Dueling Decisions Spur Employer Confusion on 401(k) Forfeitures

Employers tasked with reallocating 401(k) assets forfeited by former employees are encountering a wave of litigation alleging the misuse of plan funds, as well as emerging disagreement between judges on these suits’ viability.

The appetite for litigation has risen over plan sponsors’ use of forfeited funds to pay their own contributions rather than offset workers’ costs, despite existing and proposed US Treasury Department regulations that appear to allow this type of usage.

HP Inc., which used unvested 401(k) cash to fund its other required plan contributions, successfully defeated class action claims June 17, when a US District Court for ...