Paul F. Sikora v. UPMC

A so-called “top-hat” plan is “a plan which is

unfunded and is maintained by an employer primarily for

the purpose of providing deferred compensation for a

select group of management or highly compensated

employees.” 29 U.S.C. §§ 1101(a)(1), 1051(2),

1081(a)(3). These plans need not comply with many of

the substantive provisions of the Employee Retirement

3

Income Security Act of 1974 (“ERISA”). When Paul F.

Sikora sought to recover pension benefits under ERISA,

the District Court held that he was not entitled to obtain

such relief because he sought benefits under a top-hat

plan. Sikora appeals, arguing that the District Court

should have required Defendants, the University of

Pittsburgh Medical Center and its Health System and

Affiliates Non-Qualified Supplemental Benefit Plan

(collectively, “UMPC”), to prove that plan participants

had bargaining power before concluding that he

participated in a top-hat plan.1 Plan participant

bargaining power, though, is not a substantive element of

a top-hat plan. We will therefore affirm the District

Court’s judgment.

I

1 While Sikora’s notice of appeal also references the

District Court’s entry of summary judgment on his

contract claim, he makes no argument in support of that

claim in his briefing. We therefore deem it abandoned.

See New Jersey v. Merrill Lynch & Co., 640 F.3d 545,

547 n.3 (3d Cir. 2011) (quoting Kost v. Kozakiewicz, 1

F.3d 176, 182 (3d Cir. 1993) (“Failure to set forth an

issue on appeal and present arguments in support of that

issue in one’s opening brief generally amounts to

‘abandon[ment] and waive[r of] that issue . . . and it need

not be addressed by the court of appeals.’”) (alterations

in original).

4

Sikora is a former employee of UPMC. He

became the Vice President of IT Transformation & IT

Infrastructure Services in 2005. Following that position

change, Sikora became a participant in UPMC’s Non-

Qualified Supplemental Benefit Plan (“the Plan”) in

2008. Sikora’s participation in the Plan ended upon his

voluntary termination from UPMC in 2011. Sikora

applied for benefits under the Plan following his

voluntary termination but was denied benefits for reasons

unrelated to the current appeal.

Sikora filed suit against UPMC in the United

States District Court for the Western District of

Pennsylvania in December 2012. During discovery,

UPMC and Sikora each filed motions for partial

summary judgment. UPMC argued that the Plan was a

top-hat plan, and, because three of Sikora’s claims relied

on ERISA provisions inapplicable to top-hat plans, those

claims should be dismissed. Concluding that the Plan

was a top-hat plan, the District Court granted UPMC’s

partial summary judgment motion and denied Sikora’s

motion. Following completion of discovery, UPMC filed

a motion for summary judgment as to Sikora’s remaining

non-ERISA claim, which the District Court granted.

Sikora timely appealed.

II

5

The District Court exercised jurisdiction pursuant

to 28 U.S.C. § 1331. We have appellate jurisdiction

pursuant to 28 U.S.C. § 1291.

We exercise plenary review over the District

Court’s decision to grant summary judgment, and so we

apply the same standard of review the District Court

should apply. See Willis v. UPMC Children’s Hosp. of

Pittsburgh, 808 F.3d 638, 643 (3d Cir. 2015). We review

questions of law de novo. See Samaroo v. Samaroo, 193

F.3d 185, 189 (3d Cir. 1999) (“We must review legal

conclusions and questions of statutory construction de

novo.”).

III

ERISA defines top-hat plans as those that are

“unfunded and . . . maintained by an employer primarily

for the purpose of providing deferred compensation for a

select group of management or highly compensated

employees.” 29 U.S.C. §§ 1101(a)(1), 1051(2),

1081(a)(3). This Court previously described the top-hat

plan derived from this statutory definition as having three

elements: (1) “the plan [must] be unfunded”; (2) it must

“exhibit the required purpose”; and (3) “it must also

cover a ‘select group’ of employees.” In re New Valley

Corp., 89 F.3d 143, 148 (3d Cir. 1996). Sikora has the

burden of showing that the Plan is not a top-hat plan to

obtain relief under ERISA. See Pane v. RCA Corp., 868

F.2d 631, 637 (3d Cir. 1989) (rejecting contention that a

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plan’s status as a top-hat plan is an affirmative defense

and concluding that § 1101(a)(1) “does not provide for an

exemption from liability under section 502(a)” but

instead “merely provides the legal standard by which [a

defendant’s] section 502(a) liability is to be

determined”).2

Sikora does not dispute that the Plan is both

unfunded and maintained by UPMC for the statutorily

prescribed purpose. Sikora takes issue only with the

third element of the test laid out in In re New Valley

Corp., which requires that the Plan “cover a ‘select

group’ of employees.” In re New Valley Corp., 89 F.3d

at 148. This Court has previously described this “select

group” element as having “both quantitative and

qualitative restrictions. In number, the plan must cover

relatively few employees. In character, the plan must

2 Sikora contends that UPMC waived reliance on Pane

by assuming the burden of proving the Plan’s top-hat

status in its opening summary judgment brief. Because

UPMC did (albeit belatedly) raise the issue before the

District Court, and the District Court did not conclude the

issue of burden was waived (instead providing Sikora

with the opportunity to respond to UPMC’s reliance on

Pane), we too will not deem the issue waived. Even if

UPMC had the burden of proving the Plan’s top-hat

status, it has done so for the reasons explained infra.

