On October 13, 2026, the Supreme Court denied certiorari in Aldridge v. Regions Bank, No. 25-590. That ends a case brought by 96 former Ruby Tuesday managers and executives who lost deferred compensation when the restaurant chain collapsed — and it leaves standing a rule that every participant in a nonqualified plan should understand before deferring another dollar.
The Carve-Out That Makes Deferral Possible
A "top-hat" plan is deferred compensation for "a select group of management or highly compensated employees." Identical language appears in three separate places in ERISA, and each one excludes these plans from a different protection: minimum participation and vesting rules, funding rules, and fiduciary responsibility rules — including the requirement that plan assets be held in trust.
That last exemption is not a loophole. It is the whole mechanism. If a nonqualified plan's assets were held in a genuine trust beyond the employer's creditors, participants would generally be taxed as soon as they vested. The deferral works because the money is still, legally, the company's.
Why the Rabbi Trust Could Not Save Them
Employers address this with a "rabbi trust," which shields assets from creditors — until the sponsor becomes insolvent. At that point participants hold only the rights of unsecured general creditors. Many plans use the IRS model language in Revenue Procedure 92-64.
So the protection and the tax benefit are mutually exclusive by design. A rabbi trust that actually protected you in bankruptcy would not be a rabbi trust.
Ruby Tuesday's trust went further: a change-of-control provision required full funding of all benefits if ownership changed. NRD Capital bought the company in 2017. Participants alleged the trust was never fully funded afterward and that the trustee did not enforce the obligation. The board terminated the plans on March 1, 2019, authorizing lump sums between March 1, 2020 and March 1, 2021. Ruby Tuesday then directed the trustee to suspend payments scheduled after August 1, 2020, told it on September 2, 2020 that it was insolvent, and filed Chapter 11 on October 7, 2020. The trust was liquidated into the bankruptcy estate.
No Fiduciary Duty, and No Damages
The Sixth Circuit held that state-law claims for breach of fiduciary duty, breach of trust, breach of contract and negligence were all preempted, because Congress "deliberately omitted" those duties on the theory that high-level employees can protect themselves by contract. Participants could not "use state law to put back in what Congress has taken out."
Note the asymmetry: top-hat plans escape ERISA's protections but remain inside ERISA's preemption. The court then rejected the remaining ERISA claim for "surcharge," finding the requested recovery was compensatory damages, not the equitable relief §502(a)(3) permits.
The Second, Fifth, Seventh, Eighth and Eleventh Circuits allow surcharge to some degree; the Fourth and Sixth do not. The Solicitor General told the Court in August that the decision below was wrongly decided but that the case was an unsuitable vehicle. The Court passed. The split survives, so the remedy still depends on geography.
Practical Takeaways
- Deferring compensation is a credit decision, not an investment decision. You are lending to your employer, unsecured, for years. Weigh its solvency, not just the tax savings.
- Fill protected space first. 401(k) and IRA assets are held in trust and insulated from your employer's creditors. Top-hat money never is.
- Defer only what you can afford to lose outright, and spread distribution elections across several years rather than one lump sum — payment timing was the difference between recovery and loss here.
- A funding clause is not security. With no ERISA fiduciary standing behind it, enforcement depends on the trustee's contractual duties alone.
- Ask which circuit governs your plan. It determines what relief, if any, exists.
Sources: Supreme Court Docket No. 25-590, Aldridge v. Regions Bank (cert. denied Oct. 13, 2026); Aldridge v. Regions Bank, No. 24-5603 (6th Cir. July 17, 2025); Brief for the United States as Amicus Curiae (Aug. 31, 2026); ERISA §§201(2), 301(a)(3), 401(a)(1); 29 U.S.C. §1132(a)(3); IRS Revenue Procedure 92-64; PLANADVISER and PLANSPONSOR coverage, October 2026.