No State-Law End-Run Around ERISA for Top-Hat Plans; “Equitable Surcharge” Is Not Available Under § 1132(a)(3)

Introduction

In Jerry Aldridge v. Regions Bank, No. 24-5603 (6th Cir. July 17, 2025), the U.S. Court of Appeals for the Sixth Circuit addressed two recurring ERISA questions with high-stakes implications for executives participating in unfunded “top-hat” deferred compensation plans:

Whether ERISA preempts state-law fiduciary, trust, contract, and negligence claims brought by plan participants against a plan’s trustee/administrator; and
Whether ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), permits participants to recover lost benefits as an “equitable surcharge.”

The plaintiffs were scores of former Ruby Tuesday, Inc. executives and managers who participated in two top-hat plans—the Executive Supplemental Pension Plan and the Management Retirement Plan. Ruby Tuesday created a rabbi trust administered by Regions Bank to facilitate payments under the plans. After a change in control, alleged noncompliance with trust and plan terms, and Ruby Tuesday’s insolvency and Chapter 11 filing, Regions paid trust assets into the bankruptcy estate pursuant to court orders. Participants—who had settled with the bankruptcy estate—then sued Regions in federal court, asserting:

State-law claims under Alabama law (breach of fiduciary duty, breach of trust, breach of contract, negligence); and
An ERISA § 502(a)(3) claim seeking an “equitable surcharge” equal to unpaid plan benefits.

The district court dismissed the state-law claims as preempted and granted summary judgment to Regions on the § 502(a)(3) claim. The Sixth Circuit affirmed, resolving both a preemption question and a remedies question that together reinforce ERISA’s uniformity and remedial exclusivity, even for top-hat plans that are exempt from ERISA’s fiduciary standards.

Summary of the Opinion

Express preemption under § 514(a) (29 U.S.C. § 1144(a)): The court held that the participants’ state-law fiduciary, trust, contract, and negligence claims are expressly preempted because they have a prohibited “connection with” ERISA-covered plans. Congress deliberately excluded top-hat plans from ERISA fiduciary duties so that executives would protect themselves by contract, not by heterogeneous state-law duties. Allowing state-law claims would supply “alternative enforcement mechanisms” that undermine ERISA’s exclusive remedial scheme.
Exclusive ERISA remedies apply even to contractual duties: Participants may not enforce contractual duties owed by a plan administrator via state-law contract claims; any effort to recover plan benefits or enforce plan-related promises must proceed under ERISA’s exclusive enforcement provision—typically § 502(a)(1)(B). Participants forfeited any argument to recharacterize their state-law claims under § 502(a)(1)(B).
No monetary recovery under § 502(a)(3): The participants’ request for lost benefits from Regions styled as an “equitable surcharge” is legal relief (money damages) not available under § 502(a)(3). Relying on Mertens v. Hewitt Associates and its own precedent in Helfrich v. PNC Bank, the court aligned with the Fourth Circuit’s Rose decision and treated “surcharge” as functionally damages, not “typically available in equity.” The Supreme Court’s contrary discussion in Amara was nonbinding dicta, later cabined by Montanile.
No new federal common-law cause of action: Courts cannot create additional causes of action or remedies beyond those enumerated in § 502(a).

Detailed Analysis

1. Precedents Cited and Their Role

ERISA preemption and exclusive remedies:
- Shaw v. Delta Air Lines and Rutledge: Framework for “reference to” versus “connection with” tests under § 514(a).
- Pilot Life v. Dedeaux and Travelers: State laws that provide “alternative enforcement mechanisms” to § 502(a) are preempted; ERISA’s remedial design is exclusive.
- Gobeille v. Liberty Mutual and Egelhoff v. Egelhoff: State regulation of core plan administration (reporting; beneficiary designations) is preempted due to uniformity imperatives.
- Mackey v. Lanier and Sixth Circuit cases (PONI; Smith v. Provident Bank): General state-law claims against nonfiduciary service providers or run-of-the-mill commercial relationships may escape preemption, but not suits implicating relationships among traditional ERISA entities for plan benefits.
Top-hat plan status and unfunded structure:
- Bakri v. Venture Mfg. Co.; In re IT Group; Simpson v. Mead; Paneccasio; Cogan: Top-hat plans are ERISA plans, but exempt from fiduciary, vesting, and funding rules; executives are expected to negotiate contractual protections.
- Demery; Moglia; IRS Rev. Proc. 92-64: Rabbi trusts can be used without “funding” the plan if assets remain available to general creditors upon insolvency and participants have no beneficial interest.
§ 502(a)(3) “equitable relief” line:
- Mertens and Great-West: “Equitable relief” means remedies typically available in equity; compensatory money damages are legal and unavailable under § 502(a)(3).
- Sereboff, McCutchen, Montanile: Equitable restitution is available only when the defendant holds specifically identifiable funds traceable to the plaintiff; claims against general assets are legal and barred. Montanile also diminishes reliance on Amara’s surcharge discussion.
- CIGNA v. Amara: Nonbinding dicta suggesting “surcharge” may be equitable in trust cases; the Sixth Circuit treats this as dicta narrowed by Montanile.
- Sixth Circuit: Helfrich v. PNC Bank—participants cannot obtain monetary compensation from a fiduciary under § 502(a)(3); Rochow (en banc)—cautions against duplicative recovery under § 502(a)(3) where § 502(a)(1)(B) supplies relief.
- Fourth Circuit: Rose v. PSA Airlines—“equitable surcharge” is damages and not typically available in equity; relied upon by the Sixth Circuit.

