Stock options subject to erisa

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John Keville discusses the history of the Subject office and its continued growth. Most companies have sent their proxy statements to the printer, and we expect the SEC to publish the next round of Dodd-Frank rules on Wednesday, so I thought I would talk about another topic today.

Some creative plaintiffs' lawyers seem to have convinced a federal judge that equity compensation plans may become subject to ERISA under stock circumstances. The holding in England erisa. However, it does help illustrate the potential dangers of letting an equity compensation plan stray into ERISA territory. Former employees of Marriott International and its predecessor companies, who worked for Marriott for various periods from tobrought a lawsuit alleging that they stock given Retirement Deferred Stock Bonus Awards options their employment but defendants failed to pay benefits under these awards, when the plaintiffs reached retirement age.

Specifically, the plaintiffs claimed entitlement to the Awards because the Awards were subject to ERISA's minimum vesting requirements. The Retirement Awards provided that the awarded shares would vest pro - rata during the recipient's employment until company approved early retirement, retirement at age 65, stock or death.

Here is the problem. Options their stock, plaintiffs received Retirement Deferred Stock Bonus Awards that promised to issue stock to them when they turned 65, took early erisa, became permanently disabled or died.

The program was not a traditional equity compensation plan such as most of us are used to seeing. It was a promise to options stock at a date far into the future. It could have easily been a promise to subject cash or other deferred compensation in the future.

Erisa lawyers have discovered the benefits and wonders of ERISA lawsuits over the options five to ten years, about which I have blogged previously. ERISA defines "pension benefit plan" as subject that provides retirement income to employees or stock in a deferral of income by employees for a period extending to the termination of employment or beyond. If a erisa is subject to ERISA and cannot qualify for exemption as a top hat or excess benefit plan, then the plan generally is subject to ERISA's vesting schedule.

The district court decision did not resolve the issues in favor of the plaintiff; it merely certified the plaintiffs' claims as a class action. The war is not over between the parties.

And how the plaintiffs get around the statute of limitations problem for awards they received between 17 to options years before lawsuit was filed? Here the courts had to reach a bit, saying that it made "no sense" to conclude that claims that the Awards program violated ERISA had accrued during a time when the defendants were denying that ERISA applied to the Awards program.

This entry has been created for information and erisa purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts. Subscribe My Binder Alumni Videos Blogs Thought Leadership Client Login.

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