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May 01, 2024 at 01:58 PM
What You Need to Know
- Kelly Milligan contends he had to forfeit over $500,000 in deferred commissions.
- Merrill's parent says its compensation plan complies with all relevant laws.
- The plaintiff says the plan violates the Employee Retirement Income Security Act.
A former Merrill Lynch financial advisor has filed a putative class-action lawsuit against the investment company and its parent, Bank of America Corp., over a rule requiring advisors to forfeit commissions allocated to an awards plan if they leave before the funds have vested.
Plaintiff Kelly Milligan contends 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.
Milligan, a California resident with various professional certifications, forfeited over $500,000 in deferred compensation due to the cancellation rule when he left Merrill Lynch, where he worked as a financial advisor from 2000–2021, according to the suit, filed Tuesday in U.S. District Court for North Carolina’s Western District.
The complaint seeks to recover what it defines as deferred compensation that advisors “wrongfully forfeited” when they left Merrill, and asks the court to rule the plan is subject to ERISA and that the cancellation rule violates ERISA’s vesting and anti-forfeiture requirements.
“We are confident the WealthChoice Plan is not covered under ERISA and that our compensation program complies with all relevant laws,” Bank of America spokesman Bill Halldin told ThinkAdvisor by email Thursday.
Financial advisors at Merrill receive salary and commissions, with a portion of commissions automatically allocated to the WealthChoice plan, according to the suit. Commissions allocated to the plan vest in eight years, the suit says.
The plan qualifies as an “employee benefit pension plan” under ERISA because it “results in a deferral of income by employees for periods extending to the termination of covered employment or beyond,” Milligan argues, adding that financial advisors are paid for revenue they generate years after they perform the work.
Advisors receive the value of their plan accounts after their employment ends if they retire, are laid off or become disabled, the lawsuit says.
