If you’ve been paying attention to the growing wave of 401(k) forfeiture litigation, the Department of Labor’s latest move is a big deal — even if it didn’t come with fireworks and fanfare.
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 — signaling a continued shift toward a more employer-friendly posture in this corner of ERISA litigation.
So What’s the Dispute, Anyway?
Here’s the basic setup in plain English:
· 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.
· What the sponsor does with those forfeitures — whether to offset future contributions or pay administrative costs — has become the subject of a growing number of lawsuits. Plaintiffs say certain uses violate ERISA’s fiduciary duties; defendants — and now the DOL — say they don’t.
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’s duty of loyalty and prudence. The defendant, backed by the DOL, argues that if the plan documents permit it, using forfeitures this way doesn’t violate the law.
Why the DOL’s Involvement Matters
When the DOL files an amicus brief, it’s not because they’re bored. It’s because the department thinks the issue matters to the administration of employee benefit law. In this case, the DOL is essentially saying:
· The practice of allocating forfeitures toward employer contributions is supported by long-standing practice and plan terms.
· Doing so, by itself, doesn’t automatically violate ERISA.
· Distinguishing between “settlor functions” (plan design and funding decisions) and “fiduciary functions” (managing the plan for the exclusive benefit of participants) is key.
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.
Bottom line? The DOL’s backing could influence how appellate courts evaluate these claims, especially in circuits like the Ninth where a precedent-setting decision could ripple nationwide.
But This Isn’t a Guaranteed Win for Employers
Let’s be clear: an amicus brief isn’t the same thing as a court’s ruling. It’s advice to the court. Courts are free to follow the DOL’s lead or chart their own course. And remember — there are dozens of these forfeiture lawsuits pending, with courts across the country taking different approaches on motions to dismiss. (Mayer Brown)
So while the DOL’s position is good news for sponsors with clear plan language and solid administrative processes, it doesn’t mean plaintiffs will stop filing or that all cases will be dismissed.
What Plan Sponsors Should Take Away
Here’s my take — plain and practical:
1. Solid plan language still matters. If your plan clearly authorizes how forfeitures can be used — and you follow it carefully — you’re in better shape defending any plaintiff challenge.
2. Documentation is your friend. Maintain contemporaneous records showing why you allocated forfeitures as you did. That helps defeat claims that you acted imprudently.
3. Compliance doesn’t stop at “it’s permitted.” Just because the plan says you can use forfeitures in a certain way doesn’t mean the decision was “prudent” under ERISA. Be sure your fiduciaries genuinely consider participant interests.
4. The DOL’s voice counts — but courts still decide. A departmental brief isn’t binding. It influences courts, especially where appellate precedent is lacking — but it doesn’t bind them. So don’t assume victory yet.
Final Rosenbaum Rule
In the world of ERISA litigation, trends matter. And right now, the trendlines — from forfeiture cases to public DOL positions — are pointing in favor of clarity, compliance, and careful fiduciary deliberation. The department’s 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.
If you’re a plan sponsor or adviser, this is not a “set it and forget it” issue. It’s a reminder that good plan design paired with disciplined administration is the best defense against litigation risk — especially when plaintiffs try to recast decades-old practices as new theories of liability.
Stay vigilant, stay documented, and as always — stay Rosenbaum-smart about your ERISA compliance.
