Navigating the Complexities of 401(k) Forfeiture Lawsuits
Scott Higgins AIF? CFP? CPFA
Retirement Plan Advisor @ Rose Street Advisors | AIF? CFP? CPFA
Recent litigation against major corporations like Bank of America, Intuit, and Qualcomm has put a spotlight on the proper management of 401(k) forfeitures. At the heart of these lawsuits is the accusation that these companies have violated the Employee Retirement Income Security Act (ERISA) by using forfeited funds to offset their own contribution obligations instead of allocating them back to plan participants.
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Forfeitures occur when employees leave a company before fully vesting in their retirement benefits. According to ERISA guidelines, these forfeited funds should be used to benefit the remaining plan participants, such as by reducing plan fees or increasing participant balances. However, the lawsuits allege that the companies in question used these funds to reduce their own financial obligations, thereby depriving participants of potential gains.
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The advancement of these cases in district courts underscores the significance of fiduciary responsibility in managing retirement plans. The courts have allowed the lawsuits to proceed, indicating that the companies' practices warrant closer scrutiny. This development serves as a critical reminder for plan sponsors to carefully manage forfeitures and ensure they comply with ERISA regulations to avoid legal challenges and uphold their duty to plan participants.
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In conclusion, these lawsuits highlight the importance of proper fiduciary conduct in managing retirement plans. As these cases unfold, they may set important precedents for how forfeitures should be handled, potentially leading to more stringent guidelines and greater accountability for plan sponsors.
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Scott Higgins, AIF?, CFP?
Rose Street Advisors
244 North Rose Street, Kalamazoo, MI 49007
(269) 552-3200
Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC.? Rose Street Advisors, LLC is independently owned and operated. #6895764.1
Retirement Relationship Manager
7 个月Great insight, Scott! It's important that forfeiture use is laid out in plan documents and that fiduciaries are allocating them appropriately. When in doubt, check the plan document!