: This continuing series of articles is intended to provide deep insight into trends, events, and issues that impact the design and operation of nonqualified executive benefit plans (sometimes referred to as Top Hat plans). We occasionally highlight court cases that may be relevant to our clients.

1. Washington Report
(November 13, 2015) Ponte Vedra Beach, Florida
Acceleration of Benefits following
Nonqualified Benefit Plan Terminations
SUMMARY: This continuing series of articles is intended to provide deep insight into trends,
events, and issues that impact the design and operation of nonqualified executive benefit plans
(sometimes referred to as Top Hat plans). We occasionally highlight court cases that may be
relevant to our clients.
In this court case, the 11th Circuit held that the termination of a nonqualified deferred
compensation plan and acceleration of the participant's annuity benefits to a present value lump
sum does not "adversely affect" the participant's benefit. The court concluded that the fact that
the lump sum payment results in accelerated as well as potentially higher taxes to the participant
does not give rise to a claim under the Employee Retirement Income Security Act ("ERISA").
CITATION: Taylorv.NCR Corp.,No.1:14-cv-2217-WSD(U.S.Dist.Ct.N.D.Ga.,Sept 23, 2015);
Holloman v. Mail-Well Corp., 443 F.3d 832 (11th Cir., 2006).
RELEVANCE: This case exemplifies the importance of carefully drafting plan documents. Here
the court analyzed and followed the plan documents that permitted the plan to be terminated as
long as it did not "adversely affect" accrued benefits. Importantly, the court concluded that a
deferral of compensation is not a protected benefit under ERISA.

2. FACTS: Plaintiff, Keith Taylor was a 21-year NCR employee. In 1999, he became a participant of
NCR's nonqualified "top hat" plan for senior employees. Mr. Taylor retired in 2006, electing a
100% joint and survivor life annuity benefit, with an annual benefit of approximately $29,000. In
2013, NCR terminated the plan and paid Mr. Taylor a lump sum of approximately $440,000
representing the actuarially calculated net present value of the life annuity. After state and federal
income tax withholding, Taylor received $254,063.
The plan documents allowed the plan to be terminated provided that "no such action shall
adversely affect ... accrued benefits..."
Taylor sued, arguing that the termination of the plan "resulted in a 52.5% reduction ..." of his
benefit, due to adverse tax consequences and the 5% discount rate applied to calculate the net
present value. He contested the application of any discount rate at all, but did not argue that the
5% was the wrong rate.
NCR filed a motion to dismiss. The court dismissed Taylor's claims finding that:
1. NCR was permitted to terminate the plan under the terms of the plan document,;
2. The tax impact is not an ERISA protected benefit; and
3. Using a discount rate to calculate the present value of a future benefit is not a
reduction of benefits and therefore, does not "adversely affect ... accrued benefits" in
violation of the plan documents.
Citing Hollomanv.Mail-WellCorp.,the courtconcludedthatapplying a discount rateto calculate
the present value of future payments is simply a sensible way of calculating the real value of the
benefit, not a reduction.
About Fulcrum Partners LLC:
Fulcrum Partners LLC is one of the nation's leading and largest executive benefits consultancy.
Its consultants focus on an integrated approach to the design, financing and plan administration
of executive benefit programs. Fulcrum Partners offers its clients a unique combination of
industry experts with diverse skill sets, targeted experience, and in-depth expertise in executive
compensation and benefits consulting. Fulcrum Partners is a wholly independent, member-
owned firm dedicated to help clients enhance their Total Rewards Strategy.
About AALU:
The AALU's mission to promote, preserve and protect advanced life insurance planning for the
benefit of our members, their clients, the industry and the general public reflects each of our
primary issue priorities.
Contact:
Fulcrum Partners
Bruce Brownell
904.296.2563
press@fulcrumpartnersllc.com

3. Disclosures
Fulcrum Partners does not provide legal, tax, and/or accounting consulting and/or advice. We
have provided you with this material strictly in its capacity as an employee benefits consulting
firm. The information contained herein is based on our interpretation of the existing Internal
Revenue Code, and the application of relevant statutes, regulations, court rulings, and
familiarity with this material as it currently exists. Based on the legal and accounting
complexity of employee benefit issues, along with the changing statutory and regulatory
environment, we strongly recommend that you consult with, and seek the advice of, your legal
and/or accounting advisor(s) regarding this material.
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