The Fourth Circuit's six-factor test could reshape how employers design incentive plans
The Fourth Circuit just gave employers a new playbook for keeping long-term incentive plans outside federal retirement law.
On April 17, 2026, the Fourth Circuit Court of Appeals ruled that Merrill Lynch's WealthChoice Award program – a long-term incentive plan for top-performing Financial Advisors – is a bonus plan, not a pension plan, and therefore falls outside the reach of the Employee Retirement Income Security Act of 1974.
The case was brought by Kelly Milligan, a former Merrill Lynch Financial Advisor who worked at the firm from 2000 to 2021. During his more than two decades at the firm, Milligan was granted and earned several WealthChoice Awards. He then voluntarily resigned to cofound a competing investment firm. Under the program's terms, his departure canceled all unvested awards. Milligan responded with a putative class action, arguing the program was really an ERISA-covered pension plan and that its forfeiture provisions violated federal vesting and anti-forfeiture rules. The district court in the Western District of North Carolina disagreed and granted summary judgment to Merrill Lynch. The Fourth Circuit affirmed unanimously.
At the center of the dispute is how the WealthChoice program works. Merrill Lynch grants awards annually to Advisors who exceed a minimum production threshold. When an award is granted, a notional account is created – but the account holds no actual...
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