Sometimes, in the strange world of ERISA litigation, you get a surprise. And in Hutchins v. Hewlett Packard, we got one: the Department of Labor, yes, that DOL, the one whose name alone strikes fear into the heart of many plan sponsors, has filed an amicus curiae brief in favor of the employer.
That’s right. The DOL didn’t sue. It wasn’t a party. But in the first appellate-level case tackling forfeiture allocation under ERISA, the DOL felt compelled to jump in, not on the side of the plaintiffs, which is usually the case, but on the side of HP.
Let’s be clear: this is not the DOL turning into the employer’s best friend. The Department even acknowledged it had never weighed in on this issue before. And courts, rightfully, don’t like when agencies attempt to make law through litigation rather than through proper rulemaking under the Administrative Procedure Act. But in this case, the DOL appears to be saying: “We can’t wait for years of notice and comment and inter-agency politics while litigation explodes across the country like brushfire.”
Forfeiture litigation isn’t new, but what’s changed is volume. We’re now talking about fifty-plus active cases, all attacking the use of plan forfeitures, often arguing they should’ve reduced employer contributions instead of covering plan administrative expenses. While district courts have generally sided with employers, the trickle of cases hasn’t slowed. That’s where the DOL likely felt pressure: a growing patchwork of inconsistent decisions and no clear, authoritative guidance.
What makes this case even more fascinating is that the DOL’s position wasn’t a given. This is the same Department that’s often criticized for aggressively siding with plan participants and making fiduciaries jump through regulatory flaming hoops. So when they side with the defense, you pay attention.
Now, let’s talk strategy. The DOL’s brief leaned heavily on the language of the plan document. That’s not surprising. In ERISA land, the plan document is gospel. If the plan explicitly allows forfeitures to pay for admin expenses, then that’s the rule. The DOL, to its credit, stuck to that orthodoxy. They also noted the plaintiffs’ case was thin on specifics, even after being amended. In litigation, that’s everything.
And because this is the Ninth Circuit, the appellate court for the Wild West of ERISA litigation, the DOL’s focus was understandably narrow, sticking to that Circuit’s precedent. Still, this brief is a shot across the bow to plaintiffs everywhere, and it signals that the DOL and the IRS are now singing from the same hymnal. That’s important, because some practitioners were rightly concerned that one agency might go rogue.
Perhaps the most compelling part of the DOL’s argument is their observation about the potential conflict between plan sponsors and plan administrators when forfeitures are involved. If a fiduciary is forced to use forfeitures to reduce employer contributions, rather than pay plan expenses, it puts them in a bind, because funding decisions belong to the plan sponsor (the
settlor), not the fiduciary. It’s the kind of nuance that ERISA nerds (like me) find thrilling and that casual readers find exhausting.
But before plan sponsors start celebrating or sending fruit baskets to the DOL, let’s pump the brakes. This is just a brief. The Ninth Circuit hasn’t ruled yet. They could ignore the DOL’s argument entirely. It’s happened before. And even if the court agrees, the ruling only binds courts in the Ninth Circuit. Plaintiffs’ lawyers in other circuits may not be deterred.
Still, this changes the game. The DOL has sent a signal: not every forfeiture allocation claim is going to fly. If you’re a fiduciary sitting on pins and needles because your forfeiture allocation is under attack, this might be the first decent night’s sleep you’ve had in a while. You’re not in the clear—but you’re not alone either.
Ultimately, what we have here is the DOL doing something pragmatic and, dare I say, refreshingly reasonable. They saw a litigation trend spiraling out of control, recognized the lack of regulatory clarity, and tried to inject some order. That doesn’t mean we’re headed for a golden age of DOL-employer camaraderie, but in a litigation climate that often feels like trench warfare, it’s nice to see a little common sense.
So for now, plan sponsors, keep doing what you’re doing, dotting the i’s, crossing the t’s, and following your plan document to the letter. And maybe, just maybe, don’t curse the DOL under your breath today. They might’ve just saved you from your next ERISA headache.
