Fourth Circuit Rules Merrill Lynch's Eight-Year Deferred Bonus Program Falls Outside ERISA's Pension-Plan Protections

The underlying dispute began when Kelly Milligan, a Merrill Lynch financial advisor who worked there from 2000 to 2021, voluntarily resigned to cofound a competitor investment firm. His resignation triggered cancellation of his unvested WealthChoice Awards under the program's terms. Milligan filed a putative class action in the Western District of North Carolina arguing that the WealthChoice program qualified as an employee pension benefit plan under ERISA, which would have subjected it to the statute's vesting, anti-forfeiture, and fiduciary-duty requirements. District Judge Kenneth D. Bell granted summary judgment to Merrill Lynch, and Milligan appealed.

The Fourth Circuit, in an opinion by Judge Wynn joined by Judges Wilkinson and Berner, affirmed. The court held that the WealthChoice program falls within the Department of Labor's bonus-program regulation, 29 C.F.R. § 2510.3-2(c), which excludes from ERISA's pension-plan definition bonus payments that are not systematically deferred to the termination of covered employment or beyond and do not provide retirement income. The court rejected Milligan's argument — grounded in Loper Bright Enterprises v. Raimondo — that the regulation exceeded the agency's authority, concluding that Congress expressly delegated to the Secretary of Labor the power to define trade terms used in ERISA, that the regulation was promulgated less than one year after ERISA's enactment and has remained unchanged, and that Congress amended the relevant ERISA provision in 1980 without disturbing the regulation.

Applying a non-exhaustive list of factors it drew from sister-circuit precedent, the court held the WealthChoice program comfortably qualifies as a bonus plan. The program requires advisors to exceed a minimum production threshold to qualify, uses an unfunded notional account representing only a contingent promise of payment, does not set aside any income the advisor would otherwise immediately receive, and triggers automatic mandatory payment upon vesting rather than allowing advisors to elect deferral until termination or retirement. Critically, the parties agreed that approximately 92% of the advisors who were paid WealthChoice Awards between 2018 and 2024 were current employees — meaning payments were not systematically deferred to termination. The program's own documents describe its purpose as encouraging advisors to remain employed and aligning their interests with the company's business objectives, with no presentation as a retirement vehicle.

Judge Wilkinson wrote separately to underscore the stakes of Milligan's proposed interpretation. He argued that reading ERISA's pension-plan definition to cover any compensation scheme that generates even a single post-termination payment would sweep ordinary payroll practices into ERISA's coverage, expose employers to retroactive civil and criminal liability, and potentially cause employers to eliminate humanitarian exceptions for retired, disabled, and deceased employees — the very workers ERISA was designed to protect. He invoked the principle that courts should not sanction major socioeconomic disruption absent clear congressional direction, noting that Congress has not acted to disturb the bonus-program regulation in the more than fifty years since it was promulgated.

The decision is published and binding in the Fourth Circuit. Six amicus parties — including the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, the Society for Human Resource Management, the American Benefits Council, the ERISA Industry Committee, and the Center on Executive Compensation — filed briefs supporting Merrill Lynch, signaling the breadth of industry concern about the case's potential reach.