A San Francisco area advisor has fo;ed a class-action lawsuit against Merrill Lynch, his former employer, over deferred-compensation forfeitures that he says violate ERISA standards.

In charges filed with the U.S. District Court in the Western District of North Carolina, Kelly Milligan of Danville, Calif., accuses the firm, its Bank of America parent company, and an unnamed senior vice president of human resources of violating the Employee Retirement Income Security Act of 1974 (ERISA) when it denied him and countless “similarly situated” others of their due benefits.

The compensation at issue relates to Merrill Lynch’s WealthChoice Contingent Award Plan, which holds a portion of each advisor’s commissions for eight years, called the “vesting period.” (Advisors receive a salary plus commissions on new business they bring to the firm.)

Generally, advisors are awarded a percentage of their account in the plan after the vesting period. But if the advisor quits before then, the account is forfeited, unless the employment ended because of workforce reductions, disability, retirement, or either exceptions. The plan is administered by Bank of America’s senior vice president of human resources.

In the suit, Milligan contends that WealthChoice is an employee benefit pension plan, per ERISA, and not a bonus incentive plan that can be forfeited subject to managers’ discretion. The firm disagrees.

“We are confident the WealthChoice Plan is not covered under ERISA and that our compensation program complies with all relevant laws,” said Bill Halldin, a spokesperson for Bank of America.

In the lawsuit, Milligan argues that he was “fully vested” and, under ERISA rules, was entitled to all of his deferred compensation when he left the firm in 2021 after 21 years of service. The documents estimate that it amounts to some $500,000 that was denied him.

“Advisors are waking up to the fact that many of the forfeitures they suffer when they leave are not legal,” said Jack Edwards, a partner at Ajamie and one of his attorneys. “Firms impose various forms of golden handcuffs on advisors to deter them from leaving and punish them when they do. They then try to force the advisors’ claims into individual arbitrations in order to prevent class actions and avoid judicial scrutiny.”

Edwards asserted that many firms have maintained “illegal forfeiture provisions” in their deferred compensation plans for many years.

“Our class action aims to end this practice for most advisors at Merrill Lynch and recover damages for past forfeitures,” said Edwards.

Milligan referred requests for comment to his attorneys.

The charges are similar to others filed by advisors who moved firms, and may be part of a growing trend. For instance, in March a Finra arbitration panel ordered Morgan Stanley to pay more than $3 million in back pay, fees, and interest to seven advisors who had accused the company of cheating them out of their deferred compensation when they left the firm.

“Deferred compensation programs are subject to the ERISA, the federal law governing employee benefits,” said Doug Needham, an attorney at MotleyRice, which was involved in both the Merrill Lynch and Morgan Stanley cases. “ERISA has rules that prohibit companies from forcing employees to forfeit deferred compensation when they change jobs. Advisors who leave Morgan Stanley and Merrill Lynch forfeit significant amounts of money, often hundreds of thousands of dollars, so it is unsurprising that they want to enforce their rights under ERISA.”

In the current suit, Milligan seeks not only to receive the deferred compensation he says he was due, and for other ex-Merrill advisors who are in the same position to receive the value of their WealthChoice accounts too, but also to secure an order from the court declaring that Merrill’s deferred compensation rules related to forfeitures violate ERISA requirements. He further wants the court to find the administrators of the deferred-compensation plan guilty of breaching their fiduciary duty.

The class action suit is seeking compensation dating back to April 2018 and estimates that there could be thousands of potential claimants.