The latest chapter in the wave of forfeiture reallocation lawsuits comes from Armenta v. WillScot / Mobile Mini. The good news: most of the claims were dismissed. The caution: one prudence claim survived, and the court gave the plaintiff a chance to amend.
What Happened
The lawsuit challenged how plan forfeitures were used, arguing they should have been applied first to pay administrative expenses instead of reducing employer contributions. The court dismissed most counts, noting the plan document gave discretion by saying forfeitures “may” be used for admin costs — not “must.” Claims of disloyalty and prohibited transactions didn’t stick.
But one claim remains: whether fiduciaries acted prudently in their process. The court is allowing the plaintiff to try again, focusing on how decisions were made rather than what outcome occurred.
Why It Matters
This case reflects a broader pattern. Many forfeiture suits are getting tossed, but courts are open to claims that target the decision-making process. Judges aren’t as interested in second-guessing outcomes as they are in whether fiduciaries engaged in a thoughtful, documented process.
Lessons for Fiduciaries and Plan Sponsors
· Plan language matters. Words like “may” versus “must” can be the difference between discretion and liability. Review your documents and know what flexibility you have.
· Process is everything. Keep records of how decisions are made around forfeitures. Meeting minutes, comparisons, and documented alternatives can make or break a case.
· Dismissal isn’t final. Plaintiffs often get another chance, as here. Even when claims are weak, expect persistence.
· Be proactive. Don’t wait for a lawsuit to review your forfeiture provisions and fiduciary practices. A little preparation now is cheaper than defense later.
Bottom Line
The court’s ruling is encouraging for fiduciaries — most of the claims didn’t stick. But the fact that a prudence claim survived is a reminder: outcomes matter less than process. If you’re making discretionary decisions about forfeitures, make sure the “paper trail” shows a prudent, deliberate process.