2. The Court’s Legal Reasoning

a. Express preemption: claims have an impermissible “connection with” ERISA plans

The court bypassed the “reference to” prong and found express preemption under the “connection with” prong. Functionally, every state-law claim sought the same thing: payment of plan benefits based on alleged misadministration. Because § 502(a)(1)(B) already provides the exclusive vehicle for recovering benefits under the terms of an ERISA plan, the state-law claims would create “alternative enforcement mechanisms” forbidden by Pilot Life and Travelers.

Substantively, plaintiffs attempted to impose state-law fiduciary/trust obligations on Regions as trustee of a rabbi trust. But ERISA deliberately exempts top-hat plans from fiduciary standards, reflecting congressional judgment that sophisticated executives protect themselves “through contract” rather than through multi-state public-law duties. Allowing state fiduciary standards would “put back in what Congress has taken out,” undermining uniformity and ERISA’s remedial exclusivity.

b. Contract claims must be brought, if at all, under ERISA’s exclusive remedial scheme

Plaintiffs argued they were merely enforcing Regions’ contractual obligations (e.g., change-in-control funding protections) through a state-law contract claim. The court held such claims, when they seek plan benefits or implicate the plan’s administration among traditional ERISA entities (participants, sponsor, administrator), must be pursued under ERISA—typically § 502(a)(1)(B)—not state law. Plaintiffs forfeited any argument to reframe their claims under § 502(a)(1)(B).

The court distinguished cases allowing state-law suits against nonfiduciary service providers by plan sponsors. Claims like PONI—a sponsor’s contract claim against a recordkeeper—are not ERISA governance disputes and do not seek plan benefits on behalf of participants. By contrast, participants suing a plan trustee for plan benefits lie at ERISA’s core.

c. Rabbi trust agreements and choice-of-law provisions cannot defeat ERISA

Although the IRS model rabbi trust includes a state choice-of-law clause, that clause does not permit participants to bypass ERISA’s exclusive remedies. Even if state law might govern certain disputes between a plan sponsor and the trustee, participants cannot use third-party beneficiary contract theories to recover plan benefits in state-law suits.

d. The narrow meaning of “equitable relief” forecloses “equitable surcharge” under § 502(a)(3)

The participants’ § 502(a)(3) claim requested an “equitable surcharge” equal to unpaid benefits. The court held this is legal relief, not “typically available in equity.” Four key points drove the holding:

Mertens controls: Monetary “compensation for losses” is damages, not equitable relief, even if equity courts sometimes awarded such relief in trust cases within exclusive equity jurisdiction.
“Surcharge” is a label for damages: Historical treatises and modern scholarship equate “surcharge” with damages; changing the label does not change the remedy’s legal character.
Amara is dicta and cabined: The Supreme Court later emphasized in Montanile that Mertens’s reading of § 502(a)(3) “remains unchanged,” relegating Amara’s surcharge discussion to nonbinding dicta.
Sixth Circuit precedent governs: Helfrich bars monetary recovery from fiduciaries under § 502(a)(3), and nothing in intervening Supreme Court decisions overrules it.

The court also emphasized that equitable restitution was off the table: Regions no longer possessed any specifically identifiable funds after complying with bankruptcy orders. Under Montanile and Great-West, a claim against a defendant’s general assets seeks legal relief.

e. No new federal common-law cause of action

The court rejected plaintiffs’ invitation to craft a new federal common-law damages remedy for top-hat plans. Supreme Court precedent (Mertens, Russell, Sandoval) forecloses judicial creation of remedies beyond § 502(a)’s “carefully crafted” scheme. While courts may develop a federal common law of ERISA contract interpretation within § 502(a) causes, they cannot add new causes or remedies.

