Simple English definitions for legal terms
Read a random definition: pursuit
A top-hat pension plan is a special type of retirement plan that is set up by an employer for a select group of high-level employees. This plan is designed to provide deferred compensation to these employees after they retire. Unlike other pension plans, top-hat plans are not subject to the same rules and regulations as they are meant for a specific group of people.
A top-hat pension plan is a type of pension plan that is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of managers or highly paid employees. It is an unfunded pension plan, which means that the employer does not set aside funds to pay for the benefits promised to the employees.
Top-hat plans are generally not subject to the broad remedial provisions of the Employee Retirement Income Security Act (ERISA) because Congress recognized that certain individuals, by virtue of position or compensation level, can substantially influence the design or operation of their deferred-compensation plans.
For example, a company may offer a top-hat pension plan to its top executives as a way to provide additional retirement benefits beyond what is offered to other employees. The plan may promise specific benefits to each executive and may be funded through the company's general assets rather than through a separate trust fund.
Another example of a top-hat plan is a deferred-compensation plan that allows highly paid employees to defer a portion of their income until retirement. The plan may be designed to provide tax benefits for the employees and may be subject to certain restrictions on contributions and withdrawals.