Johnson v. State, 2010 ND 213

Terry Sanders, employed by Gravel Products since 1980, entered a deferred compensation agreement in 1996 (top-hat ERISA plan).
The plan provides annual benefits from age 60 to 75, with benefits increasing for longer employment, and allows either a payout beginning at 60 or assignment of the funding insurance policy to Sanders.
Gravel Products funded the plan by purchasing a Flexible Premium Adjustable Variable Life Insurance Policy in 1997, naming Sanders as insured and paying annual premiums of $14,000.
Sanders was terminated in 2003 at age 46; under the plan, he could receive $51,000 annually at 60, but Gravel elected to assign the policy to him instead.
The policy was transferred to Sanders in 2004 with a net cash surrender value of $114,072.83; Sanders then asserted breach of contract and a claim under ERISA for inadequate funding.
The district court dismissed Sanders’ breach claim and the ERISA claim; on remand, the parties stipulated the plan was an ERISA top-hat plan, and the district court held Gravel complied with the plan’s terms.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the plan unambiguously required funding via assignment or payment of benefits	Sanders argues the phrase 'to fund this plan' obligates Gravel to fully fund the benefits with a policy value.	Gravel contends the plan permits either annual payments or assignment of the policy as full payment.	Unambiguous; policy assignment satisfied the plan’s obligations.
Standard of review for ERISA top-hat plan determinations	Sanders urges de novo review due to ERISA plan terms.	Gravel argues deference under abuse-of-discretion standard with consideration of potential conflicts.	court need not resolve split; applying the chosen standard would not change the outcome.
Whether equitable estoppel could justify funding differences	Sanders seeks equitable estoppel to obtain the funding gap between surrender value and full funding.	Gravel contends estoppel claims were not raised below and hence cannot be raised on appeal.	Issue waived for lack of preservation; cannot be raised on appeal.
Whether the plan terms should be construed against the drafter	Sanders urges contra proferentem to interpret ambiguities in Sanders’ favor.	Gravel argues the plan is unambiguous and should not be construed against the drafter.	Plan is unambiguous; contra proferentem not applied.

Sznewajs v. U.S. Bancorp Amended and Restated Supplemental Benefits Plan, 572 F.3d 727 (9th Cir. 2009) (discusses standard of review under ERISA top-hat plans and conflicts of interest)
Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (U.S. 1989) (establishes abuse of discretion framework for plan interpretations with discretion)
Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (U.S. 2008) (conflict-of-interest considerations in ERISA plan determinations)
Goldstein v. Johnson & Johnson, 251 F.3d 433 (3d Cir. 2001) (top-hat plan treatment and deference to plan terms in the presence of discretion)
Craig v. Pillsbury Non-Qualified Pension Plan, 458 F.3d 748 (8th Cir. 2006) (top-hat plans and de novo review considerations; effect of plan discretion)
Demery v. Extebank Deferred Compensation Plan (B), 216 F.3d 283 (2d Cir. 2000) (top-hat plan funding and unfunded status)
Hooven v. Exxon Mobil Corp., 465 F.3d 566 (3d Cir. 2006) (ERISA plan interpretation requires analysis within ERISA framework)
Brewer v. Lincoln Nat’l Life Ins. Co., 921 F.2d 150 (8th Cir. 1990) (contra proferentem principle and ERISA limitations on state-law interpretation)
Delk v. Durham Life Ins. Co., 959 F.2d 104 (8th Cir. 1992) (constraining ERISA plan ambiguities against the drafter as a last resort)