3. Likely Impact and Practical Implications

For executives in top-hat plans: The opinion confirms that executives cannot rely on state-law fiduciary or tort remedies against a plan administrator or rabbi trust trustee when benefits are lost. Protection must be negotiated into plan documents themselves, with enforcement through ERISA (typically § 502(a)(1)(B) to “recover benefits due under the terms of the plan”). Drafting precision matters: build fiduciary-like obligations and payment triggers directly into the plan text and rabbi trust in a way that can be enforced via § 502(a)(1)(B).
For plan sponsors and trustees: The decision reduces exposure to a patchwork of state-law theories brought by participants, preserving federal uniformity. Trustees remain accountable through ERISA suits that enforce plan terms, but participants may not pursue state-law fiduciary/trust claims for money. Sponsor–service provider disputes that are genuinely collateral to plan governance may still proceed under state law (e.g., PONI-type claims by sponsors).
Litigation strategy in the Sixth Circuit: Plaintiffs must plead ERISA causes precisely. If seeking benefits or enforcement of plan-related obligations, § 502(a)(1)(B) is the correct vehicle. § 502(a)(3) is limited to truly equitable relief (injunctions, reformation, equitable restitution with specific, traceable funds, equitable estoppel subject to circuit standards). Monetary loss claims repackaged as “surcharge” are barred.
Bankruptcy overlay for rabbi trusts: The court underscores the inherent insolvency risk of top-hat plans: rabbi trust assets are available to creditors and not owned by participants. Once assets are transferred to the bankruptcy estate (or dissipated), equitable restitution is typically unavailable.
Doctrinal alignment and possible national trend: The Sixth Circuit aligns with the Fourth Circuit’s Rose on rejecting surcharge under § 502(a)(3) and leans on Mertens/Montanile. Some circuits previously suggested broader post-Amara availability of surcharge; this opinion deepens the post-Montanile recalibration toward a narrow view of § 502(a)(3).
Complete vs. express preemption: Although the court did not decide “complete preemption,” it reinforces that express preemption is broader and dispositive when participants seek plan benefits via state law. Removal and jurisdictional posture may vary, but the merits result (dismissal) will likely be the same.

Complex Concepts Simplified

Top-hat plan: A deferred compensation plan for a select group of management or highly compensated employees. It must be “unfunded”—benefits are paid from the employer’s general assets and remain subject to creditors. Top-hat plans are ERISA plans but are exempt from ERISA’s fiduciary, vesting, and funding requirements.
Rabbi trust: A trust used to hold assets intended to pay deferred compensation. It helps signal intent to pay and may improve participant confidence, but the assets remain available to the employer’s general creditors upon insolvency; participants have no beneficial ownership until actual payment.
ERISA preemption:
- Express preemption (§ 514(a)): ERISA supersedes state laws that “relate to” ERISA plans (those that have a “connection with” or “reference to” such plans). State laws providing alternate enforcement mechanisms for plan benefits or imposing state fiduciary standards on plan administrators are typically preempted.
- Complete preemption: A jurisdictional doctrine that converts certain state-law claims into federal ERISA § 502(a)(1)(B) claims for removal purposes; not necessary to reach here.
ERISA’s exclusive remedies: Section 502(a) provides the only avenues for relief. For benefits, use § 502(a)(1)(B). Section 502(a)(3) permits only “equitable relief,” understood narrowly as remedies traditionally available in equity (e.g., injunctions, reformation, equitable restitution with traceable funds), not compensatory money damages.
Equitable restitution vs. legal restitution: Equitable restitution requires recovery of specific, identifiable funds in the defendant’s possession; if the defendant no longer holds those funds (or they are untraceable), any award is against general assets and becomes legal restitution (damages), which § 502(a)(3) does not allow.
“Equitable surcharge”: A historical equity-court term used in trust cases for monetary awards against fiduciaries. Despite the label, modern ERISA jurisprudence treats such monetary compensation for losses as damages, not equitable relief, and therefore unavailable under § 502(a)(3).
“Relations among traditional ERISA entities”: Disputes involving participants, plan sponsors, and plan administrators about plan benefits or administration ordinarily fall within ERISA’s domain and are preempted if framed under state law.

Conclusion

Aldridge v. Regions Bank squarely holds that participants in top-hat plans cannot use state fiduciary, trust, contract, or negligence law to recover plan benefits or to impose state-law conduct standards on plan administrators. Congress purposefully exempted top-hat plans from ERISA’s fiduciary regime, expecting executives to protect their interests by contract and to enforce those contractual protections through ERISA’s exclusive remedial scheme—principally § 502(a)(1)(B). The court further clarifies that § 502(a)(3) remains a narrow equitable pathway that does not allow money damages relabeled as “equitable surcharge,” aligning with Mertens, reaffirmed by Montanile, and consistent with Sixth Circuit precedent in Helfrich and the Fourth Circuit’s Rose.

The practical message is clear: executives must negotiate robust plan terms and enforcement mechanisms on the front end; participants seeking benefits must use § 502(a)(1)(B); and parties cannot circumvent ERISA’s uniform, exclusive remedial structure through state law or by rebranding damages as equity. The decision fortifies national uniformity in ERISA plan administration and sets a firm boundary against state-law end-runs in the top-hat plan context.