DOL Issues Advisory Opinion Concluding that Long-Term Incentive Compensation Plan is not an ERISA Plan
- Published Date: September 9, 2025
On September 9, 2025, the Department of Labor (DOL) issued Advisory Opinion 2025-03A, addressed to Davis & Harman partner Kent Mason concluding that a long-term incentive compensation plan (LTICP) offered by Morgan Stanley to its employee-advisers is not an ERISA-covered pension plan.
In general, LTICPs provide awards based on various factors, including company or employee performance, and/or seniority. The awards are generally subject to a vesting period and are subject to forfeiture under certain conditions.
Through arbitrations and class action lawsuits, some former employees who have had their benefits forfeited have sought to have these types of plans be treated as ERISA-covered pension plans, contrary to longstanding law. In 2023, the U.S. District Court for the Southern District of New York ruled that Morgan Stanley’s LTICP is an ERISA-covered pension plan because it sometimes makes payments at the end of employment or beyond. Also, the court ruled that Morgan Stanley’s plan does not qualify as a “bonus program” that is exempt from ERISA pursuant to Labor Regulation section 2510.3-2(c). If these very common types of plans are subject to ERISA, they would become unworkable due to, for example, ERISA’s vesting rules.
Advisory Opinion 2025-03A directly contradicts the conclusion reached by the court and expresses the view that Morgan Stanley’s LTICP is not an ERISA plan, in accordance with past DOL guidance and court decisions. Specifically, the opinion states that, when considering the program’s design and operation, DOL has no reason to believe that Morgan Stanley’s plan is a pension plan for purposes of ERISA and “the mere fact that the terms of the program contemplate limited situations where an award could be paid after termination of employment does not implicate a deferral of income of the kind contemplated by [ERISA’s pension plan definition].” Furthermore, the advisory opinion states that Morgan Stanley’s LTICP is a “bonus program” within the meaning of Labor Reg. section 2510.3-2(c) because it provides bonuses based on performance and service, and it does not involve the systematic deferral of payments to the termination of covered employment or beyond.
