Ex Brokers Sue Pru Over Deferred Comp

May 11, 2001 (PLANSPONSOR.com) - Prudential Securities' plan to retain employees through its deferred compensation program may backfire if former employees are successful in a suit against the group.

Two brokers have filed a lawsuit seeking class-action status against their former employer charging that the group withheld wages through its optional Master Share program, which allows employees to defer up to 25% of their pretax compensation, which is then, together with a company match, invested in an index fund.

The plan has an initial three-year vesting period and those who leave the company before the end of this period forfeit the wages they contributed to the plan, as was the case with the plaintiffs.

The suit seeks class-action status for all of Prudential’s California employees who risk forfeiting part of their paychecks if they leave the company before vesting. It is unclear how large that class is or the value of the compensation that employees are seeking.

Besides return of wages, the suit also seeks a court order declaring Master Share’s forfeiture provision illegal and an injunction preventing its enforcement.

While the suit is the first filed against the MasterShare program, which began in January 2000. Similar suits have been filed against Citigroup’s Capital Appreciation Plan, which also has a forfeiture clause.

– Camilla Klein                      editors@plansponsor.com

Read more about it at Deferred Comp Approach Stems Tide .