Common use of Select Group Of Management Or Highly Compensated Employees Clause in Contracts

Select Group Of Management Or Highly Compensated Employees. Neither ERISA nor the applicable Department of Labor (DOL) regulations define the term “select group of management or highly compensated employees” (Select Group).4 The legislative history suggests that the Select Group includes only those employees who have sufficient individual bargaining power to ensure that their rights to benefits under a plan are adequately protected. DOL Opinion Letter 90-14A (1990 Opinion) stated: It is the view of the Department that in providing relief for top hat plans from the broad remedial provisions of ERISA, Congress recognized that certain individuals, by virtue of their position or compensation level, have the ability to affect or substantially influence, through negotiation or otherwise, the design and operation of their deferred compensation plan, taking into consideration any risks attendant thereto, and, therefore, would not need the substantive rights and protections of Title I [of ERISA]. The DOL offers little additional meaningful guidance to assist in identifying which employees are members of a Select Group. By focusing on an individual’s “ability to affect or substantially influence, through negotiation or otherwise, the design and operation of their deferred compensation plan,” its 1990 Opinion utilizes a functional definition of a Select Group. In addition, a top hat plan must be maintained “primarily” for the purpose of providing deferred compensation to a Select Group.5 In the 1990 Opinion, the DOL stated that “primarily” refers to the type of benefits provided by the top hat plan and not to the type of participants.6 Therefore, the DOL is likely to take the position that if the employer permits even one employee who is not a member of a Select Group to participate in a top hat plan, the plan fails to meet the definition of the top hat exemption to the ERISA coverage requirements.