Wells Fargo branch in Baltimore, MD. Photo: Diego M. Radzinschi/ALM
Just a week after JPMorgan Chase had its misuse of 401(k) forfeited funds lawsuit dismissed in a California court, Wells Fargo was able to convince a federal judge in Minneapolis to dismiss a proposed class-action lawsuit over how it manages money forfeited by departing employees in its employees’ 401(k) plan. This dismissal aligns with recent decisions from other federal courts rejecting challenges to employers’ use of forfeited funds under Employee Retirement Income Security Act (ERISA) guidelines.
Judge John R. Tunheim of the U.S. District Court for the District of Minnesota dismissed the Wells Fargo case on June 19, after determining that former employee Thomas Matula Jr. has no standing “because the plan does not authorize Wells Fargo to use forfeited funds to pay optional services and operating expenses.”
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The case is one of several alleging that various companies violated ERISA by not treating forfeited employer contributions to 401(k) plans properly. Cases against Qualcomm and Intuit have advanced, while such claims failed against JP Morgan and Kaiser Foundation were recently dismissed.
In Matula v. Wells Fargo & Co., a lawsuit filed in California federal court, former employee Thomas Matula Jr. alleged that the Wells Fargo & Company 401(k) plan violated ERISA by “wrongfully and consistently” misusing 401(k) plan assets for the benefit of the company instead of its participants. Plan assets “have been wrongfully diverted out of the plan,” according to the suit. Wells Fargo used forfeited assets—those left behind by employees leaving the company before becoming fully vested in the plan—to reduce its own contributions for the year ended December 31, 2022, according to a Form 5500 filing in the suit. The lawsuit alleged a breach of fiduciary duty and a failure to monitor plan fiduciaries.
However, in dismissing the lawsuit, Judge Tunheim noted that, “while it is true that the plan authorizes the use of forfeited funds ‘to pay expenses of the plan,’ ‘expenses’ in this context refers to the necessary administrative expenses of the plan, not the optional and investment expenses for which Matula is advocating. … Because the plan does not authorize Wells Fargo to use forfeited funds to pay optional services and operating expenses, Matula cannot have been injured by Wells Fargo’s alleged failure to use forfeited funds to pay for such expenses.”
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From: BenefitsPRO
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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.
