ERISA Case Against WPP Group USA Dismissed

A federal judge dismissed a complaint accusing WPP Group USA Inc. and its retirement plan committee of misusing employee forfeitures to offset company costs rather than benefiting plan participants.

The dismissal continues a recent trend of mixed results in forfeiture cases since the Department of Labor issued an amicus brief in July backing employers.

Since then, a handful of new cases have been filed, including one with a new wrinkle, in which the plaintiffs allege the employer failed to exhaust forfeiture funds promptly. In addition, at least four have been dismissed by district courts, while one received a judge’s approval to proceed in August, and another resulted in a settlement in September.

U.S. District Judge John G. Koeltl, presiding in U.S. District Court for the Southern District of New York, ruled that the plaintiffs in Polanco v. WPP Group USA Inc. et al. failed to plausibly allege violations of the Employee Retirement Income Security Act in their December 2024 complaint.

As such, the court rejected claims that WPP and its plan administrators breached fiduciary duties or engaged in prohibited self-dealing by using forfeited funds to reduce future employer contributions instead of paying plan administrative expenses.

Background of the Case

The plaintiffs filed the initial complaint in 2024, arguing that WPP’s handling of forfeitures—unvested employer contributions lost by employees who left the plan before full vesting—violated ERISA’s fiduciary standards. They alleged that by applying forfeitures primarily to offset WPP’s future contributions, the company enriched itself at its employees’ expense and forced participants’ accounts to bear administrative costs.

The plaintiffs sought to represent a class of WPP employees participating in the plan since 2018. They claimed five separate ERISA violations, including prohibited transactions and breaches of the duties of loyalty and prudence.

The Court’s Analysis

Koeltl found that the plan documents expressly granted WPP discretion in how to apply forfeitures—either toward administrative costs or future contributions—and that the plaintiffs did not allege they were denied any benefit promised by the plan.

“Because the touchstone of ERISA is the plan document, the fiduciary duty is fulfilled where the fiduciary ensures that participants have received their promised benefits,” Koeltl wrote, citing multiple federal precedents.

Koeltl also emphasized that WPP’s contributions were discretionary, meaning the company was not required to make employer contributions at all. Therefore, using forfeitures to fund those contributions actually provided employees with benefits they otherwise might not have received.

Furthermore, the opinion aligned with recent rulings across the country rejecting similar ERISA forfeiture suits. Koeltl referenced cases involving HP Inc., Honeywell and Thermo Fisher Scientific, noting a “settled understanding” under federal law and Department of the Treasury regulations, an understanding that allows forfeitures to be used for either administrative costs or to reduce employer contributions.

The citation of the HP case is notable, since that was the forfeiture case in which the DOL weighed in with an amicus brief in July, arguing in favor of employer discretion over how to spend forfeitures.

Claims of Conflict and Prohibited Transactions Rejected

The plaintiffs also alleged that WPP acted out of self-interest. The court ruled, however, that merely following the plan’s terms does not amount to disloyalty to participants, and that the plaintiffs failed to provide factual support for their conflict-of-interest theory.

On the prohibited transactions claims, Koeltl determined that reallocating forfeitures within the plan does not constitute a transaction under ERISA’s definition.

“Employer contributions are benefits,” Koeltl wrote. “Every dollar of forfeiture allocated toward employer contributions is a benefit plan participants are not otherwise entitled to.”

Since the plaintiffs’ derivative claim that WPP failed to monitor its plan committee depended on the success of their other counts, it was dismissed as well.

Glenn Agre Bergman & Fuentes LLP and Chirinos Law Firm PLLC represented the plaintiffs, while Groom Law Group represented the defendant.