Plaintiffs Target Use Of 401(k) Plan Forfeitures

In the past month, plaintiffs have filed two separate lawsuits – Dimou v. Thermo Fisher Scientific, Inc. and Rodriguez v. Intuit, Inc – accusing plan fiduciaries of violating the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), by using plan forfeitures to offset future employer contributions. This use of forfeitures is widespread, so sponsors and providers will want to monitor the cases closely. For plan sponsors and service providers, these new claims are disconcerting and offer another example where a long common practice is now being challenged in the context of a class action complaint.

In both cases, the plans permitted the use of forfeitures for multiple purposes (e.g., paying administrative expenses and reducing future employer matching contributions). The plaintiffs allege that the plan fiduciaries violated their duties under ERISA by using the forfeitures to offset the employers' contribution obligation rather than some other