7

cover only high level employees.” Id. Applying both the

quantitative and qualitative restrictions of the “select

group” element reveals that the Plan qualifies as a top-hat

plan.

Turning first to the quantitative restriction, the

Plan covers relatively few employees. During Sikora’s

participation in the Plan, approximately 0.1% of the

entire UPMC workforce was a participant in the Plan.

See Pane, 868 F.2d at 637 (holding that a plan-participant

group comprising less than one-tenth of one percent of

the workforce was numerically select); see also

Alexander v. Brigham & Women’s Physicians Org., Inc.,

513 F.3d 37, 46 (1st Cir. 2008) (concluding that a plan’s

participants comprising only 8.7% of entire workforce

was select); Demery v. Extebank Deferred Comp. Plan

(B), 216 F.3d 283, 289 (2d Cir. 2000) (stating that a

plan’s participants comprising 15.34% of the relevant

workforce was sufficiently select). The quantitative

restriction of the “select group” element is met.

As to the qualitative restriction, although the

relevant statutory language only requires participants to

be members of a select group of management or highly

compensated employees, here the Plan covers high-level

employees who are both a select group of management

and highly compensated employees. 29 U.S.C.

§§ 1101(a)(1), 1051(2), 1081(a)(3) (requiring “a select

group of management or highly compensated

employees” (emphasis added)). UPMC allowed only

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members of management to participate in the Plan.

Sikora speculates that some Plan participants may have

had duties rendering them “non-management,” but that

assertion is without record support. Even if Sikora’s

assertion is true, the Plan participants were also highly

compensated. During Sikora’s participation in the Plan,

the lowest paid Plan participant earned an annual salary

of over $200,000.3 Between 2007 and 2011, the average

annual salary of Plan participants hovered around

$500,000, as compared to the average annual salary of all

UPMC employees, which was around $55,000. See

Alexander, 513 F.3d at 46 (observing that plan

participants earned an average income of $440,000,

“more than five times the average income” of the

employer’s workforce and concluding that the question

of whether plan participants were highly compensated

was “open-and-shut” in “relative and absolute terms” and

“nowhere near the gray area”); Demery, 216 F.3d at 289

(citing evidence that “the average salary of plan

participants was more than double that of the average

salary of all . . . employees” to conclude that plan

participants were highly compensated). The Plan

participants were indisputably select members of

management, and were highly compensated employees.

The qualitative restriction of the “select group” element

3 In 2008, the lowest paid participant earned only

$80,000, but that employee was UPMC’s new CEO, who

earned that amount in only one month of work.

9

is therefore satisfied. Given that both the quantitative and

qualitative restrictions of the “select group” element have

been satisfied, we hold that the Plan in question qualifies

as a top-hat plan.

IV

Although both the quantitative and qualitative

restrictions of the “select group” element have been

satisfied, Sikora nonetheless argues that the Plan does not

cover a “select group” because there is no evidence

regarding the “bargaining power” of the Plan

participants. Sikora’s argument would require a district

court to inquire not only into the qualitative and

quantitative restrictions discussed above, but also into the

presence of “bargaining power” before concluding that a

particular plan is a top-hat plan. The argument is

unpersuasive.

Sikora cites to no text in ERISA nor to any

legislative history to support his argument. Instead, he

relies on a paragraph from a 1990 Department of Labor

(“DOL”) opinion letter. The DOL opinion letter states in

relevant part:

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

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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.

U.S. Dep’t of Labor, Pension & Welfare Benefit

Programs, Opinion Letter 90-14A at 2 (May 8, 1990).

In interpreting this opinion letter, three of our

sister circuits have inquired into participants’ bargaining

power before determining whether a particular plan

qualifies as a top-hat plan. In Bakri v. Venture Mfg. Co.,

the Sixth Circuit favorably quoted a district court opinion

highlighting the importance of participants engaging in

“direct negotiations with the employer.” Bakri v.

Venture Mfg. Co., 473 F.3d 677, 678-79 (6th Cir. 2007)

(quoting Carrabba v. Randalls Food Markets, Inc., 38 F.

Supp. 2d 468, 478 (N.D. Tex. 1999)). Quoting the

district court’s opinion, the Bakri court noted that “the

‘select group’ test is whether the members of the group

have positions with the employer of such influence that

they can protect their retirement and deferred

compensation expectations by direct negotiations with

the employer.” Id. Writing that the plan in question

“consisted of employees . . . who had no supervisory,

policy making, or executive responsibility, and had little

11

ability to negotiate pension, pay or bonus compensation”

the Sixth Circuit concluded that the “select group”

element had not been satisfied. Id. at 680.

