Top Hat Plans

Summary

This practice note summarizes issues for employers to consider in drafting and administering "top hat" pension benefit plans. A properly designed and administered top hat plan will help limit the risk of employee litigation against the sponsoring employer and the negative consequences from any audits of the plan by the Internal Revenue Service (IRS) and/or the U.S. Department of Labor (DOL). This practice note does not address the corporate tax implications to employers that maintain a top hat plan or the rules imposed by Section 409A of the Internal Revenue Code (IRC) that relate to top hat plans. For a discussion on that topic, see Section 409A Fundamentals and other titles in the Section 409A Resource Kit.