Caleb Barron Quoted in Pension & Investments on 401(k) Plans Using Forfeiture Assets

Bradley attorney Caleb Barron was quoted in Pension & Investments on courts deciding how 401(k) plans can use forfeiture assets.

What started as a small law firm filing a handful of suits against a 401(k) plan’s use of forfeited funds has metastasized into a broad attack on sponsors that raises questions about reducing participants’ expenses.

Although there are differences among the various sponsor-defendants, the general theme is the same: What can sponsors do with company contributions to a participant’s retirement account if the employee leaves before being fully vested? (Participants’ contributions aren’t affected).

“Amend the plan document to take the choice out of an administrator’s hands by removing fiduciary responsibility,” Barron said. “In that way, the administrator is just following the document.”

Given the flurry of lawsuits, DC plans that give plan executives discretion in using forfeited funds “may be the low-hanging fruit” for ERISA [Employee Retirement Income Security Act of 1974] complaints, he noted.

“Generally, if a plan administrator is acting with discretion, it is acting in a fiduciary capacity” and subject to an ERISA claim, Barron wrote in a note to clients.

“When the plan administrator has no discretion, it is generally acting in a ministerial capacity,” the note said. “The key is that the plan administrator cannot be faulted for making a choice it does not have.”

The full article, “DOL vs. IRS rules: Courts asked to decide how 401(k) plans can use forfeiture assets,” was published by Pension & Investments on September 23, 2024. (login required)