, vesting, funding, and fiduciary requirements. To qualify, a plan must be unfunded and must limit coverage to a "select group of management or highly compensated employees." In Sikora, a former employee sued to recover a pension benefit that he forfeited upon termination of his employment on the ground that the forfeiture violated ERISA's vesting requirements. To make his case, he argued that the plan did not qualify for "top hat" status — and therefore was not exempt from ERISA's vesting requirements — because the participants in the plan did not have bargaining power with respect to the plan. The Third Circuit held that bargaining power over plan design and operation