Deferred Compensation Planning, the Exclusive Benefit Rule, and the Hughes Aircraft Case: Has the Employer Benefit Restriction been Altered with Respect to ERISA Qualified Pension Plans
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Authors
Karns, Jack E.
Issue Date
2000
Type
Journal Article
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Abstract
INTRODUCTION|The process of planning a deferred compensation program for employees has seemingly become increasingly more difficult as federal government agencies and the judiciary unnecessarily complicate that which should be facilitated. However, with the decision in Hughes Aircraft Co. v. Jacobson, it appears that the United States Supreme Court has rendered a very readable, understandable opinion, and in the process done away with precedent that was lacking in its factual basis. Although the Court did not likely intend that Hughes Aircraft achieve the importance it has achieved since the date of decision, it is clear that pension planners have a bright line rule with regard to the "employer benefit" rule, and facts that make for the so-called "good case law." The issue for which Hughes Aircraft will be remembered is whether a surplusage that builds up in a plan due to good investment decisions-and accrued interest on employee contributions of employees who departed the company prior to the pension vesting date-and which in aggregate form exceeds that amount of monies needed to fund all promised benefits, may be used by the plan sponsor to add a benefit that will most assuredly dissipate the aforementioned surplus. In Hughes Aircraft, an opinion arising out of the Ninth Circuit, approximately ten thousand former employees argued that the...
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Citation
33 Creighton L. Rev. 507 (1999-2000)
Publisher
Creighton University School of Law