I blogged recently about an Eighth Circuit decision concluding that an agreement with a single employee cannot be an ERISA plan because a plan necessarily requires more than one participant. Other courts disagree. Recently the United States District Court for the District of Idaho in the case of Knoll v. Moreton Insurance of Idaho, Inc. concluded that an agreement with a single employee providing for severance did constitute an ERISA plan. The Court rejected the position of the Eighth Circuit, noting that a number of other circuit courts and the Department of Labor have found that an arrangement covering a single employee can constitute an ERISA plan.
This split in the courts makes it difficult for employers to determine whether certain arrangements would be covered by ERISA. Until the Supreme Court decides to answer the question, the application of ERISA to an employment agreement providing severance or deferred compensation may vary depending upon the location of the employer or employee – and which court decides any dispute between the parties. In some situations, we have filed protective top hat registration statements with the Department of Labor in the event that it is later determined that the executive’s compensation arrangement was an ERISA plan when it was unclear based on the facts and the conflicting federal cases.