Merrill Lynch, Bank of America Hit with Class Action Lawsuit For Allegedly Denying Financial Advisor Vested Commissions

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Merrill Lynch and parent company Bank of America face a proposed class action lawsuit wherein a former financial advisor claims he was wrongfully denied the vested commissions to which he was entitled as part of a deferred compensation plan.

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The 21-page lawsuit was filed by a California resident who says that, as part of Merrill Lynch’s WealthChoice Contingent Award Plan, at least five percent of his commissions were withheld from his paycheck and automatically deferred into the program each year. The man alleges that the defendants violated the federal Employee Retirement Income Security Act (ERISA) when they, as a result of his departure from company, cancelled the deferred compensation that he had earned under the plan.

Under the plan, a financial advisor must be employed by Merrill Lynch on the date their annual commissions vest, or become earned and payable, in order to receive their deferred compensation, the suit shares. Per the complaint, if the worker’s employment ends before the vesting date, which occurs after an eight-year period, Merrill Lynch and Bank of America invoke a “cancellation rule” that voids the employee’s plan account balance and causes them to forfeit their deferred compensation.

The plaintiff, who had worked as a financial advisor for Merrill Lynch for more than 20 years when he the firm in 2021, claims he was forced to forfeit over $500,000 in deferred compensation as a result of the defendants’ cancellation rule.

The filing contends that the cancellation rule violates ERISA’s vesting and anti-forfeiture requirements because financial advisors vest in their deferred compensation in eight years under the plan, regardless of their employment term.

“Based upon his years of service, [the plaintiff] should have been fully vested in his deferred compensation under ERISA,” the lawsuit charges.

The suit also argues that employees’ deferred compensation qualifies strictly as commissions and cannot be considered bonus payments, which, according to the case, are not subject to the same rules under ERISA.

The lawsuit looks to represent any former Merrill Lynch financial advisors who forfeited deferred compensation in the WealthChoice Contingent Award Plan since April 30, 2018 because of the company’s cancellation rule.

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