DOL submits pro-sponsor amicus brief in forfeiture litigation

Where we are on the confirmation of the new EBSA head

On June 25, 2025, the Senate Health, Education, Labor, and Pensions (HELP) Committee approved the nomination of Daniel Aronowitz as head of EBSA – as of this writing, no full Senate vote on his confirmation has been scheduled. Currently, President Trump’s nominee for Director of the Pension Benefit Guaranty Corporation, Janet Dhillon, is the acting head of EBSA.

DOL brief in Hutchins v. HP Inc.

On July 9, 2025, the Department of Labor filed a brief in plaintiff’s Ninth Circuit appeal of a decision by the United States District Court for the Northern District of California, in Hutchins v. HP Inc. (June 2024), granting defendants’ motion to dismiss.

Background – forfeiture litigation generally

Hutchins v. HP Inc. is one of a series of cases challenging – as a violation of ERISA’s fiduciary rules – committee decisions to allocate forfeitures to reduce sponsor contributions, rather than to increase participant benefits.

These cases generally involve a similar set of facts:

• A plan document that gives someone – the plan’s administrator, or the sponsor, or a plan committee – discretion to decide whether to allocate forfeitures for the benefit of the sponsor (generally by using forfeitures to reduce company contributions) or for the benefit of participants (in Hutchins v. HP Inc., by using forfeitures to pay administrative expenses that would otherwise be paid out of participant accounts).

• A decision by that person (administrator/sponsor/plan committee) to use forfeitures to reduce employer contributions.

In these circumstances, plaintiffs claim, the person making that decision ((administrator/sponsor/plan committee) (1) was acting as an ERISA fiduciary and not as a “settlor” (see the sidebar below) and (2) violated ERISA’s fiduciary duties of loyalty and prudence, its anti-inurement provision, and its prohibited transaction provisions.

Sidebar: Settlor vs. fiduciary functions. It has long been understood that ERISA recognizes certain decisions as belonging to the sponsor as “settlor” of the plan’s trust. Examples of settlor functions include: the sponsor’s decision to establish a plan, the design of a plan (e.g., its benefit formula or matching contribution rate), the decision to terminate a plan, and the decision to pay administrative expenses out of plan assets or, alternatively, out of the sponsor’s pocket.

These settlor functions are non-fiduciary and are distinguished from fiduciary functions such as discretion over the investment of plan assets and the retention of investment managers.

DOL’s amicus brief

DOL’s amicus brief weighs in on the side of the sponsor. Its argument in the brief is elaborate and not very easy to follow. Here is a bulleted version:

• The HP committee’s discretion with respect to the allocation of forfeitures “was a fiduciary decision because it ‘exercised discretion and control over Plan assets and thus w[as] making decisions of Plan administration rather than Plan design’” [quoting the lower court]. But, the court held, decisions with respect to plan funding are a settlor function, not a fiduciary function.

• “It is axiomatic that ‘ERISA does no more than protect the benefits which are due to an employee under a plan.’ … Here, the district court correctly observed that there is no allegation participants and beneficiaries received less than the 4% matching contribution guaranteed under the Plan language, nor is there any allegation that the Plan’s administrative fees were excessive.”

• Given that sponsor funding (e.g., of matching contributions) is a settlor decision, if the committee used forfeitures to pay expenses rather than fund matching contributions, and the sponsor (as it had consistently done in the past) only contributed enough to fund matching contributions net of forfeitures, “the Plan would be faced with a funding shortfall and unable to timely allocate matching contributions to each participant as required by the Plan terms.”

• Thus, “Faced with the decision to either ensure the participants timely received the matching contributions they were owed under the Plan, or to risk a funding shortfall and a potentially protracted legal dispute with the Plan sponsor [over how much the sponsor should have contributed to the plan], a prudent fiduciary may appropriately choose to ensure participants timely received the benefits guaranteed by the Plan document [by using forfeitures to reduce the amount of employer matching contributions].”

For these reasons, DOL argues, the court should hold that “Plaintiff failed to adequately plead a breach of the fiduciary duties of loyalty and prudence and uphold the district court’s decision dismissing the amended complaint.”

More simply put …

In our view, DOL’s argument here is overly complicated and unnecessarily limited. The lower court made nearly the same point much more succinctly:

Plaintiff’s theory of liability would improperly extend the protection of ERISA beyond its statutory framework. … Plaintiff’s claim is that the fiduciary duty provisions create an unqualified duty to … to maximize pecuniary benefits in favor of plan beneficiaries. But it is neither disloyal nor imprudent under ERISA to fail to maximize [participant] pecuniary benefits.”

But at least they are doing something

In his Opening Statement to the HELP Committee, Mr. Aronowitz said:

I will strive to provide regulatory clarity so that plan sponsors have the proper incentive to expand employee benefits. There are many issues that require regulatory clarity and stability so that the system can function properly, including (1) modernizing defined contributions plans to include alternative investments, such as private equity and cryptocurrency; (2) the consideration of ESG-factors; (3) the fiduciary rule as applied to IRA rollovers; (4) mental health parity; (5) plan forfeitures; (6) pension risk transfers; (7) tobacco and vaccine surcharges and wellness programs; (8) managing pharmacy benefit managers and health-care costs; and (9) cybersecurity to protect participants assets. [Emphasis added.]

Whatever else it may be, DOL’s amicus brief in this case represents a step in that direction.

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We will continue to follow this issue.