In Demery v. Extebank Deferred Comp. Plan (B),

the Second Circuit similarly inquired into participants’

ability to negotiate. As the Second Circuit wrote in that

case:

Plaintiffs also claim that the participants in

Plan B did not have the ability to negotiate

the terms of the Plan. Ability to negotiate is

an important component of top hat plans . . .

. We do not think plaintiffs have proffered

either direct or circumstantial evidence

suggesting an absence of bargaining power

sufficient to raise a question of fact on this

issue.

Demery, 216 F.3d at 289.

Finally, in Duggan v. Hobbs, the Ninth Circuit

wrote that “the ‘select group’ requirement includes more

than a mere statistical analysis.” Duggan v. Hobbs, 99

F.3d 307, 312 (9th Cir. 1996). Citing to the DOL opinion

letter, the Duggan court noted that the “Department of

Labor has explained that the top-hat exception was

intended to apply to employees who ‘by virtue of their

position or compensation level, have the ability to affect

or substantially influence, through negotiation or

12

otherwise, the design and operation of their deferred

compensation plan.’” Id. at 312-13 (quoting U.S. Dep’t

of Labor, Pension & Welfare Benefit Programs, Opinion

Letter 90-14A at 2 (May 8, 1990)). After noting that the

participant in the plan in question “exerted sufficient

influence,” the Ninth Circuit concluded that the plan

“was maintained for a ‘select group’” within the relevant

statutory language. Id. at 313.

The First Circuit has expressed a different view,

one which is in tension with the positions taken by the

Second, Sixth, and Ninth Circuits. In Alexander v.

Brigham & Women's Physicians Org., Inc., that court

declined “the appellant’s invitation to depart from the

plain language of the statute and jerry-build onto it a

requirement of individual bargaining power.” Alexander

v. Brigham & Women’s Physicians Org., Inc., 513 F.3d

37, 47 (1st Cir. 2008). The First Circuit explained:

The DOL opinion letter speaks only to

Congress’s rationale for enacting the top-hat

provision. It does not present itself as an

interpretation of the provision’s

requirements, nor does it make any mention

of the need for or propriety of demanding

that employers demonstrate their employees’

ability to negotiate the terms of deferred

compensation plans.

Id. We agree with the First Circuit’s approach. On its

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face, the opinion letter does not require that participants

in a top-hat plan possess bargaining power. The opinion

letter does, however, explain Congress’s intent for

creating top-hat plans. On that point, the opinion letter is

therefore entitled to persuasive deference under Skidmore

v. Swift & Co, 323 U.S. 134 (1944). See Alexander, 513

F.3d at 47 (“We have no quarrel with the letter’s

persuasiveness as a gloss on Congress’s intentions in

enacting the top-hat provision.”); see also Parker v.

NutriSystem, Inc., 620 F.3d 274, 278 (3d Cir. 2010)

(stating that, under Skidmore, statutory interpretations in

opinion letters are given deference to the extent they

persuade).

The opinion letter’s explanation undermines

Sikora’s position. Rather than suggest that courts inquire

into whether a particular participant wielded the requisite

level of “bargaining power,” the opinion letter observes

that participants in top-hat plans were deemed by

Congress to possess bargaining power “by virtue of their

position or compensation level.” In other words,

Congress felt justified in including the top-hat plan

provisions in ERISA, at least in part because individuals

in positions such as Sikora’s “have the ability to affect or

substantially influence, through negotiation or otherwise,

the design and operation of their deferred compensation

plan.” In short, reading the DOL opinion letter in light of

Skidmore does not support Sikora’s position.

Although the Second, Sixth, and Ninth Circuits

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have inquired into plan participants’ bargaining power,

those decisions do not clearly adopt bargaining power as

an additional requirement.4 Even assuming that those

opinions did adopt bargaining power as an additional

requirement, they offer no reason for doing so. Given

that lack of reasoning, the plain text of ERISA’s top-hat

provisions, and our reading of the DOL’s opinion letter,

we decline to engraft a bargaining power requirement

onto the elements of a top-hat plan. We conclude that

plan participants’ bargaining power is not a substantive

element of a top-hat plan.

V

For the reasons set forth above, we will affirm the

judgment of the District Court.

4 The Sixth Circuit in Bakri, for example, did not

explicitly mention bargaining power when it laid out the

factors it uses to determine whether a plan qualifies as a

top-hat plan. Bakri 473 F.3d at 678 (6th Cir. 2007) (“In

determining whether a plan qualifies as a top hat plan, we

consider both qualitative and quantitative factors,

including (1) the percentage of the total workforce

invited to join the plan (quantitative), (2) the nature of

their employment duties (qualitative), (3) the

compensation disparity between top hat plan members

and non-members (qualitative), and (4) the actual

language of the plan agreement (qualitative).”).

Affirmed