Opinion ID: 2604
Heading Depth: 2
Heading Rank: 1

Heading: 1991 Deferred Compensation Plan

Text: Paneccasio elected to participate at its inception in the Alco Standard Corporation 1991 Deferred Compensation Plan (the 1991 Plan), which was offered to certain highly compensated employees of Alco and its subsidiaries including Unisource. The 1991 Plan, which was a type of plan commonly referred to as a top hat plan, furnished benefits supplemental to the pension plan benefits already provided by Unisource. (Paneccasio had previously vested in the pension plan and in Alco's 1980 deferred compensation plan.) The 1991 Plan allowed participants to defer a portion of their income until retirement and provided two different life insurance components: coverage for the participant at a certain level prior to retirement, and transfer of a life insurance policy to the participant at age 65. Eligible employees had the choice of selecting among three options under the Plan. Paneccasio chose Option II, which provided that when he retired and reached age 65 he would receive an annuity in the amount of $15,000 per year for ten years, and would own a life insurance policy with a $95,000 cash value and a paid-up death benefit of $375,000. If Paneccasio died before age 65, the death benefit would be $450,000. Paneccasio had the option to elect vesting after five years, which he did when he signed up. An employee who terminated employment before vesting would no longer be allowed to participate in the Plan, and his aggregate salary deferrals at the time his employment ended would be reimbursed without interest. The 1991 Plan also gave Alco's Board of Directors the sole authority to terminate the Plan: Termination. The Board of Directors of Alco shall have the right to terminate the Plan in its entirety and not in part at any time it determines that proposed or pending tax law changes or other events cause, or are likely in the future to cause, the Plan to have an adverse financial impact upon Alco. Upon termination, a participant would no longer be entitled to an annuity and life insurance benefit. Instead, a participant would be entitled only to a lump-sum distribution, in amounts calculated based on whether the participant's benefit payments had commenced (Paneccasio's payments had not when the Plan was terminated): Alco shall have no liability or obligation under the Plan or the Participant's Participation Agreement (or any other document), provided that 1) Alco distributes, in lump sum, to any participant whose benefits have not commenced, the value of the amount of the Participant's deferrals to the date of termination plus interest (compounded annually) at a rate of 6% per annum; and 2) Alco distributes, in a lump sum, to any Participant whose benefit payments have commenced, all amounts thereafter due, in an amount as calculated in accordance with Paragraph [20], Acceleration of Benefits. Such lump-sum distribution, at Alco's election, may be made in the form of cash, or life insurance, or both. (emphasis added). At his deposition, Paneccasio testified that he read and understood the terms of the 1991 Plan when he elected to participate. He further testified that he had read the termination provision of the Plan, acknowledged that the Board had the right to terminate the Plan under that provision, and understood what benefit would be payable if the Plan were terminated.