Joint Amicus Brief Backs Dismissal of 401(k) Forfeiture Complaint Against Wells Fargo

Interest groups the ERISA Industry Committee, the U.S. Chamber of Commerce and the National Retail Federation filed a joint amicus brief in the U.S. 8th Circuit Court of Appeals, urging the court to uphold a lower court’s June decision to dismiss a 401(k) forfeiture complaint against Wells Fargo & Co.

U.S. District Judge John Tunheim, presiding in U.S. District Court for the District of Minnesota, ruled on June 18 that plaintiff Thomas Matula Jr., a former employee and plan participant, failed to state a valid claim because Wells Fargo’s 401(k) plan “does not authorize Wells Fargo to use forfeited funds to pay optional services and operating expenses of the Plan or to make arbitrary payments to participants’ individual accounts when there is no error to correct.”

The plaintiff, represented by Haffner Law PC, appealed the decision in July to the 8th Circuit, which hears appeals from federal district courts in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.

The initial complaint, filed in June 2024, alleged that Wells Fargo, the plan sponsor and its plan fiduciaries violated the Employee Retirement Income Security Act by improperly using forfeited funds to reduce employer contributions, rather than allocating forfeited funds to participants’ accounts.

However, as ERIC and its coalition stated in their November 26 brief, the IRS has consistently taken the position that forfeitures can be used for any of three purposes: to pay plan expenses, to reduce employer contributions or to make an additional allocation to participants.

“Plans have long followed a well-established practice of using forfeited funds to offset employer contributions or plan expenses, a practice commonly understood to be entirely permissible under ERISA,” said Tom Christina, executive director of the ERIC Legal Center, in a statement. “Now, after a recent rash of lawsuits, the plaintiffs’ bar is asking the court for a legal about-face despite decades of legal and regulatory precedent.”

ERIC’s brief stated, “It would be not just exceedingly odd but legally incoherent for ERISA to impose fiduciary liability for a practice that is allowed under the Tax Code’s analogous regulations and does not result in participants receiving fewer benefits than they were promised.”

The brief aligned with the Department of Labor’s recent employer-friendly stance in a 401(k)forfeiture case—a development legal experts told PLANADVISER they expect it to be a “significant” influence on future court decisions.

Citing the DOL’s amicus brief in Hutchins v. HP Inc., the industry groups’ amicus brief stated, “the DOL recently made clear that an employer’s ‘deci[sion] to use Plan forfeitures to fund matching contribution benefits’ does not state a plausible claim for breach when permitted by the plan documents. … As DOL’s brief explains, ‘it is axiomatic that ERISA does no more than protect the benefits which are due to an employee under a plan.’”

According to the Wells Fargo & Co. 401(k) Plan’s latest Form 5500, forfeitures used to offset employer contributions were approximately $8.73 million for the year that ended on December 31, 2024. The plan had nearly $57.9 billion in assets with 288,416 participants, as of December 31, 2024, according to the filing.