The corporate sign in front of the JP Morgan Chase & Co office building on Park Avenue in New York City..
After getting hit with a class action lawsuit over misuse of 401(k) forfeited funds in January, JPMorgan Chase has had its lawsuit, Daniel Wright v. JPMorgan Chase & Co. et al., dismissed by a California federal judge. This dismissal aligns with recent decisions from other federal courts rejecting challenges to employer use of forfeited funds under the Employee Retirement Income Security Act guidelines.
U.S. District Judge Josephine L. Staton granted JPMorgan’s motion to dismiss, ruling the bank’s use of forfeited funds was permissible under the explicit terms of the JPMorgan Chase 401(k) savings plan.
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The suit alleged the company breached its fiduciary duty under the ERISA by using $53 million in forfeited funds from departing, unvested employees between 2019 and 2023 to “offset its employer contributions,” according to the class action complaint.
Rather than using 401(k) forfeited funds to reduce plan administrative fees, JPMorgan mismanaged its employees’ retirement plan by using the funds “for its own benefit,” according to the complaint filed in the U.S. District Court for the Central District of California.
However, Judge Staton’s order highlighted that the plaintiff failed to address prior rulings in similar ERISA cases and presented no facts justifying a different outcome. The plan terms allow forfeitures to either reduce the company’s contributions or cover its share of administrative expenses.
“There is no allegation that Plaintiff or any Plan participant did not receive the benefits they were promised under the terms of the Plan,” said the judge. “Nor is there any allegation that Defendants violated the terms of the Plan by using the forfeited funds to offset their own contributions.”
Citing multiple precedents within the Ninth Circuit, including a recent decision in Hutchins v. HP, Judge Staton noted that courts have consistently rejected similar forfeiture-based ERISA claims.
Related: JP Morgan fights back against new 401(k) lawsuit that alleges ‘devastating’ participant losses
The JPMorgan Chase 401(k) Savings Plan had more than $44 billion in assets and 292,458 participants, according to its 2023 Form 5500 filing. Employees are fully vested in the “employer contributions after three years,” according to the complaint.
JP Morgan still is facing two more lawsuits. In March, a former employee filed another 401(k) lawsuit, alleging that an in-house stable value investment fund in the bank’s $44 billion 401(k) plan performed poorly when compared with other available similar funds. JP Morgan Chase is now disputing allegations of mismanagement, in a motion filed in March.
In the other lawsuit that was filed in March, current and former employees are suing JPMorgan, alleging that the company allows inflated drug prices through its partnership with its pharmacy benefit manager, CVS Caremark. Employees claim that the bank’s failure to properly oversee its PBM contract resulted in unnecessarily high prescription drug costs.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
