If you\u2019ve been paying attention to the growing wave of 401(k) forfeiture litigation, the Department of Labor\u2019s latest move is a big deal \u2014 even if it didn\u2019t come with fireworks and fanfare.<\/p>\n
In a recent development, the U.S. Department of Labor filed an amicus brief supporting JPMorgan Chase & Co. in a 401(k) forfeiture lawsuit now on appeal in the Ninth Circuit. This marks the second time in recent months that the DOL has sided with a plan sponsor rather than plaintiffs challenging the use of forfeited plan funds \u2014 signaling a continued shift toward a more employer-friendly posture in this corner of ERISA litigation.<\/p>\n
So What\u2019s the Dispute, Anyway?<\/p>\n
Here\u2019s the basic setup in plain English:<\/p>\n
\u00b7 In many 401(k) plans, when an employee leaves before fully vesting in employer contributions (like matching amounts), those unvested funds get forfeited back to the plan.<\/p>\n
\u00b7 What the sponsor does with those forfeitures \u2014 whether to offset future contributions or pay administrative costs \u2014 has become the subject of a growing number of lawsuits. Plaintiffs say certain uses violate ERISA\u2019s fiduciary duties; defendants \u2014 and now the DOL \u2014 say they don\u2019t.<\/p>\n
The plaintiffs typically argue that using forfeitures to reduce future employer contributions (instead of paying expenses that otherwise would be charged to participants) breaches ERISA\u2019s duty of loyalty and prudence. The defendant, backed by the DOL, argues that if the plan documents permit it, using forfeitures this way doesn\u2019t violate the law.<\/p>\n
Why the DOL\u2019s Involvement Matters<\/p>\n
When the DOL files an amicus brief, it\u2019s not because they\u2019re bored. It\u2019s because the department thinks the issue matters to the administration of employee benefit law. In this case, the DOL is essentially saying:<\/p>\n
\u00b7 The practice of allocating forfeitures toward employer contributions is supported by long-standing practice and plan terms.<\/p>\n
\u00b7 Doing so, by itself, doesn\u2019t automatically violate ERISA.<\/p>\n
\u00b7 Distinguishing between \u201csettlor functions\u201d (plan design and funding decisions) and \u201cfiduciary functions\u201d (managing the plan for the exclusive benefit of participants) is key.<\/p>\n
This approach echoes a similar position the DOL took in another employer-defense forfeiture case last year, reinforcing the idea that not all allocation decisions demonstrate improper fiduciary conduct.<\/p>\n
Bottom line? The DOL\u2019s backing could influence how appellate courts evaluate these claims, especially in circuits like the Ninth where a precedent-setting decision could ripple nationwide.<\/p>\n
But This Isn\u2019t a Guaranteed Win for Employers<\/p>\n
Let\u2019s be clear: an amicus brief isn\u2019t the same thing as a court\u2019s ruling. It\u2019s advice to the court. Courts are free to follow the DOL\u2019s lead or chart their own course. And remember \u2014 there are dozens of these forfeiture lawsuits pending, with courts across the country taking different approaches on motions to dismiss. (Mayer Brown)<\/p>\n
So while the DOL\u2019s position is good news for sponsors with clear plan language and solid administrative processes, it doesn\u2019t mean plaintiffs will stop filing or that all cases will be dismissed.<\/p>\n
What Plan Sponsors Should Take Away<\/p>\n
Here\u2019s my take \u2014 plain and practical:<\/p>\n
1. Solid plan language still matters. If your plan clearly authorizes how forfeitures can be used \u2014 and you follow it carefully \u2014 you\u2019re in better shape defending any plaintiff challenge.<\/p>\n
2. Documentation is your friend. Maintain contemporaneous records showing why you allocated forfeitures as you did. That helps defeat claims that you acted imprudently.<\/p>\n
3. Compliance doesn\u2019t stop at \u201cit\u2019s permitted.\u201d Just because the plan says you can use forfeitures in a certain way doesn\u2019t mean the decision was \u201cprudent\u201d under ERISA. Be sure your fiduciaries genuinely consider participant interests.<\/p>\n
4. The DOL\u2019s voice counts \u2014 but courts still decide. A departmental brief isn\u2019t binding. It influences courts, especially where appellate precedent is lacking \u2014 but it doesn\u2019t bind them. So don\u2019t assume victory yet.<\/p>\n
Final Rosenbaum Rule<\/p>\n
In the world of ERISA litigation, trends matter. And right now, the trendlines \u2014 from forfeiture cases to public DOL positions \u2014 are pointing in favor of clarity, compliance, and careful fiduciary deliberation. The department\u2019s latest brief in the JPMorgan case is just the latest chapter in a broader story about how retirement plans should treat forfeited dollars, and how the law interprets fiduciary judgment calls.<\/p>\n
If you\u2019re a plan sponsor or adviser, this is not a \u201cset it and forget it\u201d issue. It\u2019s a reminder that good plan design paired with disciplined administration is the best defense against litigation risk \u2014 especially when plaintiffs try to recast decades-old practices as new theories of liability.<\/p>\n
Stay vigilant, stay documented, and as always \u2014 stay Rosenbaum-smart about your ERISA compliance.<\/p>\n
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