Washington – The ERISA Industry Committee (ERIC) and a coalition of employer and retirement-industry organizations filed an amicus brief with the U.S. Court of Appeals for the Fifth Circuit, supporting Ochsner Clinic’s use of plan forfeitures in Estay v. Ochsner Clinic. The brief urges the court to affirm the district court’s dismissal of the case.
A 401(k) match doesn’t always belong to an employee outright. Employer contributions typically vest gradually, and if someone leaves before that vesting is complete, their unvested balance is forfeited back into the plan rather than returned to the employer. The plan document spells out what happens next, which can authorize using those dollars to cover administrative expenses or reduce the company’s future matching contributions.
Ochsner Clinic’s plan gives itself that choice, and it used forfeitures to fund additional matching contributions rather than pay expenses. Plaintiffs claim this decision violated fiduciary duties of loyalty and prudence and amounted to a prohibited transaction under ERISA. The district court disagreed and dismissed the case.
“Retirement plans have relied on this practice for decades, with the express blessing of the Treasury Department,” said Doug Hinson, Executive Director of the ERIC Legal Center. “Plaintiffs are asking the court to rule that ERISA prohibits something the Treasury Department has long permitted. If Plaintiffs’ theory succeeds, sponsors might lower or stop matching contributions altogether, and workers and retirees would ultimately receive less benefits.”
The brief argues that decades of Treasury Department regulations, legislative history, and tax provisions confirm this practice is lawful, putting plaintiffs’ claims at odds with a regulatory framework Congress has never disturbed. It also draws a line between an employer’s business decisions, such as how much to contribute or whether to cover plan costs, and a fiduciary’s duties to participants, noting that ERISA guarantees only the benefits a plan promises, and that Ochsner Clinic delivered exactly what its plan promised.
Read full brief here.