Bank of America has become the latest employer to face a class action lawsuit alleging misuse of forfeited 401(k) funds. Retirement plan participants claim that the bank breached its fiduciary duty under the Employee Retirement Income Security Act (ERISA) by improperly benefiting from 401(k) matching funds that employees forfeited when they left the company. The case is Becerra v. Bank of America Corp., which was filed on August 9, 2024, in the U.S. District Court for the Central District of California.
In her suit, Esmeralda Becerra claims that Bank of America has engaged in a regular practice of wrongfully using forfeited plan assets to benefit itself by reducing future employer contributions to the plan rather than benefit plan participants. Becerra alleges that by choosing to benefit itself instead of plan participants, Bank of America has placed its own interests above those of the plan and its participants, which is a direct violation of ERISA.
The suit filed against Bank of America is only one of many similar lawsuits that various major companies are facing nationwide. Retirement plan participants have filed similar suits against Wells Fargo, Thermo Fisher Scientific, Tetra Tech, Honeywell, HP, Mattel, Intuit, Clorox, Qualcomm, and Intel in recent months. The first such suit occurred when the U.S. Department of Labor (DOL) filed suit against a tech company challenging how its plan sponsor utilized forfeited plan funds. In that case, plan terms required that forfeited funds be used to lower plan expenses before being used to reduce employer contributions. The DOL suit was settled in 2023.
In 2023, the Internal Revenue Service (IRS) also guided employers on how they could use forfeited plan funds. That guidance indicates that employers may use the forfeited funds to pay plan costs, reduce employer contributions, or make additional allocations to employees. In many cases, depending on plan terms, forfeited funds go directly into a pooled “forfeited funds” account until the employer decides how to best utilize them.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and H.R./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.
Hall Benefits Law, LLC
Latest posts by Hall Benefits Law, LLC (see all)
- October 2024 | Happy HBL-loween! Plan Sponsor Treats Inside - October 31, 2024