Latest news with #deferredcompensation
Yahoo
4 days ago
- Business
- Yahoo
Morgan Stanley Wins Deferred Compensation Arbitration Case
You can find original article here Wealthmanagement. Subscribe to our free daily Wealthmanagement newsletter. Morgan Stanley avoided a former advisor's attempt at retrieving deferred compensation after he left to start his own firm, according to a recent arbitration award. In the FINRA award dated Aug. 8, a three-person panel ruled against former Morgan Stanley rep Patrick T. O'Neill. The Michigan-based advisor left in 2018 to join Raymond James' independent division as part of Family Legacy Wealth Partners. O'Neill filed an arbitration in February 2024, requesting an award of about $546,001, 2,324 shares of Morgan Stanley stock and attorneys' fees. In the arbitration, he argued that Morgan Stanley's deferred compensation plan forfeiture for advisors who leave is 'impermissible under ERISA,' (the Employee Retirement Income Security Act). The case refers to Morgan Stanley deeming some advisors' compensation 'deferred,' allowing it to 'vest' for several years. According to the wirehouse, if the reps leave before those vesting dates, they forfeit the compensation (known as the 'Cancellation Rule'). As part of his arbitration, O'Neill asked arbitrators to find the deferred compensation plan and its cancellation rule violate federal statutes and requested an injunction asking Morgan Stanley 'to remedy their past violations of ERISA's vesting rules,' as well as 'reformation of the (financial advisor) Deferred Compensation Plan.' Morgan Stanley originally filed a motion to dismiss in October 2024. The panel heard arguments in January before deciding to deny the motion. After testimony and evidence at the hearing, the panel denied O'Neill's claims 'in their entirety' and mandated that the advisor handle the lion's share of the hearing session fees. An attorney for O'Neill did not return requests for comment prior to publication. The award marks Morgan Stanley's fourth straight deferred compensation-related victory in arbitration this year, and comes several weeks after a federal appeals court denied Morgan Stanley's attempt to appeal a lower court decision that its deferred compensation plans are protected under ERISA. The case originated as a class action led by Matthew Shafer, a Florida-based rep who also left for Raymond James in 2018. Shafer and the other plaintiffs brought the class action for all former advisors in similar positions when they left the firm. In 2023, a federal judge partially ruled in favor of Morgan Stanley, agreeing that the advisors assented to arguing claims in private arbitration. However, the judge also agreed with reps that their compensation plans were covered under ERISA; advisors' attorneys were buoyed by the decision, believing it would strengthen their case in arbitration. In hearing Morgan Stanley's appeal, the Second Circuit Court of Appeals opted not to strike the language, arguing that the firm was free to argue to arbitrators that the judge's conclusions were 'legally incorrect.' 'Indeed, Morgan Stanley admits that it has already done so—successfully—in some of the intervening arbitrations,' the appeal order read. Sign in to access your portfolio
Forbes
11-07-2025
- Business
- Forbes
Why Settle For A 401 (K)? How Deferred Compensation Can Be A Big Boost
Sometimes it is best to wait. We discuss with Ashley Cline, an associate wealth advisor at JFS Wealth Advisors, based in Hermitage, Pa., how deferred-compensation plans can support long-term wealth-building, reduce tax liabilities and create future income flexibility. Larry Light: Many people have heard the saying, 'Good things come to those who wait.' How does that apply in the world of executive compensation? Ashley Cline: It's especially true when it comes to deferred compensation. These plans enable high-earning professionals to defer receiving part of their income, typically bonuses or other forms of compensation until a later date. The real advantage is that taxes are deferred as well, meaning your earnings can grow tax-free until you eventually take the money out, often in retirement. Light: What kinds of deferred compensation plans are there? Cline: There are two main types: qualified and non-qualified. Qualified plans include 401(k)s, pensions, and profit-sharing plans. These are governed by the Employee Retirement Income Security Act, or ERISA, which sets rules around contribution limits, asset protection, and eligibility. If you're already contributing to a 401(k), you're participating in a qualified deferred-compensation plan. Whereas, non-qualified plans, on the other hand, are typically designed for executives. They don't follow ERISA rules, so there's more flexibility but also more risk. These plans often let you defer significantly more income than a 401(k) allows, which can be a massive benefit for highly compensated individuals. Light: What are some potential risks or drawbacks with non-qualified plans? Cline: Unlike qualified plans, the assets in non-qualified plans aren't required to be held in a separate trust. That means they remain part of the company's assets and if the company runs into financial trouble, those funds could be at risk. Also, once you choose your withdrawal schedule, it may be hard to change. In some plans, investment options may be limited sometimes to only company stock, which can lead to an overly concentrated portfolio. Light: What factors should be considered before participating in a non-qualified plan? Cline: The decision whether to participate should be weighed seriously. These plans can be an excellent tool if you don't need the money right away, expect to be in a lower tax bracket in retirement, and have confidence in your employer's long-term health. They can also be ideal if you've maxed out your qualified plan contributions, but still want to set aside more for the future or need greater flexibility for the timing and amount of withdrawals. Light: Any final advice? Cline: Deferred compensation plans for qualified plans, if offered by your company and you qualify, are almost always a good idea to make regular contributions, preferably to the maximum allowed. Non-qualified plans can be powerful but complex, and it's important to understand the rules and risks before committing. That's where working with a financial advisor can help.
