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DOL sues over forfeitures

While there have been a few lawsuits over the use of forfeitures in retirement plans, it’s important to follow what the plan document says.

The Department of Labor (DOL) filed a complaint in the Federal District Court, Western District of Kentucky, stating that Sypris Solutions Inc. members of its retirement savings plan advisory committee failed to follow its own governing documents regarding the use of forfeiture funds for several of its 401(k) plans.

The DOL claims that from 2012 through 2015, the 401(k) plans’ plan documents required defendants to use forfeiture funds to pay plan expenses—but the plan sponsor used the forfeiture funds to reduce employer contributions to the plans.

The DOL argued that by doing so, the plan sponsor benefited by reducing its contributions to the plans, but plan participants who saw their plan account balances reduced by payments of plan expenses from plan assets and not from forfeitures.

Judge Benjamin Beaton issued a consent order and judgment ordering the plan sponsor to restore $575,000 to the plan participants who were harmed by the defendants’ use of the forfeiture funds.

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