Estimated reading time: 9 minutes.
Key facts
- What happened: A federal judge in Manhattan preliminarily approved a $39 million class action settlement on October 7, 2026 over the interest Merrill paid on cash swept out of Merrill Edge retirement accounts.
- Who is covered: Everyone who had one or more Merrill Edge retirement accounts with cash balances swept through Merrill's Retirement Asset Savings Program (RASP) at any time from December 15, 2016 through March 15, 2020. Notice of the earlier class certification went to about 1.1 million account IDs.
- No claim form: Payments are calculated from Merrill's account records. Class members do not need to file a claim, but no payment is issued if a person's share is under $10.
- Key dates: Notice goes out by December 4, 2026. Objections and new opt-out requests are due February 19, 2027. The final approval hearing is March 12, 2027.
- Fees: Class counsel will ask for up to 30% of the fund, or $11.7 million, plus up to $2.1 million in expenses and a $15,000 service award.
- The case: Valelly v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 1:19-cv-07998-VEC, U.S. District Court for the Southern District of New York, before Judge Valerie E. Caproni.
- No admission: Merrill denies all claims and wrongdoing.
In this article
- What the settlement does
- What the lawsuit was about
- Who the parties are
- Seven years of litigation
- Who qualifies and how payments are calculated
- Timeline and next steps
- What remains unclear
- Frequently asked questions
What the settlement does
Merrill Lynch, Pierce, Fenner & Smith Incorporated agreed to pay $39 million into a settlement fund to resolve the case brought by Merrill Edge customer Sarah Valelly. The parties signed the Stipulation of Settlement on September 30, 2026. It replaced a term sheet the parties had finalized on September 5.
The fund will pay, in order of the settlement's own list:
- Notice and administration costs
- Attorneys' fees and litigation expenses the court awards
- Any service award for Valelly
- Pro rata cash payments to class members
Judge Valerie E. Caproni signed the preliminary approval order on October 7, 2026, finding that the court "will likely be able to finally approve" the deal, subject to a final hearing.
Trial had been set to begin on October 13, 2026. The parties agreed to settle on September 1, about six weeks before that date.
What the lawsuit was about
Merrill Edge is Merrill's self-directed brokerage service, where customers choose their own investments. When cash sits uninvested in a Merrill Edge retirement account, such as an IRA, it is automatically "swept" into a deposit account at a Merrill-affiliated bank such as Bank of America. Merrill calls this sweep the Retirement Asset Savings Program, or RASP.
The court's February 2026 class certification opinion explains that Merrill Edge customers sign a Client Relationship Agreement. That agreement says interest on swept deposits is set "at the discretion of the Merrill Lynch Affiliated Bank based on economic and business conditions."
Valelly alleged that Merrill breached that agreement. Her claim was that RASP deposits paid less than "a reasonable rate" of interest, and that class members lost money as a result. Merrill denies the claims.
The plan of allocation shows how wide the gap was under the plaintiff's theory. It includes a month-by-month chart prepared from her expert's analysis. For the lowest asset tier, the chart lists the actual RASP rate at 0.01% for most of early 2017 and 0.14% from mid-2017 into mid-2019. Over the same months, the plaintiff's estimated "reasonable" rate rose from about 0.03% to more than 0.43%.
Merrill set RASP rates by tier, based on a customer's month-end assets with Merrill:
- Tier one: up to $250,000
- Tier two: $250,000 up to $1 million
- Tier three: $1 million up to $10 million
- Tier four: $10 million and above
Watch for an email or postcard by December 4 JND Legal Administration will email notice to class members with a valid email address on file and mail a postcard to the rest. If you held cash in a Merrill Edge IRA or other retirement account between late 2016 and early 2020, check your inbox and spam folder for a notice naming Valelly v. Merrill Lynch.
Who the parties are
Sarah Valelly is the named plaintiff and class representative. She had Merrill Edge retirement accounts during the class period.
Merrill Lynch, Pierce, Fenner & Smith Incorporated is a registered broker-dealer and the defendant. The settlement's release also covers its affiliates Bank of America, N.A., BofA Securities, Inc. and Bank of America Corporation.
Wolf Popper LLP of New York is class counsel. The firm told class members it has worked the case on a contingency basis since 2019. Davis Polk & Wardwell LLP represents Merrill.
JND Legal Administration is the administrator and runs the official website, MLRetirementAccountLitigation.com. Huntington Bank is the escrow agent holding the fund.
Seven years of litigation
The settlement's recitals trace a long fight:
- August 27, 2019: Valelly files the complaint.
- 2020 to 2021: The court dismisses several claims. The amended complaint, filed February 5, 2021, proceeds on a breach of contract claim over the "reasonable rate of interest," plus two claims over how Merrill assigned asset tiers.
- 2022 to 2024: The court denies a first class certification attempt without prejudice, excludes the plaintiff's first expert and partly limits the opinions of her second expert.
- July 23, 2025: The court grants Merrill summary judgment on the asset-tier claims but lets the reasonable-rate claim go forward.
- February 26, 2026: The court certifies the class and appoints Wolf Popper as class counsel.
