Agreement With Single Employee is Not an ERISA Plan
If an arrangement is subject to ERISA, state law claims relating to that arrangement are preempted. In some situations, therefore, employers try to argue that a particular arrangement is subject to ERISA. In a recent decision involving a state law breach of contract claim, the Eighth Circuit Court of Appeals determined that a deferred compensation agreement with a single employee could not constitute a plan under ERISA. Therefore, when the employer ceased paying deferred compensation otherwise owed under the agreement to the widow of a deceased employee, the court concluded that state law breach of contract claims were not preempted.
Not all courts have ruled this way. Some have found agreements with a single employee to be ERISA covered plans. Employers wanting to rely on ERISA preemption and to take advantage of ERISA’s favorable standard of review should be aware that courts may not always agree with the employer’s characterization of an arrangement as an ERISA plan. Particularly in the Eighth Circuit, an arrangement that consists of an agreement with a single employee might be found not to be an ERISA plan.
Contact Benefits Notes for more information.