Groom principal and firm chair, David Levine, is quoted extensively by PSCA in the article, “How Sponsors Can Prepare for Forfeiture Lawsuits.” This article addresses the wave of lawsuits in which “retirement fiduciaries have been sued for fiduciary breaches due to their handling of forfeited employer contributions.” Levine discussed the legal theory of these cases. While the application of forfeited contributions varies by plan, they are sometimes used “to defray plan expenses [and] to fund employer contributions to other participants.” However, as summarized by Levine, “the plaintiff attorneys have argued that the funds should be used for plan expenses, since this is generally in the financial interest of the participants.” The defense has “typically countered that this practice is permitted under the law and isn’t a fiduciary decision,” and, in the face of these challenges, “[t]he defense side has generally faired pretty well.”
Levine highlighted that the Department of Labor filed an amicus brief in support of a plan sponsor and the defense position. “Levine described the amicus brief as a ‘big deal’ because ‘historically the DOL has not weighed in to defend fiduciaries in litigation.’”
The article stresses that plan language is critical to mitigating litigation risk. Levine recommended that sponsors review their documents and process to see if they align. “Levine [said] ‘it’s a consideration’ if sponsors would like to ‘clarify what the hierarchy is,’ when it comes to which comes first, defraying fees or offsetting contributions.”
To read the article, click here.
