Many retirement plans have historically allocated former participant contributions, or “forfeited funds,” to reduce future employer contributions or to benefit current plan participants.
The Internal Revenue Service (IRS) has supported this practice; however, current litigation focuses on whether using forfeitures to reduce employer contributions aligns with ERISA’s fiduciary duty requirements, particularly since ERISA’s plain text does not explicitly address this issue.
In this Insights, CRA’s Matthew Stratford, Yifan Yu, and Ken Morotomi discuss two key developments in ERISA forfeiture litigation: an increase in class action lawsuits related to ERISA forfeitures, and differing interpretations among federal courts of cases with similar fact situations and allegations.
