Merrill Lynch Faces ERISA Lawsuit Over Allegedly Withholding Advisor Commissions

The Employee Retirement Income Security Act (ERISA) protects employee benefits, including retirement plans and certain commission-based compensation plans. A new class action lawsuit alleges Merrill Lynch violated ERISA by denying former financial advisors access to millions of dollars in commissions earned through the company's WealthChoice Contingent Award Plan.

Former Advisor Sues for Unpaid "Forfeited" Commissions

Plaintiff Kelly Milligan, a former Merrill Lynch financial advisor, filed the lawsuit against the company and its parent company, Bank of America Corp. Milligan alleges Merrill Lynch withheld a portion of his commissions invested in the WealthChoice plan through an unfair "cancellation rule."

According to the lawsuit, Merrill Lynch automatically allocates a portion of advisor commissions to the WealthChoice plan, with the funds vesting over eight years. However, Milligan argues the company's cancellation rule forces advisors to forfeit these vested commissions if they leave the firm before the full eight years are up.

Milligan claims he lost over $500,000 due to the cancellation rule and seeks to recover his and potentially thousands of other former advisors' commissions.

ERISA Vesting Rules and the Lawsuit

The Employee Retirement Income Security Act of 1974 is a federal law that sets minimum standards for retirement and health plans, to provide protection for people in these plans.

ERISA sets minimum standards for participation, vesting, benefit accrual and funding, provides fiduciary responsibilities for those who manage and control plan assets and gives participants the right to sue for benefits and breaches of fiduciary duty.

The lawsuit argues that the WealthChoice plan qualifies as an ERISA-protected plan and that the cancellation rule violates its vesting requirements.

What is the Lawsuit Asking For?

Milligan seeks a court order declaring the cancellation rule illegal under ERISA and forcing Merrill Lynch to:

• Repay all commissions forfeited by former advisors due to the cancellation rule since April 30, 2018. (Targets specific timeframe for potential class members)
  
  
• Change the WealthChoice plan to comply with ERISA vesting rules. (Highlights the desired policy change)
  
  
• Disgorge any profits Merrill Lynch earned from the allegedly improper withholding of commissions. (Focuses on potential financial consequences for Merrill Lynch)

The lawsuit could impact thousands of former Merrill Lynch advisors who left the company after April 2018 and forfeited commissions under the cancellation rule.

Last year, Merrill Lynch faced a class action lawsuit alleging it failed to pay clients a reasonable interest rate on cash in retirement accounts. 

Case Details

• Lawsuit: Milligan v. Merrill Lynch et al
• Case Number: 3:24-cv-00440
• Court: U.S. District Court for the Western District of North Carolina. 

Plaintiffs' Attorneys:

• Thomas R. Ajamie, John S. “Jack” Edwards, Jr. and Courtney D. Scobie (Ajamie LLP)
• John D. Hurst, Matthew P. Jasinski, and Douglas P. Needham (Motley Rice LLC)
• Robert A. Izard and Christopher M. Barrett (Izard, Kindall & Raabe LLP)