Compliance February 11, 2025

Schlichter Joins 401(k) Forfeiture Suit Fray

The plaintiffs in the case against Charter Communications Inc. allege the telecommunications giant ‘misused’ forfeited plan assets when reducing the employer’s future matching contributions to the plan.

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Law firm Schlichter Bogard LLC has added to the litany of 401(k) asset forfeiture lawsuits with a complaint filed against Charter Communications Inc. on Friday.

In O’Donnell et al. v. Charter Communications Inc. et al., three participants in the Charter Communications Inc. 401(k) Savings Plan, which maintains approximately $7.9 billion in assets, are suing the telecommunications giant for using forfeited plan assets toward reducing the employer’s future matching contributions to the plan.

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This is the first forfeiture case in which attorney Jerome Schlichter has been involved, as he is most known for representing plaintiffs in excessive fee lawsuits and, more recently, pension risk transfer-related suits.

Forfeiture lawsuits have picked up steam in the last year, with more than 30 cases filed against employers. JPMorgan Chase & Co, BMO Financial Corp., Capital One and Amazon.com Inc. are among the major employers that have faced scrutiny for their management of forfeited funds.

In the Charter Communications case, the plaintiffs allege that the company’s “misuse” of forfeitures was “contrary to the plan’s plain terms.” According to the complaint, from January 1, 2017, to December 31, 2024, the plan mandated how plan forfeiture assets would be used by Charter. Specifically, plan forfeiture assets were first required to be used to pay plan administrative expenses, the complaint states.

Only if the forfeiture assets “exceed administrative expenses,” could the remaining assets then be used to offset Charter’s required employer matching contributions, the plan documents state.

“In direct violation of these terms of the plan, during the class period, Charter used plan forfeiture assets to reduce its employer matching contributions instead of paying plan administrative expenses,” the complaint states.

According to the lawsuit, in 2019, Charter used $16.3 million in forfeiture assets to reduce its employer matching contributions, but in the same year, it reported that participants were charged $7.3 million in allocated administrative expenses paid by the plan.

Charter has 126,016 participants in its 401(k) plan, as per its 2023 Form 5500 filing.

As of January 1, 2025, Charter amended its plan. It now mandates that forfeiture assets be used to reduce the company’s required employer matching contributions, according to the lawsuit. Any remaining forfeiture assets are then to be used to pay “any expenses of administration not allocated” to a plan participant’s account.

While using forfeited funds toward future employer contributions is permitted under IRS rules, Title 1 of the Employee Retirement Income Security Act of 1974 requires that fiduciaries administer their plans in accordance with the terms laid out in the plan documents. ERISA attorneys have previously noted that plan sponsors should ensure they are managing forfeiture funds as authorized by the plan’s language.

The plaintiffs in the Charter lawsuit are asking the U.S. District Court for the Eastern District of Missouri, where the case was filed, to find and declare that Charter has breached its fiduciary duty to follow the terms of the plan documents and that the company engaged in “prohibited conduct.” They also ask the court to make Charter restore to the plan all losses resulting from each ERISA violation alleged in the suit, among other demands.

Charter Communications did not immediately respond to a request for comment.

 

Compliance February 11, 2025

Unions’ Motion for Restraining Order Against DOL Blocked

A judge blocked an attempt from several union groups and a think tank to prevent the Department of Labor from allowing Elon Musk and the Department of Government Efficiency to access sensitive data and information.

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A federal judge late Friday rejected labor unions’ attempt to block President Donald Trump’s Department of Government Efficiency Service Temporary Service Organization from gaining access to sensitive data at the Department of Labor.

U.S. Senior District Judge John Bates, presiding in the District of Columbia, stated in his opinion that while the court has concerns about the DOL and the DOGE’s alleged conduct, the plaintiffs “failed to establish standing” in their motion for a temporary restraining order.

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A collection of labor unions and a think tank—the Economic Policy Institute—filed a lawsuit and the motion for a temporary restraining order against the DOL and DOGE to prevent DOGE-affiliated personnel from gaining “unlawful” access to DOL systems or information.

The motion had argued that the DOGE could potentially gain access to information regarding American workers, labor statistics and even health information. The union groups alleged that this would be unlawful because the DOGE lacks legal authority to take these actions and the DOL is required under the Privacy Act of 1974 to get individuals’ approval before sharing records with another agency or person.

According to the judge’s opinion, on February 4, DOL leadership reportedly told its employees—including an unnamed DOL employee and member of a plaintiff, the American Federation of Government Employees—that the DOGE personnel would be accessing the DOL headquarters around 4 p.m. on February 5. That information from DOL leadership came with an instruction for employees to “do whatever [the DOGE] asks.” This included providing access to any requested department system without regard to security protocols.

While the plaintiffs argued that allowing the DOGE access to sensitive information will harm millions of workers or their families because it will result in “unauthorized access to sensitive employee health and disability data,” the court stated that association standing requires more than generalizations about the organization’s members.

Organizational standing also requires the plaintiff organization to “show actual threatened injury in fact that is fairly traceable to the alleged illegal action and likely to be redressed by a favorable court decision,” according to Bates’ opinion.

“In sum, plaintiffs fail to establish that any one of them has standing under either route an organization can take,” Bates stated. “That means they are not entitled to preliminary relief at this juncture.”

Bates ordered that the parties file a proposed preliminary injunction motion briefing schedule by no later than February 12.

The plaintiffs in the case are represented by the Democracy Forward Foundation, and the DOL is represented by attorneys Benjamin Kurland and Michael Jospeh Gerardi.

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