A former Wells Fargo employee filed a proposed class action lawsuit against the company, alleging that it violated the Employee Retirement Income Security Act (ERISA) in using forfeited 401(k) funds to reduce its own contributions to the plan rather than to benefit plan participants. The case is Thomas O. Matula Jr. v. Wells Fargo & Co. et al., case number 3:24-cv-03504, U.S. District Court for the Northern District of California.
Matula claims that Wells Fargo put its interests above those of its 401(k) plan participants by failing to invest workers’ forfeited funds and increase plan assets. Instead, the company uses the funds to benefit itself by reducing its contributions to other workers’ 401(k) plans. The net result is that the company’s actions reduce plan assets and cause plan participants to incur expenses that the forfeited funds could have covered.
Wells Fargo holds 401(k) plan assets in a trust, and employees contribute to their 401(k) plans, with their contributions vesting immediately. However, Wells Fargo’s contributions to employees’ plans do not vest until after three years of employment. If employees leave before their employer contributions fully vest, they forfeit their balance of the unvested employer contributions. Wells Fargo then decides how to allocate those forfeited funds.
In 2022, Wells Fargo collected over $2 million in forfeited nonvested employer contributions from the 401(k) plan. The company claimed in a public financial statement that it would use the forfeited funds to reduce future employer contributions, pay administrative expenses for the plan, or make corrections to the participants’ accounts. However, Matula alleges that ERISA prohibits Wells Fargo from using the forfeited funds to reduce its future employer contributions, which, in turn, reduces plan assets and causes participants to incur administrative expenses that the funds could have covered.
Matula asks the Court to certify a class of Wells Fargo & Company 401(k) Plan participants and beneficiaries in his complaint. He alleges that Wells Fargo breached its fiduciary duty, failed to monitor fiduciaries, and violated ERISA’s prohibited transactions and anti-inurement provisions.
The proposed class action lawsuit is one in a series of allegations against Wells Fargo that have snowballed since a national scandal in 2015 when it was discovered that the company had created thousands of fake customer accounts. That incident led to billions in fines, several turnovers in CEOs, one who has sued for over $34 million in back pay, and a host of regulatory and compliance enforcement actions that have led to additional fines and costs. Investors have recently sued the banking giant in two states over a lack of proper DE&I monitoring systems.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all 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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