A former Merrill Lynch broker’s attempt to claim more than $500,000 in deferred compensation has been rejected by a U.S. district court in North Carolina. The court’s decision underscores Merrill’s position that such payments are bonuses, not guaranteed retirement benefits. Kelly D.
Milligan, a broker based in Danville, California, who was with Merrill for 21 years before leaving in 2021 to help found Quorum Private Wealth, sued Merrill, its parent company, Bank of America, and related parties in May. Milligan claimed that the firms had used his departure to withhold money he had earned during his employment. Milligan is among numerous brokers using legal actions to secure unpaid deferred compensation, which is typically not paid until it “vests” years later.
Advisors have argued that delayed payments mean deferred comp is akin to retirement benefits protected under the federal Employee Retirement Income Security Act of 1974 (ERISA). However, Merrill and other large wealth managers argue that deferred compensation is essentially a bonus used to reward employees for staying with the firm for a set period of time. North Carolina federal judge Kenneth Bell dismissed Milligan’s claims, stating Merrill’s deferred comp policies are “designed to reward long-term financial advisors who help the company meet financial goals.”
Merrill’s stance on deferred compensation
He emphasized that awards such as salary and commission are not guaranteed; employees must meet production thresholds and remain with the company until the award vests, typically eight years later. In the court proceedings, Merrill’s legal team described deferred comp as a bonus to foster employee loyalty.
According to the quoted remarks, ” By awarding a portion of a financial advisor’s incentive compensation in the form of a cash award that becomes earned and payable over time, the company intends to encourage the financial advisor to remain employed and align their interests with the company’s business objectives. ” Doug Needham, one of Milligan’s attorneys, said they are considering an appeal. “We are disappointed in the court’s decision and believe it departs from the ERISA statute’s plain language,” Needham commented.
Judge Bell’s order will unlikely end Merrill’s battles over deferred comp claims. In February, seven other former Merrill advisors filed a motion to intervene in Milligan’s lawsuit, aiming to join a potential class-action suit. Although their motion was ultimately unsuccessful, they noted at least 32 ongoing FINRA arbitration proceedings involving deferred comp disputes with Merrill and at least 240 former advisors.
Lawyers have also reported representing hundreds of brokers in similar cases against Morgan Stanley. Merrill declined to comment on the case.
Image Credits: Photo by Saúl Bucio on Unsplash
