The U.S. Department of Labor (DOL) has issued Advisory Opinion 2025-03A, in which it resolves a dispute over Morgan Stanley's deferred compensation program, which provides incentive awards to financial advisors. In its opinion, the DOL found that the program is a bonus, not a pension plan subject to the Employee Retirement Income Security Act (ERISA).
The impact of the DOL opinion for Morgan Stanley employees is that if they leave the company before the end of the deferred compensation program's vesting period, they will not receive the incentive funds.
According to the DOL opinion, the program is not the type of income deferral program that falls within the purview of ERISA. More specifically, the program does not systematically defer payments to the termination of employment or a future date, which would subject it to ERISA and prevent the DOL from characterizing it as a bonus program.
The DOL decision bolsters Morgan Stanley's wins in five recent arbitration cases filed by financial advisers who left the company before their program vesting dates. Most recently, a three-person arbitration plan rejected the claims of a former Morgan Stanley advisor, who left the company in 2018. The advisor alleged that the company owed him over half a million dollars, 2,324 shares of stock, and attorney's fees. The panel disagreed, awarding the advisor nothing and charging him most of the arbitration costs.
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