On October 28, 2025, former Morgan Stanley financial advisers filed suit against the United States Department of Labor (DOL), challenging the propriety of Advisory Opinion 2025-03A (Opinion) in Sheresky et al v. United States of America et al. The DOL Opinion opined the Morgan Stanley Compensation Incentive Plan was a bonus program exempt from ERISA. See EBSA Agrees Morgan Stanley Deferred Compensation Plan Is Not Subject to ERISA–Is Bonus Program. The suit alleges that the DOL exceeded its regulatory authority and acted arbitrarily and capriciously by: creating and applying an impermissible “purpose test” for determining whether a plan is a pension plan; incorrectly relying on an invalid regulation regarding bonus plans; failing to follow its own procedures regarding advisory opinions; and ignoring contradictory case law.

Purpose Test. The complaint states that the Opinion used a purpose test and determined that the plan’s purposes were to provide bonuses and not retirement income, when case law requires an examination of whether the plan has the effect of deferring income to termination of employment or beyond.

Bonus Regulation. The bonus regulation requires that not only must a plan result in a deferral of income for periods extending to termination of employment or beyond, as provided by the words of ERISA, but adds an additonal requirement that the deferral be “systematic”. 29 C.F.R. 2510.3-2(c). The complaint alleges the DOL had no authority for adding this additional element and the regulation should be held invalid.

Advisory Opinion Procedures. The complaint further alleges the DOL violated its own advisory opinion procedures set forth in ERISA Procedure 76-1.  Those procedures state that advisory opinions will generally only be issued with respect to prospective transactions.    Yet, plaintiff’s allege the Opinion was applied to years 2015-2021. Plaintiffs also cite the DOL’s website as stating the DOL does not issue advisory opinions for use in any investigation or litigation matter existing before the request for the opinion. 

Ignoring Precedent. The plaintiff’s further allege the DOL disregarded binding case law, citing two cases decided by the same New York district court where the suit was filed, holding the Morgan Stanley plans were governed by ERISA. The complaint also cites the Fifth Circuit case of Tolbert v. RBC Capital Markets Corp., 758 F. 3d 619 (5th Cir. 2014), as finding a similar plan was subject to ERISA.

Stay Tuned. It will be a while before the case is decided, however, it is not unforeseeable that the court that previously held that the Morgan Stanley plan is subject to ERISA will invalidate the Opinion holding it is not. Meanwhile, pending before the United States Court of Appeals for the Fourth Circuit is the appeal of the district court case involving Merrill Lynch’s deferred compensation plan where the lower court found that the plan was an exempt bonus program with similar reasoning as the Opinion, including an examination of the purposes of the plan. The Appellees in that case cite some of the same arguments as the plaintiffs in the Morgan Stanley case. The Opinion is not binding on any court but only persuasive authority of how the agency charged with ERISA enforcement applies the law to the facts. Therefore, the Fourth Circuit may or may not find the reasoning of the DOL persuasive.