DOL Filing for Top Hat Plans

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.  

A recent call with a financial advisor from Washington is representative of a common inquiry related to top hat plans. The advisor asked:  “Are top hat plans required to file a Form 5500 report with the Department of Labor (DOL)?” 

Highlights of the Discussion

Top hat plans (i.e., unfunded plans maintained for a select group of management or highly compensated employees) are exempt from most of the requirements of the Employee Retirement Income Security Act of 1974 (ERISA), including the need to file a Form 5500 series report. Instead, top hat plans are subject to an alternative method of compliance with the reporting and disclosure provisions of ERISA.

Sponsors of top hat plans are required to submit a “statement” to the DOL pursuant to DOL Reg. 2520.104–23 within 120 days of the plan’s effective date. As of August 16, 2019, it is mandatory for sponsors of such plans to file top hat plan statements electronically via the Top Hat Plan Statements Online Filing System. In March 2020, the DOL introduced its a top-hat plan statement search engine.

The information requested on the statement is quite simple: 

• Employer identification information (EIN, name, address); 

• Plan administrator information; 

• Number of top-hat plans maintained; 

• Number of participants in each plan; and 

• A declaration that the sponsor maintains the plan(s) primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. 

If a sponsor fails to file the top hat statement with the DOL, the plan could be subject to ERISA's full reporting and disclosure requirements, and assessed penalties by the DOL and IRS. Corrections can be made through the Delinquent Filer Voluntary Compliance Program. 

Conclusion

While a sponsor of a top hat plans does not have to file an annual Form 5500 series report for the plan, it must submit a statement to the DOL within 120 days of the plan’s effective date. Failure to do so could result in more burdensome reporting requirements and penalties.