Chamber of Commerce Files Amicus Brief in Merrill Lynch Deferred Compensation Case

The U.S. Chamber of Commerce and a coalition of retirement organizations and employer groups filed an amicus brief in the U.S. 4th Circuit Court of Appeals, urging the court to uphold a lower court’s ruling that distinguishes bonus programs from pension plans.

The ERISA Industry Committee, the Center on Executive Compensation and the American Benefits Council joined the amicus brief, which advocates upholding a district court judgment in the case Milligan v. Merrill Lynch et al. that determined that bonus compensation programs are not pension plans regulated by the Employee Retirement Income Security Act.

The core issue in Milligan is whether the deferred compensation award programs offered by Merrill Lynch qualify as “employee benefit pension plans” under ERISA. Typically, the structure of a deferred compensation program determines whether it triggers ERISA coverage. Often, qualified plans are governed by ERISA, while nonqualified plans are not.

In Milligan the U.S. District Court for the Western District of North Carolina held that Merrill Lynch’s programs are not ERISA pension plans, which ERIC and the other organizations joining in the brief stated was the correct ruling.

“These discretionary, performance-based incentives were never intended as retirement benefits, and the court correctly recognized them for what they are—tools to reward performance and help employers attract and retain top talent,” said Andy Banducci, ERIC’s senior vice president for retirement and compensation policy, in a statement. “By upholding the lower court’s decision, along with nearly a half-century of case law and regulatory guidance, the Court prevents two bad outcomes. First, it stops the plaintiffs’ bar from weaponizing ERISA as a novel and expensive litigation tool—sparing employers from a surge in costly lawsuits. Second, it helps protect customers from those costs in the form of higher prices and employees from reduced compensation and opportunities.”

Deferred compensation plans are used to provide highly compensated employees additional tax-advantaged benefits that can be realized in retirement, when they are likely to be in a lower tax bracket. While the plans offer benefits, they also come with much higher forfeiture risks, as employers use them to deter employees from switching jobs.

That risk, however, is partly what allows employers to offer attractive compensation packages.

According to the amicus brief, putting deferred compensation programs under ERISA would undermine the packages’ benefits for employees and workers alike.

“Making those programs subject to ERISA’s strict vesting and anti-forfeiture rules would expose employers to potentially astronomical liability for unexceptional cancellations of incentive awards that have not vested under those programs’ terms,” the brief states. “That result would undermine employers’ justifiable reliance on nearly fifty years of case law and regulatory guidance concluding that such programs fall outside ERISA’s scope, making it more difficult for businesses to offer their employees attractive and flexible compensation programs.”

Milligan v. Merril Lynch, originally filed in 2024, was decided March 11. The plaintiffs appealed to the 4th Circuit—which hears appeals from district courts in Maryland, North Carolina, South Carolina, Virginia and West Virginia—on April 9.