Plan Sponsors Win Two More Forfeiture Decisions

Written By Anthony Powers

Plaintiffs have filed several cases in the past months claiming the use of 401(k) plan forfeitures to reduce employer contributions, rather than to reduce participant-paid plan expenses, violates the ERISA fiduciary duty to act solely in the best interests of the plan participants. To date, in these cases, we have three decisions granting defendants’ motion to dismiss –

  • Hutchins v. HP Inc., US District Court for the Northern District of California (June 17, 2024),

  • Naylor v. BAE Systems, Inc., US District Court for the Eastern District of Virginia (September 5, 2024) and

  • Dimou v. Thermo Fisher, US District Court for the Southern District of California (September 19, 2024).

And two decisions denying defendants’ motion to dismiss –

  • Perez-Cruet v. Qualcomm Incorporated, US District Court for the Southern District of California (May 24, 2024) and in

  • Rodriguez v. Intuit Inc., US District Court for the Northern District of California (August 12, 2024).

Except for Naylor (in which the court found the plan document mandated the plan use forfeitures to reduce employer contributions), all of these cases involve plan documents giving the plan sponsor/sponsor fiduciaries discretion to use forfeitures either to reduce employer contributions or to pay plan expenses. Bottom line: The courts are divided on what rule should apply in that circumstance.

Anthony Powers
Previous

Access Retirement Savings Penalty-Free After Disasters with SECURE 2.0 QDRDs
Next

IRS Notice 2024-77 Addresses SECURE 2.0 Changes to Plan Overpayments