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During the last few months, some big corporation retirement plan forfeiture lawsuits have gotten dismissed, including Wells Fargo and JP Morgan’s suits. Last week, WakeMed Health & Hospitals was sued by a former employee, alleging the North Carolina-based hospital system mismanages its workers’ retirement plan by using forfeited contributions for its own benefit, which “cost Plan participants millions of dollars,” according to the suit.
Participant-plaintiff Jeanette Tillery, on behalf of the 12,000 participants in the WakeMed 403(b) Retirement Savings Plan, alleges that WakeMed consistently chose “to use Plan participant forfeited funds to reduce Company contributions to the Plan instead of using the funds to reduce or eliminate the amounts charged to Plan participants for administrative and recordkeeping services,” according to the lawsuit,Tillery v. WakeMed Health & Hospitals et al.
WakeMed’s consistent choice to “prioritize the interests of the Company over that of the Plan participants” – instead of reducing plan expenses paid by employees – saved the health system more than $10 million between 2019 and 2023, alleges the lawsuit. The suit alleges that the defendants “based the decision of how to allocate forfeitures solely on the Company’s own self-interest and failed to consider … the interests of the Plan and its participants.”
In the last two years, at least 50 class action 401(k) lawsuits have been filed by plan participants over misuse of forfeited assets from former employees. Some have been dismissed, while the Department of Labor last week got involved in the HP 401(k) forfeiture lawsuit, which is now on appeal.
“The established understanding for several decades has been that defined contribution plans … may allocate forfeited employer contributions to pay benefits for remaining participants rather than using those funds to defray administrative expenses …,” wrote the DOL, in an amicus brief filed to the Court of Appeals for the Ninth Circuit, on behalf of HP.
Related: Tech giant HP gets support from DOL, in its 401(k) ‘misuse of forfeited funds’ fiduciary lawsuit
In 2021, WakeMed was sued over its retirement plan in an Employee Retirement Income Security Act (ERISA) fiduciary breach lawsuit that alleged that plan fiduciaries had not acted prudently or loyally in the operation of the 403(b) retirement plan – and settled the lawsuit the very day it was filed.
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