Fourth Circuit Holds That Merrill Lynch’s WealthChoice Award Program Is an Excepted Bonus Payment Plan, Not an ERISA-Covered Employee Pension Benefit Plan

In Milligan v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 25-1385, — F.4th —-, 2026 WL 1041935 (4th Cir. Apr. 17, 2026), the Fourth Circuit affirmed a district court’s order granting summary judgment to Merrill Lynch, holding that the company’s WealthChoice Award program — a contingent cash incentive requiring eight years of continuous employment to vest — is an excepted bonus payment plan under 29 C.F.R. § 2510.3-2(c) and does not qualify as an ERISA-covered employee pension benefit plan.

Plaintiff Milligan worked as a Financial Advisor for Merrill Lynch from 2000 to 2021. During his tenure, he participated in the company’s WealthChoice Award program, which provided annual contingent cash awards to select high-performing Advisors who generated production credits exceeding a minimum threshold. Upon grant, Merrill Lynch created a notional account indexed to a benchmark investment selected by the Advisor. The Award Agreement characterized the account as an “unsecured, unfunded, contingent promise” to pay its hypothetical value once the Advisor satisfied vesting conditions. Awards generally became earned and payable eight years after grant, contingent on continuous employment and satisfaction of ongoing performance criteria established at the plan administrator’s sole discretion. Upon vesting, payment was mandatory and prompt—no later than two and one-half months following the vesting date—and Advisors had no right to defer payment. Unvested awards were ordinarily canceled upon voluntary separation. In 2021, Milligan voluntarily resigned to cofound a competing investment firm. His unvested WealthChoice Awards were canceled in accordance with program terms.

Milligan filed a putative class action alleging that the WealthChoice Award program qualified as an “employee pension benefit plan” under ERISA and that Merrill Lynch had violated ERISA’s vesting, anti-forfeiture, and fiduciary duty requirements. The district court granted summary judgment to Merrill Lynch, concluding the program was a bonus plan exempt from ERISA under the Department of Labor’s regulation at 29 C.F.R. § 2510.3-2(c). Milligan appealed.

The Fourth Circuit affirmed. As a threshold matter, the court rejected Milligan’s argument, grounded in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), that the Department of Labor lacked authority to exclude bonus programs from the statutory definition of an employee pension benefit plan. The court found that Congress had properly delegated to the Secretary of Labor the authority to “prescribe such regulations as he finds necessary or appropriate” and to “define accounting, technical and trade terms” used in ERISA. 29 U.S.C. § 1135. Because “employee pension benefit plan” is a term belonging to the specialist vocabulary of a particular trade or industry, the Secretary acted within the boundaries of that delegated authority when promulgating 29 C.F.R. § 2510.3-2(c). The court also found that the Secretary engaged in reasoned decisionmaking: the regulation was promulgated less than one year after ERISA’s enactment in direct response to contemporaneous inquiries, has remained unchanged in the ensuing five decades, and Congress amended the relevant statutory provision in 1980 without disturbing the regulation.

Turning to the merits, the court drew from peer circuit authority to articulate a non-exhaustive list of factors relevant to the bonus-plan inquiry: (1) whether the plan imposes heightened eligibility requirements rather than contemplating universal participation; (2) whether the plan is funded with money that would otherwise be immediately payable to the employee; (3) whether the plan involves actual funding or phantom investments; (4) whether employees can unilaterally defer payments until termination or beyond; (5) whether the plan is presented as a vehicle for obtaining retirement income; and (6) whether firm performance impacts plan payments.

Applying these factors, the court concluded that the WealthChoice Award program comfortably qualified as an excepted bonus payment plan. The program was available only to high-performing Advisors who crossed a minimum production threshold—not all employees. The award was not funded with money the Advisor had already earned; payment remained entirely contingent on continuous employment through the vesting date. The notional account held no actual funds and represented only an unfunded promise, structured to incentivize retention and productivity rather than defer the Advisor’s existing income. Approximately 92% of WealthChoice payments between 2018 and 2024 were made to current employees, demonstrating that payments were not systematically deferred to the termination of employment. The program documents explicitly described its purpose as encouraging Advisors to remain employed, with no representation that the program provided retirement income. And award amounts were tied to individual revenue contribution, a hallmark feature of performance bonus arrangements.

Judge Wilkinson wrote separately to emphasize the destabilizing consequences that would follow from Milligan’s interpretation of 29 U.S.C. § 1002(2)(A)(ii). Milligan argued that any compensation program generating even a single post-termination payment “results in a deferral of income” sufficient to trigger ERISA coverage. The concurrence rejected this reading as reductive, noting that it would sweep ordinary payroll practices within ERISA’s ambit, expose employers to retroactive civil and criminal liability, and perversely incentivize the elimination of humanitarian exceptions for retired, disabled, and deceased employees. Judge Wilkinson invoked the principle that courts should not initiate major socioeconomic disruption absent clear congressional direction, and concluded that the absence of any congressional action to disturb the fifty-year-old bonus regulation counseled affirmance.