- 2026: JND sends notice of the certified class to about 1.1 million account IDs. As of September 25, 2026, 69 people had asked to be excluded.
- September 1, 2026: The parties agree to settle, after mediation sessions and further negotiations.
Who qualifies and how payments are calculated
The class includes all persons who had one or more Merrill Edge retirement accounts with cash balances swept under RASP at any time from December 15, 2016 through March 15, 2020. People who already opted out after the class certification notice are not included. They do not need to do anything further.
There is no claim form. The settlement requires Merrill to give class counsel account records showing each class member's sweep tier, month-end cash held in RASP and the interest rate paid. The administrator uses those records to calculate each person's share.
Each person's "Individual Recognized Claim" is calculated month by month. For each month, the cash balance on the last Friday of the month is multiplied by the gap between the plaintiff's estimated reasonable rate and the rate actually paid, then adjusted for the number of days in the month. The monthly amounts are added up, and each person receives a share of the net fund in proportion to their claim.
The long-form notice stresses that these calculations weigh claims against each other. They are not estimates of what anyone will be paid. Neither the parties nor the administrator can estimate individual payments yet, the notice says, because fees and costs are not yet set.
As a rough illustration only, Class Action Pulse added up the notice chart's monthly examples for a hypothetical $10,000 tier-one balance held for the entire class period. They total about $48.97 in recognized claim. Smaller balances, shorter periods and the deductions for fees and costs would all reduce a person's actual payment. For more cases where you may be owed money, see our cases you can join page.
Payments under $10 will not be issued The settlement sets a $10 minimum payment. Class members with small or brief cash balances may receive nothing even though they are in the class and bound by the release.
Payments for people who still have Merrill accounts are made through Merrill for their benefit. Former Merrill customers are paid directly. The proposed notice encourages class members to choose electronic payment instead of a paper check on the settlement website. It sets that election deadline at 14 days after the final hearing. If checks go uncashed, the leftover money is redistributed to class members when practical. Any final remainder goes to a charity proposed by class counsel and approved by the court.
Timeline and next steps
| Date | What happens |
|---|---|
| By December 4, 2026 | JND emails or mails notice to class members |
| Within 7 days after notice | Summary notice published over PR Newswire |
| January 26, 2027 | Class counsel files proof of notice |
| February 5, 2027 | Settlement approval papers and fee request due |
| February 19, 2027 | Objections due and new opt-out requests must be postmarked |
| March 5, 2027 | Reply papers due |
| March 12, 2027, 10:00 a.m. | Final approval hearing, Courtroom 20C, 500 Pearl Street, New York |
Class members who were sent the earlier certification notice already had one chance to leave the class. The parties agreed to offer another opt-out window for the settlement. Instructions for requesting exclusion are in the long-form notice on the official website. People who opt out get no payment but keep their right to sue Merrill separately.
Objections must be filed with the court and mailed to class counsel and Merrill's counsel by February 19, 2027.
Approval is not guaranteed The judge can approve or reject the settlement and decide separately on the fee request. If the settlement fails, the parties return to their positions as of August 31, 2026, and the court will set a new trial schedule.
What remains unclear
- Individual payment amounts. No per-person estimate exists. Payments depend on each person's balances and the fees and costs the court approves.
- The fee award. Class counsel's request of up to $11.7 million in fees and up to $2.1 million in expenses has not yet been filed or approved.
- The charity. The settlement does not name the organization that would receive any final remainder.
- The related case. A separate consolidated case, In re Merrill Lynch Cash Sweep Programs, No. 1:23-cv-10768 (S.D.N.Y.), is still pending. The Valelly release excludes claims being litigated there. But to the extent that case includes RASP claims for self-directed retirement accounts during the 2016 to 2020 class period, the stipulation says those claims are released.
The official website's options table still shows the old July 2026 exclusion deadline and October 13 trial date. Rely on the dates in the October 7 order.
This article is for information only and is not legal advice. Account holders with questions about their own rights can contact the administrator, class counsel or a licensed attorney.
Frequently asked questions
Who is included in the Merrill Edge cash sweep settlement?
Anyone who had one or more Merrill Edge retirement accounts with cash swept through the Retirement Asset Savings Program at any time from December 15, 2016 through March 15, 2020 is included, unless they already opted out after the class certification notice.
Do I need to file a claim?
No. The administrator calculates payments from Merrill's account records. You can visit the official website to choose electronic payment instead of a check once that option is available.
How much money will I get?
No one can say yet. Payments are pro rata, based on your monthly cash balances and the gap between the plaintiff's estimated reasonable rate and the rate Merrill paid. Shares under $10 are not paid.
When will payments be made?
Not until after the court grants final approval at or after the March 12, 2027 hearing and the approval becomes final. The settlement does not give a specific payment date.
Did Merrill admit it underpaid interest?
No. Merrill denies all claims and allegations of wrongdoing. The court never decided who was right, and the case settled before trial.
I opted out last summer. Do I need to do anything?
No. If you validly excluded yourself after the earlier certification notice, you are already out of the class. You will not receive a payment and are not bound by the settlement.