SYNOPSIS: In Berry, Mr. Berry (the named plaintiff) and a class of former and current financial advisors filed a lawsuit against Wells Fargo and certain other defendants alleging that the financial advisors did not receive money owed to them under the “Wells Fargo Advisors, LLC Performance Award Contribution & Deferral Plan” (the “Plan”) due to an allegedly illegal forfeiture provision. Berry argued that the Plan was a “pension plan” under ERISA but did not qualify as a top hat plan, and as a result Wells Fargo breached ERISA by failing to satisfy certain minimum vesting and funding requirements under ERISA. Wells Fargo, on the other hand, contended that the Plan did in fact qualify as a top hat plan and therefore was exempt from those ERISA requirements. Notwithstanding the parties’ arguments, Wells Fargo and Berry ultimately settled the lawsuit for $79 million, including $20 million in attorneys’ fees.
TAKEAWAYS: Employers with nonqualified deferred compensation plans (“NQDC plans”) should carefully review their plans to determine if the employees eligible to participate in the plan are limited to a top hat group of employees. But because ERISA does not provide a bright-line test for defining the top hat group, employers may still face risk of employee claims, especially if the NQDC plan includes forfeiture provisions.