Wells Fargo Appears Poised to Win First 401(k) Forfeiture Appeal

An appeal challenging how Wells Fargo & Co. handles 401(k) forfeitures looked shaky Wednesday, when a panel of Eighth Circuit judges debated whether the case failed on the merits or for lack of standing.

The arguments focused on whether the plaintiff, former Wells Fargo employee Thomas Matula Jr., properly explained how he’d been harmed by the bank’s practice of using the 401(k) contributions forfeited by departing workers to fund its own matching contributions to the plan. Matula’s attorney, Alfredo Torrijos of Haffner Law PC, said the lower court decision tossing the case on standing grounds inappropriately interpreted disputed terms in Wells Fargo’s 401(k) plan document in the course of concluding that Matula hadn’t suffered an injury giving him standing to sue.

The case gives the US Court of Appeals for the Eighth Circuit a chance to become the first federal appeals court to weigh in on the growing number of lawsuits challenging how employers handle the 401(k) contributions forfeited by departing workers. Nearly 100 recent lawsuits say companies violate the Employee Retirement Income Security Act when they choose to use this forfeited money to fund their required plan contributions instead of lowering the administrative expenses paid by workers.

Early rulings in these cases have largely favored employers, and the US Labor Department has voiced its opposition to the legal theory raised by the plaintiff plan participants. Appeals are also pending in the Third, Fourth, Sixth, and Ninth circuits, the latter of which is scheduled to hear arguments in a case against HP Inc. in May.

‘Overwhelming’ Consensus

The arguments—held before Judges Steven M. Colloton, Raymond W. Gruender, and Jonathan A. Kobes— included little discussion of the dozens of other pending 401(k) forfeiture cases, or of the possibility that the Eighth Circuit could issue the first appellate ruling on a novel issue.

Russell Hirschhorn, the Proskauer Rose LLP attorney representing Wells Fargo, briefly mentioned the “overwhelming” consensus of federal district courts that have found no legal violations when companies use 401(k) forfeitures to fund their employer contributions.

He also argued against the idea that Wells Fargo’s use of forfeitures could violate ERISA’s anti-inurement provision, which prohibits employers from using retirement plan assets for their own benefit. The forfeitures never leave the plan and therefore never revert to Wells Fargo, Hirschhorn said.

One judge didn’t appear fully persuaded, pointing out that Wells Fargo is required to contribute less money to the plan if some of its contributions are funded by forfeitures.

Injury

The panel pressed Torrijos on whether his client had identified any specific 401(k) expenses he personally paid that could have been reimbursed by forfeitures.

Torrijos conceded that the complaint described a plan-wide injury rather than a specific injury suffered by Matula. He also disputed US District Judge John R. Tunheim’s analysis of injury, saying the judge found no injury by interpreting the meaning of disputed plan terms—something he shouldn’t have done when considering a motion to dismiss for lack of standing, Torrijos said.

But this only suggests the dismissal should have been on the merits, instead of on standing grounds, one of the Eighth Circuit judges told Torrijos.

Hirschhorn also focused on the question of standing, saying that Matula’s case rests on a “fundamental misunderstanding of how defined contribution plans work.”

According to Hirschhorn, there’s no mechanism in the plan document that could transform the forfeited funds into extra contributions for Matula and others, which means his purported injury wouldn’t be fixed by a decision in his favor.

The case is Matula v. Wells Fargo & Co., 8th Cir., No. 25-2441, argued 3/18/26.