Plan Administrator Free to Make Crediting Rate Changes
Retired executives who were participants in their employer's Employee Retirement Income Security Act (ERISA) deferred compensation plan for management or highly compensated employees, or so called “top hat” plan, filed a class action under ERISA. The plaintiffs complained their employer violated ERISA by amending the plan to adjust the rate at which the participants' deferred income accounts were credited with future earnings. The Fourth Circuit affirmed the lower court's denial of class certification and grant of summary judgment for the employer. It found under any standard of review, the plan permitted the plan administrator to change the crediting rate and to select new crediting rates with a different expected volatility when amending the plan. The “top hat” plan required only that the administrator make payments to participants under the plan in “approximately equal,” rather than exactly equal, annual installments.