Amazon Faces Class Action Lawsuit for Mismanagement of $350M in Forfeited 401(k) Plan Contributions

February 11, 2025
Hall Benefits Law, LLC

Like many other employers, Amazon is now facing a class action lawsuit by its retirement plan participants over their disposition of forfeited 401(k) plan contributions. In their suit, the plaintiffs allege that Amazon used forfeited retirement funds to offset company contributions to the plan rather than to benefit participants by reducing plan fees. Other companies, such as Bank of America and Wells Fargo, have recently faced similar suits.

According to the lawsuit, Amazon violated its fiduciary duty to plan participants under the Employee Retirement Income Security Act (ERISA) by allocating former employees’ forfeited funds to reduce the company’s contributions to the plan. Under Amazon’s 401(k) plan, the company can use forfeited assets to reduce its future matching contributions, pay the plan’s administrative expenses, or restore forfeited accounts to former employees. These options comply with IRS regulations proposed in 2023. Amazon chose to apply the funds exclusively to the first option, which is the only option that benefited the company. Instead, Amazon could have reduced employee administrative costs, such as recordkeeping, investment management, and transaction fees.

Amazon employees have immediate vesting of their own contributions to their retirement accounts. On the other hand, the vesting of Amazon’s contributions to those accounts does not occur until employees have worked at the company for three years. Employees who leave the company before three years of service thus forfeit the matching funds that Amazon contributed to their retirement accounts, which amounted to almost $350 million between 2018 and 2023. As of 2022, Amazon’s 401(k) plan reportedly contains over $17 billion in assets with more than 1.3 million participants.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution for your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.