Defendants Secure Another Win On Discretionary Use Of 401(k) Plan Forfeitures

On September 19, 2024, the Southern District of California dismissed claims brought by a 401(k) plan participant against Thermo Fisher Scientific Inc. regarding the use of forfeitures to offset future employer contributions. As summarized below, the decision largely tracks a decision in favor of Hewlett Packard ("HP") earlier this year, furthering a split in rulings on the issue by federal courts in California.

The Opinion

The central theme of plaintiff's claims against Thermo Fisher was that, in choosing to use forfeitures to reduce employer contributions instead of reducing administrative expenses charged to participants, the plan participants were harmed. The plan document provided the plan with discretionary authority over how forfeitures were allocated, allowing all or part to be used to "pay reasonable expenses of the Plan" or "reduce . . . Discretionary Contributions..."