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J.P. Morgan 401(k) Funds Forfeiture Case Dismissed
A federal judge dismissed the case with prejudice, meaning a new case could not be filed in the district.
A federal judge in Los Angeles dismissed a lawsuit against J.P. Morgan Chase & Co. that alleged the company and plan fiduciaries improperly used forfeited funds in its 401(k) plan, in violation of the Employee Retirement Income Security Act.
U.S. District Judge Josephine Staton, presiding in U.S. District Court for the Central District of California, dismissed the complaint in Daniel J. Wright v. JPMorgan Chase & Co et al. on June 13, ruling that J.P. Morgan fiduciaries properly followed the plan’s procedures.
Plan sponsors dealing with forfeited funds can either use the funds to reduce employer contributions to the plan or reduce plan expenses, according to the Internal Revenue Service.
Still, the complaint alleged J.P. Morgan’s plan violated its duty of loyalty to participants under ERISA, which says fiduciaries cannot place corporate interests ahead of participants’ interests. Several other similar complaints in the last several years have made similar allegations.
“Plaintiff does not dispute that Defendants’ use of forfeited funds to offset their own contributions comported with the terms of the plan. Nor could he,” Staton stated in the decision. “The plan explicitly grants defendants discretion to use forfeited funds for this purpose.”
Staton continued by stating that not offering plan sponsors discretion on how to use forfeiture funds for either offsetting plan costs or future matches goes against long-established law, calling the complaint “a novel theory.”
“The court is cognizant of plaintiff’s practical concerns about how defendants have chosen to design the plan and use forfeited amounts,” Staton stated. “But [the] plaintiff has failed to show how those choices violate the applicable law especially where, as here, it is undisputed that the terms of the plan give defendants discretion to use forfeitures to reduce their own contributions.”
The judge also dismissed claims that J.P. Morgan’s plan breached ERISA’s anti-inurement provision, engaged in any prohibited transactions or failed to monitor fiduciaries.
Staton dismissed the case with prejudice, meaning a new case could not be filed in the district.You Might Also Like:

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