Court Dismisses FA Suit over Merrill WealthBuilder

In deciding the Merrill Lynch plan did not run afoul of ERISA’s minimum vesting requirements, U.S. District Judge Roger T. Benitez of the U.S. District Court for the Southern District of California asserted that it fit the guidelines for such plans because it was unfunded and intended for a select group of highly compensated employees. Participants had an average compensation of more than double that of all other Merrill Lynch employees, the court pointed out.

Benitez said that while there is no hard and fast rule about what constitutes a “select group of management or highly compensated” employees, other judges have treated programs that limit participation to 15% or less of the workforce as being in the top-hat category. The opinion said the company indicated this was the case with WealthBuilder.

While working for Merrill, plaintiffs Trever Callan, Timothy Callan, and Ryan Callan participated in WealthBuilder and two employee compensation packages: the Financial Advisor Capital Accumulation Award Plan (FAACAP), the Growth Award Plan.

When the Callans left Merrill Lynch to form their own financial advisory firm in 2007, they alleged, the three lost some of their benefits under these plans because the plans contained forfeiture provisions that violated California’s Labor Code and Unfair Competition Law and ERISA. While the Callans admitted they received all vested awards to which they were entitled under the plans, they contended the forfeiting of unvested awards was illegal.

In dismissing all plaintiffs’ claims, Benitez found that California’s Labor Code only prohibits the forfeiture of “wages,” and plaintiffs did not have a wage interest in the Merrill plans.

Not only that, but Benitez ruled that the company did not violate ERISA’s minimum vesting standards when it came to the FAACAP or Growth Award Plan because neither plan was governed by ERISA.

The case is Callan v. Merrill Lynch & Co., S.D. Cal., No. 3:09-cv-00566-BEN-BGS.