I Hope You’re Happy Now … Coca Cola Top Hat Plan Lawsuit Highlights Importance of Careful Plan Drafting

by Alex Smith

A recent decision by a Federal district judge in a lawsuit challenging a surviving spouse’s claim to survivor benefits under Coca Cola’s executive retirement plan, a nonqualified top hat plan, highlights the importance for careful attention to plan drafting and informal interpretations of the plan in communications with participants and potential beneficiaries. The deceased executive’s surviving spouse filed a lawsuit against Coca Cola seeking surviving spouse benefits under the top hat plan.

The deceased executive retired in 1996 and began receiving benefits in the form of a 100% joint and survivor annuity under both the pension plan and the executive retirement plan while married to his first wife. The deceased executive’s first wife passed away in 2008. In 2011, prior to marrying his second wife, the executive reached out to Coca Cola to determine whether his spouse at death would be eligible to receive the survivor benefits under the plans. A human resources representative indicated that the surviving spouse at the executive’s death would be entitled to the survivor benefits under the executive retirement plan but not the pension plan. Following the executive’s death in 2023, his surviving spouse reached out to Coca Cola to commence survivor benefits under the executive retirement plan. She was initially informed she would receive survivor benefits under the executive retirement plan but eventually informed she was not entitled to the benefit.

The court denied Coca Cola’s motion to dismiss because the executive retirement plan document was ambiguous regarding the definition of “surviving spouse.” The term was not defined in the executive retirement plan and the plan did not specifically incorporate the pension plan’s definition of surviving spouse, which was based on the participant’s spouse when benefits commenced. In addition, the court determined that the executive’s widow had stated an estoppel claim because of the representations of Coca Cola’s human resources representatives indicating that she was entitled to a survivor benefit.

While the court’s decision is not surprising at the motion to dismiss stage when all facts alleged by the plaintiff are accepted as true and all inferences are construed in favor of the plaintiff, this decision serves as a reminder for employers (i) to ensure that plans are unambiguously drafted consistent with their intent, and (ii) to be careful when providing informal interpretations of the plan to participants and beneficiaries. It appears this lawsuit could have been avoided if the plan was drafted to specify that a surviving spouse had to be married to the participant when benefits commenced to be eligible for survivor benefits. Even if the lawsuit could not have been avoided, the employer’s motion to dismiss may have been granted to end the lawsuit prior to discovery if the plan document was unambiguously drafted and the employer did not informally communicate to the participant and beneficiary that a survivor benefit was available.