PLANSPONSOR - November/December 2024 - 7

was acting as a fiduciary when deciding
how to allocate them.
Robinson summarized the opinion of
U.S. District Judge Beth Labson Freeman
of the Northern District of California in
Hutchins v. HP Inc. that, " although the
decision to include a plan term setting
forth various permissible uses for forfeitures
is a settlor function, implementing
that decision is a fiduciary function. "
But he also relied on the Hutchins
dismissal in his own grounds for
dismissal, contending that because ERISA
does not require a fiduciary to maximize
pecuniary benefits and the plan document
created no entitlement to such benefits,
the court would be risking " improperly
extend[ing] ERISA beyond its bounds "
if it established such an entitlement.
Dimou's filings also argued that,
when Thermo Fisher used forfeitures to
offset its matching contributions, it was
contributing less than 100% of the first
6% that employees deferred to the plan-
the
company's
agreed-upon matching
formula between 2017 and 2022. As
a result, Dimou alleged, the employer
violated the anti-inurement provision of
ERISA because it used the plan's assets to
forgive the employer's debt to the plan.
Thermo Fisher argued, however, that
the matching contribution is not mandatory
under the plan, so it is not a plan debt.
Robinson agreed with a prior case ruling
that allegations of " indirect " benefits to an
employer are insufficient to bring an antiinurement
claim.
Dimou was granted 30 days to file
an amended complaint. Lawyers representing
her did not immediately respond
to a request for comment.
In the September 5 decision for BAE
Judge Anthony
Systems, U.S. District
Trenga of the U.S. District Court for the
Eastern District of Virginia ruled against
an employee and plan participant who
was seeking class action status. The initial
complaint in Naylor v. BAE Systems was
filed April 4, by representative firm Wenzel
Fenton Cabassa.
Trenga also denied the plaintiff's
motion to disqualify the defendant's
counsel, Groom Law Group. The plaintiff
had alleged that Groom was an unsuitable
representative because BAE had used plan
forfeitures to pay it for other projects.
The BAE Systems Employees'
Retirement Plan had assets of $4.15 billion
and 29,887 participants as of December 31,
2022, per its most recent Form 5500 filing.
In the initial complaint, the plaintiff
had alleged seven violations of ERISA,
The initial complaint also alleged that
plan fiduciaries had allowed for excessive
fees in the plan. For example, it alleged
that BAE made millions each year by
offering participants a managed account
program, the Professional Management
Program, that was not worth the additional
fee they had to pay.
Additionally, the complaint alleged
... Trenga pointed to the plan
document's language on plan
forfeitures, which clearly laid out
the use of the funds for employer
matching contributions.
including using forfeitures to offset future
employer contributions vs. to " cover
administrative
expenses "
or
otherwise
bolster plan assets. Specifically, the plaintiff
alleged that the plan managers had
" wrongfully taken " about $9.7 million in
forfeitures from 2016 to 2022, plus more in
2023, accounted for as the case progressed.
Here, Trenga pointed to the plan
document's language on plan forfeitures,
which clearly laid out the use of the funds
for employer matching contributions. " It is
unclear how, under these Plan provisions,
any forfeiture amount during the relevant
years could have been directed towards
any other purpose than offsetting contributions
when the employer contribution
amount each year exceeded the available
forfeiture amounts, " he wrote. While the
plan committee may also have chosen to
use the funds for administrative expenses,
Trenga ruled, it was not obligated to do so.
Schloss says Trenga's ruling is a little
different from others because it focuses on
the plan language detailing how the forfeitures
would be used, not on the fiduciaries'
actions. " It's a very interesting decision
because it basically holds that the plan
language effectively deprived the fiduciaries
of discretion, " he says. " It says the
plan requires, without any discretion, that
forfeitures go to employer contributions,
and ... [it] presumes the plan [may] do that. "
that BAE paid excessive fees to its counsel,
Groom Law Group, for " ERISA compliance
related services. " The plaintiff described
the roughly $700,000 per year being
paid to Groom-as noted on BAE's Form
5500-as " excessive and unreasonable. "
To both allegations, the judge ruled
that the excessive fee claims lacked sufficient
evidence; to the second he wrote,
" there are no facts alleged with respect to
the services Groom Law Group provided to
the Plan as compared to services provided
to the other clients. "
He also rejected the plaintiff's
attempt to have Groom representatives
disqualified due to their having advised
on the plan. He noted that case law does
not back up this disqualification of a firm
that had advised on fiduciary obligations.
Schloss says the decision should
make an impact. " It raises issues that other
courts will certainly want to consider, " he
says. " It is a thoughtful decision; it holds
together well, I think. "
He also notes that, while the IRS
has issued guidance approving the use of
plan forfeitures to fund employer contributions,
the Department of Labor has yet
to comment. With more cases anticipated,
he says, each agency may want to issue
guidance on how plan forfeitures should
be viewed under ERISA.
-Alex Ortolani, Remy Samuels
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