The ERISA Industry Committee (ERIC), the Chamber of Commerce of America, and the American Benefits Council have filed an amicus brief in Hutchins v. HP, Inc. This case, which is currently pending before the U.S. Court of Appeals for the Ninth Circuit, is a class action lawsuit in which retirement plan participants are challenging the use of "forfeited" money from 401(k) and 403(b) plans to pay administrative plan expenses or reduce employer contributions. Forfeited funds are funds that are returned to the employer when an employee leaves the company before becoming fully vested.
ERIC is supporting the U.S. District Court for the Northern District of California's February 2025 decision to dismiss the class action for a second time — this time, with prejudice. The district court ruled that the plaintiff's legal theory was overbroad and implausible. According to the district court, under the plaintiff's theory, HP would be required to use all forfeited funds to pay administrative costs rather than reduce its contributions to employees' plans.
The district court found that this result was contrary to both the Employee Retirement Income Security Act (ERISA) and the language of the plan. The result would impose fiduciary duties of loyalty and prudence beyond what the law requires and create benefits for plan participants beyond those outlined in the plan.
In its amicus brief, ERIC points out that the Internal Revenue Code and Treasury Regulations have allowed employers to apply forfeited funds to either administrative expenses or employer contributions to the plan for more than 50 years. Therefore, this practice has been acceptable since before Congress enacted ERISA. As a result, ERIC argues that reaching the opposite conclusion implies that the Treasury Department, which has co-regulatory and enforcement authority over ERISA-governed plans, has continuously supported the use of forfeited funds in this manner. Furthermore, the result would require the Court to determine that the "exclusive purpose" in ERISA's fiduciary breach provision would differ significantly from the "exclusive benefit" requirement in the IRC.
ERIC also notes other similar class action cases involving forfeited funds that courts have dismissed nationwide.
In addition, ERIC argues that the plaintiff's fiduciary duty claims are invalid as a matter of law. First, ERIC contends that ERISA explicitly states that it cannot be interpreted to modify or invalidate existing federal law. To adopt the plaintiff's legal theory would undermine applicable Treasury regulations.
Second, ERIC alleges that HP was not acting in a fiduciary capacity when handling forfeited funds, but as a settlor. ERIC claims that HP is a settlor, not a fiduciary, in determining the structure and design of the plan, including how to treat forfeited funds.
Finally, ERIC argues that the plaintiff's theory would undermine the text and purpose of ERISA and ultimately harm both employers and employees.
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