Eleventh Circuit Affirms Liability for Breach of Top Hat Plan Terms Where Lump-Sum Payouts Reduced Promised Lifetime Annuities

In Hoak v. Ledford, No. 24-12148, —F.4th—-, 2025 WL 2450919 (11th Cir. Aug. 26, 2025) (Before: Jordan and Newsom, Circuit Judges, and Honeywell, District Judge), the Eleventh Circuit addressed whether NCR Corporation breached the terms of several “top hat” defined benefit plans under ERISA by converting participants’ promised life annuities into lump-sum payments upon plan termination. Affirming the Northern District of Georgia’s summary judgment for participants, the court held that NCR’s lump-sum payments “adversely affected” the accrued benefits of at least some participants in violation of the plans’ unambiguous terms and that the district court’s make-whole remedy was appropriate.

NCR established five unfunded “top hat” plans to provide supplemental retirement benefits—structured as fixed monthly annuities—for senior executives. The plans granted NCR the right to terminate but expressly conditioned termination on the proviso that “no such action shall adversely affect” the “accrued benefits” of “any” participant. In 2013, NCR, seeking to reduce pension liabilities, terminated the plans and paid lump sums to 197 participants. The payments were calculated using mortality tables, actuarial assumptions, and a 5% discount rate intended to reflect NCR’s risk of default. Participants brought suit under ERISA § 502(a)(1)(B), alleging that the lump-sum payouts failed to preserve their promised lifetime benefits.

The district court found for the participants, holding that NCR’s conversion of life annuities into fixed lump sums violated the plans’ terms. It emphasized that the lump-sum payments inherently deprived participants who outlived actuarial expectations of their full annuity value, thus “adversely affecting” accrued benefits. The court also faulted NCR’s use of a 5% discount rate, which reduced payouts to account for NCR’s own credit risk, effectively shifting longevity and default risk onto participants. The court ordered NCR to pay the difference between the lump sums and the cost of purchasing replacement annuities as of the termination date, plus prejudgment interest.

On appeal, NCR argued that (1) the administrator’s interpretation of “adversely affect” was entitled to deferential review, (2) the lump-sum payments satisfied the plans’ requirements, and (3) the district court’s remedy was an abuse of discretion. The Eleventh Circuit rejected each argument.

Standard of Review

The court declined to apply deferential review, explaining that while ERISA may allow deference to administrators’ interpretations, such deference is inapplicable when plan language is unambiguous. Citing Meadows ex rel. Meadows v. Cagle’s Inc., 954 F.2d 686 (11th Cir. 1992), and other circuits’ precedent, the court noted that unambiguous terms must be enforced as written, and the plans here expressly limited the administrator’s interpretive authority by prohibiting modification of benefits.

Interpretation of “Adversely Affect” and “Any”

The Eleventh Circuit undertook a textual analysis of the critical language, holding that “adversely affect” plainly means to negatively impact in any way and that “any” has an expansive, all-inclusive meaning. By their ordinary meanings, the court concluded, the plans were violated if even a single participant’s accrued benefits were diminished. The evidence showed that approximately half of the participants were expected to outlive the actuarial assumptions underlying NCR’s lump-sum calculations, ensuring that their lifetime benefits were reduced. The court thus held that NCR’s payments breached the plans’ core promise to provide life annuities for as long as each participant lived.

Remedy and Prejudgment Interest

The Eleventh Circuit upheld the district court’s remedy as a proper exercise of discretion. Ordering NCR to pay the cost of replacement annuities ensured participants received what they were contractually owed. The court rejected NCR’s proposed remedy of reinstating annuities prospectively, finding it inconsistent with ERISA’s purpose and, given the irrevocable nature of plan terminations, impractical. The court also affirmed the award of prejudgment interest, reasoning that participants had been deprived of funds they should have received in 2013, and that interest was necessary to make them whole.

The Eleventh Circuit’s decision reinforces that top hat plans, though exempt from certain ERISA requirements, remain enforceable contracts whose unambiguous terms will be upheld. By holding that a lump-sum payout which leaves some participants worse off “adversely affects” accrued benefits, the court underscored the risks employers face when altering promised benefit structures and affirmed the principle that ERISA plan participants are entitled to exactly what their plans promise.