An Ex-Merrill Broker Loses Appeal in Deferred Compensation Dispute
An ex-Merrill broker, Kelly D. Milligan, recently lost his appeal in a dispute where he contended that his former firm owed him repayment of deferred compensation he left behind when he departed to start his own firm. The Fourth Circuit Court of Appeals ruled against Milligan in his attempt to claim over $500,000 in deferred compensation, arguing that the payments fell under the federal retirement law known as the Employee Retirement Income Security Act of 1974 (ERISA). However, the appellate panel found that Merrill’s deferred compensation is considered a bonus and not a retirement benefit protected under ERISA.
Milligan departed from Merrill approximately four years ago to establish Quorum Private Wealth, a firm affiliated with Sanctuary Securities and Sanctuary Advisors. In May 2024, he sued Merrill, alleging that the firm had unlawfully withheld compensation he had earned while at Merrill and was entitled to under ERISA.
Judges Find Deferred Comp is a Bonus, Not a Pension Benefit
A federal judge in North Carolina previously determined that Merrill’s deferred compensation was essentially a bonus used to reward employees for achieving specific performance goals and remaining loyal to the firm. The Fourth Circuit Court of Appeals agreed with this assessment, stating that Merrill provided a “lump-sum cash award to select high-performing employees conditioned on their continued employment at the company for eight years.”
The judges further clarified that the delayed payment constituted a retention-based bonus tied to ongoing service, rather than offering retirement income or systematically deferring compensation until employment termination. Despite the ruling, Milligan’s lawyer, Jack Edwards of the Ajamie law firm, expressed disappointment and mentioned considering a request for an “en banc” review of the decision by the entire Fourth Circuit of Appeals.
Merrill declined to provide a comment on the matter.
Recent Setbacks for Brokers in Deferred Compensation Disputes
Legal disputes over firms’ deferred compensation policies have been a recurring issue in recent years. In a similar case, Morgan Stanley successfully defended against a claim by two brokers seeking over $100,000 in deferred compensation and company shares after leaving to join Wells Fargo in the early 2010s.
Other instances where firms prevailed in deferred compensation disputes include cases involving ex-advisors like Patrick O’Neill and Jeffrey Zapoleon, who sought significant amounts in deferred compensation after departing to join other financial institutions.
However, there have been instances where large wealth managers, like Morgan Stanley, were ordered to pay substantial sums to former advisors who left to join different firms. At Merrill, deferred compensation is distributed under the WealthChoice Contingent Award Plan, in addition to base compensation tied to advisors’ revenue generation.
The court of appeals highlighted that brokers must meet a minimum revenue threshold to receive rewards and typically need to stay employed at Merrill for an additional eight years to qualify for deferred compensation. Exceptions to this rule are allowed for circumstances such as death, disability, or retirement.
The court emphasized that Merrill explicitly informs employees that the purpose of the program is to encourage advisors to remain employed by the company and its subsidiaries, without promoting it as a pension plan.
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