The motion to dismiss comes in response to a proposed class action from Luis Hernandez, an AT&T employee whose retirement account allegedly suffered when the company reallocated unvested funds instead of using them to benefit participants.

In its dismissal, AT&T argues that ERISA doesn’t apply to its plan-related actions and the company has the right to determine how the abandoned funds, which are forfeited by employees who left before vesting in the plan after three years, are used as the plan sponsor.

Under ERISA, only fiduciary actions fall under legal scrutiny, asserts AT&T. The use of forfeited funds was tied to plan design, not plan management. “Plaintiff is ultimately attacking the plan design decision to permit forfeitures to be applied to employer contributions — but that is a settlor decision, not a fiduciary one,” AT&T’s attorneys assert.

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The company notes that “the governing document for the AT&T 401(k) plan specifically addresses what will happen to forfeited funds, in line with those rules: It instructs that forfeitures will be used “to reduce Employer Contributions next coming due, and/or to fund Employer Corrective Contributions, and/or to pay expenses incident to the administration of the Plan and Trust,” according to the dismissal.

Now, contrary to the ‘long-standing Treasury Department-endorsed practice,” which for decades has allowed plan sponsors to “permit forfeitures to be used to reduce employer contributions or to pay plan administrative expenses,” reads the dismissal, “plaintiff contends that forfeitures must be used to pay plan expenses and cannot be used to reduce employer contributions. Plaintiff is jumping on a bandwagon of cookie-cutter plan forfeiture challenges recently brought against dozens of large plans.”

AT&T’s motion to dismiss cites a growing list of dismissed ERISA lawsuits that hinge on the same forfeited funds legal theory, referencing cases against Honeywell, Home Depot and Thermo Fisher that got dismissed.

However, this complaint alleges AT&T failed to apply forfeited funds in ways that directly benefited employees, such as lowering fees or increasing plan payouts.

If the judge sides with AT&T in this case, this could greatly affect the rising tide of ERISA class action lawsuits seeking to reinterpret fiduciary obligations in the modern era of retirement plans.