876 F.3d 110
3rd Cir.2017Background
- Paul F. Sikora worked at UPMC and became a participant in UPMC’s Non-Qualified Supplemental Benefit Plan (the Plan) from 2008 until his voluntary termination in 2011.
- Sikora sued UPMC under ERISA after being denied Plan benefits; the District Court granted partial summary judgment to UPMC, holding the Plan is a top-hat plan and therefore certain ERISA remedies do not apply.
- The Plan is undisputedly unfunded and maintained to provide deferred compensation for a select group of management or highly compensated employees.
- During Sikora’s participation, Plan members comprised about 0.1% of the UPMC workforce; average Plan participant salary ≈ $500,000 vs. workforce average ≈ $55,000.
- Sikora contested only the “select group” element, arguing the court must also find evidence that Plan participants had bargaining power to negotiate plan terms.
- The Third Circuit reviewed de novo and affirmed, holding the Plan satisfies the quantitative and qualitative “select group” requirements and rejecting a separate bargaining-power requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Plan is a “top-hat” plan because it covers a “select group” of employees | Sikora: Plan participants are not a properly "select group" unless there is record evidence they had bargaining power to negotiate plan terms | UPMC: Plan meets statutory elements — unfunded, purposeful, and covers a numerically and qualitatively select group of management/highly compensated employees; bargaining power is not a statutory element | The Third Circuit held the Plan is a top-hat plan: quantitative (≈0.1% of workforce) and qualitative (management and highly compensated) criteria satisfied; bargaining power is not a substantive statutory requirement |
| Whether the Department of Labor opinion letter requires courts to inquire into individual participants’ bargaining power | Sikora: Relies on DOL opinion letter to argue bargaining power inquiry is required | UPMC: The DOL letter describes congressional rationale but does not add a legal requirement beyond ERISA’s text | Court: The DOL letter is persuasive for congressional intent (Skidmore deference) but does not create an additional bargaining-power element; declines to graft such a requirement onto ERISA |
Key Cases Cited
- Willis v. UPMC Children’s Hosp. of Pittsburgh, 808 F.3d 638 (3d Cir. 2015) (standard of review for summary judgment on similar ERISA issues)
- Samaroo v. Samaroo, 193 F.3d 185 (3d Cir. 1999) (de novo review of legal questions)
- In re New Valley Corp., 89 F.3d 143 (3d Cir. 1996) (articulating three-element top-hat test: unfunded, purpose, and select group with quantitative and qualitative limits)
- Pane v. RCA Corp., 868 F.2d 631 (3d Cir. 1989) (placement of burden on party challenging top-hat status)
- Alexander v. Brigham & Women’s Physicians Org., Inc., 513 F.3d 37 (1st Cir. 2008) (refusing to add bargaining-power requirement; treating DOL letter as persuasive background)
- Demery v. Extebank Deferred Comp. Plan (B), 216 F.3d 283 (2d Cir. 2000) (inquiry into participants’ ability to negotiate; evidentiary treatment)
- Bakri v. Venture Mfg. Co., 473 F.3d 677 (6th Cir. 2007) (consideration of qualitative/quantitative factors and bargaining-power discussion)
- Duggan v. Hobbs, 99 F.3d 307 (9th Cir. 1996) (looking beyond statistics to influence/negotiation ability as part of select-group analysis)
- Parker v. NutriSystem, Inc., 620 F.3d 274 (3d Cir. 2010) (Skidmore deference discussion for agency opinion letters)
- Skidmore v. Swift & Co., 323 U.S. 134 (1944) (standard for persuasive deference to agency interpretations)