The $79 million settlement in late 2019 in the case of Berry v. Wells Fargo serves as a painful reminder of the unsettled nature surrounding the definition of “top hat” plans under ERISA.
The plaintiff, Mr. Berry, and a class of former and current financial advisors filed a lawsuit against Wells Fargo, among other defendants alleging that the financial advisors did not receive money owed to them under the “Wells Fargo Advisors, LLC Performance Award Contribution & Deferral Plan” (the “Plan”) due to an allegedly illegal forfeiture provision.
Berry retired from Wells Fargo in 2014, having met the age and service requirements to qualify for retirement vesting treatment under the Plan. Weeks later, he founded the Berry Financial Group. Since he created his own financial services business, Wells Fargo enforced the forfeiture clause in the Plan, causing Berry to forfeit about $200,000. Other plaintiffs alleged they were also wrongly forced to forgo deferred compensation.
An unclear statutory definition can create catastrophic financial consequences. Employers with nonqualified deferred compensation plans (NQDC) can avoid similar pitfalls by speaking with a trusted advisor.