Merrill Asks Judge to Dismiss Ex-Advisor's Suit Over Deferred Comp

What You Need to Know

Former Merrill advisor Kelly Milligan contends an award plan violates ERISA.
Milligan says he forfeited $500,000 in commissions when he left the firm before the eight-year vesting period.
The firm says the money in the plan is not deferred commissions but a bonus intended to enourage advisor retention.

Merrill Lynch and parent Bank of America have asked a federal judge to dismiss a presumptive class action lawsuit challenging a rule requiring advisors to forfeit any unvested funds allocated to an awards plan if they leave the firm.

Former Merrill financial advisor Kelly Milligan contends in the suit that the eight-year vesting schedule in Merrill’s WealthChoice Contingent Award Plan, and its “cancellation rule” requiring advisors to forfeit unvested money, violate the U.S. Employee Retirement Income Security Act of 1974.

In a Sept. 30 filing in U.S. District Court for North Carolina’s Western District, however, Merrill contends that ERISA doesn’t apply to the the WealthChoice plan. Merrill asked the judge to throw out the case with prejudice, which would mean it couldn’t be returned to court.

The award program isn’t a pension plan but rather is a “bonus program” that is “designed to reward active employees for continuing to work and improve performance,” Merrill contends in its motion. The program aims to keep advisors employed at Merrill, and generally they must be employed to receive awards, the firm says.

“This lawsuit is no more than an opportunistic attempt to capitalize on an implausible interpretation of ERISA that would stretch the statute far beyond what Congress intended when seeking to protect vested retirement benefits,” Merrill argues.

Merrill disputes Milligan’s argument that the WealthChoice plan funds represent commissions that advisors earned.

Milligan was a successful financial advisor at Merrill “and was well-compensated for it,” the firm contends. When he left, however, he had not yet earned certain contingent incentive awards granted annually under the plan, it says.

“By the express terms of (Milligan’s) award agreements, he did not earn these awards unless and until he satisfied the conditions for doing so — most notably, to stay at Merrill for eight years, when the awards vest. Indeed, over his tenure, (he) satisfied these conditions for prior WealthChoice awards, for which he was paid once earned.