Niche News

Labor Department urges Third Circuit to uphold dismissal of claims over use of forfeited plan funds under ERISA

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Key takeaways

  • The U.S. Department of Labor filed an amicus brief in Barragan v. Honeywell Int’l Inc. asking the Third Circuit to affirm dismissal of fiduciary breach claims.
  • DOL argues the district court properly found no breach because the plaintiff made only a bare allegation and the plan granted fiduciary discretion over forfeitures.
  • DOL says ERISA’s core purpose is to protect benefits promised to plan participants and to establish fiduciary standards of conduct.
  • The department states there is no per se rule prohibiting fiduciaries from allocating forfeited employer contributions to reduce future employer contributions instead of offsetting administrative costs.
  • DOL Solicitor Jonathan Berry cited prior cases (Wright v. JPMorgan Chase & Co. and Hutchins v. HP Inc.) where similar claims were dismissed by district courts.

Follow Up Questions

What is an amicus brief and who typically files one?Expand

An amicus brief (amicus curiae, “friend of the court”) is a legal brief submitted by a non‑party to a case to provide information, expertise, or legal arguments that may assist the court; typical filers include advocacy groups, industry associations, academics, state or federal agencies, and other interested organizations or individuals.

What does Title I of ERISA cover and why does the Department of Labor have primary authority over it?Expand

Title I of ERISA sets federal rules for private-sector employee benefit plans — including reporting and disclosure, participation and vesting, fiduciary conduct, funding, and civil enforcement — and its administration and enforcement authority is assigned primarily to the Department of Labor’s Employee Benefits Security Administration (EBSA).

What are "forfeited employer contributions" (forfeitures) in a retirement plan?Expand

Forfeited employer contributions are the unvested portion of employer contributions that revert to the plan when an employee leaves before those contributions vest; plan rules and tax/ERISA regulations generally require forfeitures be used to pay plan expenses or to fund/reduce future employer contributions (subject to plan terms and law).

What does it mean for a plan to provide "fiduciary discretion" over allocation of forfeitures?Expand

A plan that grants fiduciary discretion over forfeiture allocation gives the plan fiduciary (as defined under ERISA) the authority under the plan document to decide how forfeitures are applied (for example, to pay plan expenses or offset employer contributions) within the limits of ERISA fiduciary duties.

What is the Third Circuit and what does it mean for it to "affirm" a lower court decision?Expand

The Third Circuit is the U.S. Court of Appeals for the Third Circuit (an intermediate federal appellate court covering parts of the Mid‑Atlantic); for it to “affirm” a lower court decision means the appeals court agrees with and upholds the lower (district) court’s ruling, leaving that judgment in place.

Who are the parties and what were the plaintiff’s specific claims in Barragan v. Honeywell Int’l Inc.?Expand

Barragan v. Honeywell Int’l Inc. is a lawsuit by a plan participant (plaintiff Barragan) against Honeywell (the plan sponsor) alleging ERISA fiduciary‑breach claims tied to how forfeitures were used; the plaintiff alleged the sponsor misallocated forfeitures but the district court dismissed the claims (the DOL’s amicus brief asks the Third Circuit to affirm that dismissal).

What were the holdings in Wright v. JPMorgan Chase & Co. and Hutchins v. HP Inc., and why does the DOL cite them here?Expand

In Wright v. JPMorgan Chase & Co. and Hutchins v. HP Inc., federal district courts dismissed similar ERISA claims challenging use/allocation of forfeitures; the DOL cites those dismissals to show prior courts have rejected bare‑pleading forfeiture claims where plan language gives fiduciaries discretion or the complaint lacks factual detail. (Those cases were used as illustrative precedent in the DOL brief.)

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